Transcript
Welcome to Money Isn’t Everything. I’m Mary Wisniewski, Cornerstone Advisors editor-at-large. Every other Thursday, we bring on a guest who is shaking up financial services in some way, and we get into the why, how, and possibilities.
Already on the show, we’ve had Ethan Bloch, who founded Digit, and that started off by rethinking savings. We’ve also had Frida Leibowitz, who founded Debbie, which is rethinking debt payoff right now. We’ve also had Sophia Goldberg, who founded Ansa, and we chatted about digital wallets.
In this episode, I sit down with Michael Broughton, the CEO and founder of Altro, formerly known as Perch Credit. The startup is trying to help people improve their credit scores by linking their subscriptions, like Netflix, and reporting those payments to the credit bureaus.
His work is personal. The problem revealed itself when he struggled to access credit while he was in school. He needed a student loan, then realized he was far from alone.
In this episode, we get into it all: what building a startup at a hacker house is like, challenges in naming a startup and building credit scores, sorting through good and bad venture capitalists, and sharing audio clips about finance lessons.
Here’s our conversation.
Hey, Michael. How’s it going?
Good, Mary. How are you?
I’m doing well. I just want to get right into it with you because I saw that your startup’s roots started at a hacker house, and I believe that’s where you went viral.
Those two things, I’m visualizing it, but I want to hear it. First of all, what’s a hacker house like?
It’s chaos, to start.
Okay. I thought maybe.
Imagine a bunch of college students working on an idea, all living together, working together, using their mattresses as floors for their computers and desktops. It was 12 people in a three-bedroom apartment.
Wow.
Pure chaos.
Am I remembering this right? Did I read this right? You went viral while you were there?
We did. Number three in the App Store.
Wow.
Three hundred thousand downloads. It grew way bigger than we ever thought it would.
And that was because, was it a Jay-Z tweet?
Jay-Z tweet. We had a moment on Instagram, actually, where people were posting about being the earliest users to this new Jay-Z app.
It went viral on Instagram and YouTube, and then it got picked up by a lot of news outlets, and it just kept going.
It was not what we were trying to do, but free virality, you can’t be mad at that.
You can’t be mad at that. Talk me through your emotional state. I mean, that had to have been wild. Here you are, sounds like a little bit cramped conditions, working away on a passion project, and then boom, you’re like, “Whoa, I’m getting flooded with interest.”
It was amazing. The funny part about it is we had this little tracker in Slack where every time we got a new user, it would do a little noise.
That’s what woke us up that morning. At 6 a.m., it just kept going, and we thought it was broken.
We were in the room trying to figure out the bug, and we just kept seeing the ticker go, go, go. It went for the whole day and the next day and the next day.
It just validated that we were onto something.
Well, yeah. Let’s zoom in on what you’re onto because I imagine, but let me ask it, you see the credit scoring system as a bit broken and not serving all kinds of people it ought to serve.
How did you zoom in on wanting to widen access for people hoping to improve their credit scores?
Yeah, it started with myself.
I struggled with access to credit being a young adult going to USC. I was the first in my family to really go to a major university. I didn’t realize that tuition was something you had to pay for.
It taught me the hard way that credit access doesn’t come easy.
I realized that this just wasn’t a me problem. Millions of people are facing this. A lot of that early team, that hacker house team, were people who were really devoted to that cause.
We didn’t know what the solution was going to be, but we did know that there was something that needed to be done.
When we went viral, it did nothing but validate that there was more than just the people in the hacker house who believed that this needed to be solved.
That was the genesis of Altro.
Your original name was Perch?
Yes. We went through a lot of name changes.
As Cred, apparently that was too obvious. We went to Hatch Credit. We went to Perch Credit, and now we’re Altro, which means “other” in Italian.
So, it feels like a very significant name change, but maybe it’s not. Is it a significant name change?
I’ll give you the inside scoop.
Funny enough, there’s a company in the U.K. called Perch Loans, and it’s owned by an American company called Advance America.
The struggle was that they felt like our names were too similar, and they give out high-interest credit, and we are on the impact side.
People were messaging them saying, “I thought this was going to help my credit.” People were messaging us saying, “What is this? I thought this was a loan.”
They wanted us to delineate, and I think that was good for us as well.
Oh, Michael, quick aside. There’s another Mary Wisniewski reporter, so our identities have been misinterpreted over the years. I sort of understand this.
It’s a funny challenge to deal with, but especially yours.
I wanted to bring it to industry-wide. Certainly, I know banks and credit unions across the country do want to underwrite more people, and there’s always seemingly this tension of, how do you pull in another tradeline? Is it actually predictive?
I believe your startup came before Experian Boost?
Yes.
I know that’s probably helped even grow more awareness, but how do you think about which bill payment seems to be the most predictive? Is it a combination of them all? How did you start puzzling this together?
Yeah, and that’s not just a question that’s happening in fintech or with financial institutions. The government, the bureaus, everyone’s trying to understand, as we move into a new economy and as people spend differently, what really does define someone as creditworthy?
We have this resurgence of bills around rent and utilities that got turned into its own bucket of alternative data.
But when you look at subscriptions, when you’re looking at recurring bills, the question still remains: is this predictive?
That was the battle that we had over the last number of years, proving that subscription data is data that should be on your credit report.
I agree, it’s a big conversation.
We believe very strongly that people show their ability to repay by their ability to pay for their subscriptions. In the darkest of times, people will pay for their Netflix before their rent.
We thought it was a great tool to help people get credit access, using the bill they’re paying for each month.
Michael, when someone attaches their recurring bill payment, how much of the history is pulled in? Or does the person get to pick, “I want six months”? How much data is being pulled in?
Yeah, we start looking forward.
You can see it very similar to a revolving line of credit that’s only for your subscriptions. It’s going against your main credit file, so we’re hitting 65% of your score.
You’re building history. You’re opening up a new line. It’s a different type of line, which is good for your credit portfolio and mix. All the great things.
The fact that people are paying it off each month, and it’s a very low revolver, it’s only $75, is very unique to market.
Back in the day, and back in the day being like a year ago...
I mean, that is back in the day in the world of fintech sometimes.
It really is. A week feels like a month.
The bureaus didn’t want to accept anything below $500. They felt like that was not predictive data of someone’s creditworthiness.
The argument that we had at Altro was, if someone’s able to prove that they can manage a $75 line, they can manage a $100 line, $200 line, $500 line. But someone needs to grow into that.
Most Americans don’t even have $500 in a savings account. Getting a windfall of $500 as your first line of credit puts you more prone to making a mistake with your first credit line.
So, we started at $75, and the bureaus actually accept that now. They didn’t accept that, call it a year or two ago.
Wow.
This is maybe outside of your work, but maybe it’s not. I’ve been following this big debate around buy now, pay later providers and how they may not be providing data to credit bureaus. I believe Apple is now doing that.
I’m curious how you think about that. Would you be able to pull in someone’s buy now, pay later data to help improve their credit score?
That also goes into the year-ago bucket.
It’s been only a year worth of time that buy now, pay later has been required to report to the bureaus, actually positive and negative payments.
They’re not required to do the positive, just mainly the negative when they don’t get their money back.
I think BNPL has a lot going on. It’s good if you know how to manage your finances. It could be really bad for people who have variable income because they now have to fix their income around a buy now, pay later product.
But that is data that we can look at. It’s data that is in not only your checking data, but also now with the bureaus. It is very predictive in some cases.
Big tangent, but I feel like you’re definitely up for it.
I was poking around the app, and it showed me two things that I think are really striking because I don’t want to get into the branch debate unless you want to.
I saw that your app seems to foster community in interesting ways, including live events, but also audio clips.
I want to get into both of those things. How are you using that? What’s the frequency? What kind of results do you see from that?
Yeah. We get a lot of our influence from Robinhood.
When I say that, I mean, before Robinhood, and I like how everything’s a history lesson in finance.
Everything is a history lesson.
It’s usually showing you, “Don’t do this.”
Very true. We’ll keep the history going.
Before Robinhood, stocks were not something that people talked about. It was very personal. We thought it was only for affluent or wealthy families. It was hard to get into.
With the resurgence of Robinhood and all these community-driven stock apps, everyone talks about stocks.
My little sister is a sophomore in high school, and she’s asking me, “How can I start investing in stocks?” There are actually solutions for her to do that.
It completely changed the narrative, and stuff like GME and all that stuff started happening.
I think that hasn’t happened in credit.
Credit is still something that’s very personal. We have a lot of emotions tied to it. We think only wealthy people have good credit.
There’s a world where people could openly talk about credit the way that they talk about stocks. No one has developed that yet.
So, we went very community-focused with Altro. We do a lot of in-person events. We talk a lot openly about credit.
We bring in celebrities and influential leaders who will tell us their credit score in front of our audience.
Wow.
It changed the narrative so much.
I would love for you to be in one of these rooms. It’s inspiring to see how people interact with each other.
That reminds me of Refinery29. They sort of revealed the Money Diaries, I believe it’s called, where it just shows how people spend their money.
Now I see a bunch of different sites doing that sort of thing.
How curious to think about it for the credit score, because you see some surveys come out that say, “Gen Z will share their credit score on the first date.” “What’s your credit score?”
I’m like, “Okay, but really? Is that really true?” I don’t know.
Do you think the younger generations are going to push us to be more open with this kind of information?
I think we will see that world happen, especially with our younger audience. They’re just far more receptive to building community.
Call it COVID. Call it iPhones separating us. There’s a yearning to build community.
When we host these events, some people are using Altro not even to use a credit builder, but just to be a part of the community and to be able to talk with other people about their finances.
We bring in people who know about starting businesses. We bring in entrepreneurs. We brought in the CEO of FICO, actually, two weeks ago.
Oh wow.
Being able to talk to these people who are normally behind a wall or behind a screen is very impactful to our community.
What’s been one of the most vibrant topics that seems to get people going the most there?
I have so many favorites. This is a debate within the company, like, which is the best one?
It’s always a debate.
It’s always a debate.
One of my favorites was we brought in the CEO of the NAACP, President Johnson, and we talked about the history of low-income communities, Black and Latino communities, and why there is a struggle to become financially stable.
I think a lot of our community resonated with that because we put a lot of blame on ourselves whenever we have financial impact or financial struggle. This is for anybody.
But when you realize that there’s historical context, it allows you to operate and think differently.
I would say my second favorite actually was with William Lansing, the CEO of FICO, because he taught us a lot about how credit is behavior and not income-based.
A lot of people think that credit is for rich people, and he was like, “Honestly, the best credit is people who are low to medium income.”
You don’t have to have a lot of cash to have success in credit.
That was really eye-opening.
I think that’s a really important thing. I do think there’s a lot of confusion around that.
It’s like, are you paying your bills on time? Of course, much more than that too.
I’m curious. I saw you had a big expansion into more states, 47 if I’m remembering this right.
Okay, so is that changing how people are interacting with your app? What are you seeing from this big expansion?
Because it went from, how many states was it before, to the 47?
A dozen or so?
We were in nine states.
So, this is big. This is a big expansion.
Smells of a bank partner.
Yes. The power of a bank.
It really did change everything for us.
When we went viral, we were only in like two states.
Oh wow. That’s extra like, “Sorry, I can’t help you right now.”
As loved as we were from East to West Coast, there were only two states that really loved us, and the rest of them were like a waitlist.
But now there’s no waitlist.
There are only two states that we can’t operate in that we should be in soon, which is super exciting.
Being in 47 states has empowered us to help people nationwide, and it’s been really cool to see the story so far.
Are you seeing which bills people are attaching? Are they changing up, or are the patterns similar?
A lot of patterns. Netflix, Hulu, Spotify are the big three, but everything’s becoming a subscription.
Everything is becoming a subscription.
I’m kind of curious because I’ve been seeing glimpses of how a bank app is starting to let people see all their subscriptions in it, and then the next level would be canceling them.
I’m starting to get senses of that. Do you ever get users who want to cancel the subscription while they’re on your app?
Yes. Yes.
Even before we were East to West Coast, a lot of people thought that we were a subscription manager.
They were like, “Wow, I have so many subscriptions. How do I get rid of them?”
I think that there is a world for that.
Truebill, which has turned into Rocket Money, is a great example of a successful business in this space.
It’s so easy to just pile on a $9 subscription month over month and get 20 of those, to the point where everything’s a surprise.
Especially the Apple ones. The Apple ones, they don’t have a name on it. It just says Apple.
I know. I know.
I haven’t sorted all mine, or I haven’t done the big reveal. But I’m like, “Oh, I’m not ready.”
Not ready yet.
I’m curious about what excites you outside of, that’s still within fintech, but outside of the credit score.
What are you zoomed in on as something that you might think helps improve financial services in any which way, in any category?
It’s a little bit of a parlay off of the whole thing about democratizing this conversation around credit.
I think with the adoption of, and I don’t want to use a buzzword, but AI, and the adoption of this community feel happening in finance, I think you’re going to see this hyper-personalization of what your personal finances are.
Call it 10, 20 years ago, everything was a blog post, or everything was hard copy, “This is how you do it.”
But everyone’s financial journey is just so unique to the point where you can’t copy and paste one person’s success in finance to somebody else’s situation.
I think that hyper-personalization will create everyone’s own journey of how they get from point A to B to C, to the point where they can call themselves financially independent.
I think that’s going to happen, and it’s going to be really fast.
Everyone will have their own financial account, credit score process, and everything behind it.
Michael, I hope this vision becomes true because recently, on a recent episode, we interviewed a banker who remembered, because I was like, “Oh, that’s so wild to think that people had to rely on their paper statements to understand their money.”
But he’s like, “Oh no, people called their bank a lot just to get transaction after transaction.”
I’m like, “Oh, that’s even worse because it’s with that weird robot voice.”
Oh my gosh.
Another area I want to talk to you about for the entrepreneurs listening is, how do you sort out the quote-unquote good venture capitalists versus the bad, or the ones that are not going to help you the way you want to be helped?
Yeah. I have a personal blog that I haven’t shared about this in my Google Docs.
There are a lot of good VCs, and there are a lot of bad VCs.
I think every case is unique.
When interest rates get low and markets start moving a little bit more freely, you start to see a lot more bad money.
Then, in markets like this where things are tight, you start to see a lot of good money, but very focused money.
That being said, I think for the founders out there, when choosing people to work with, choose people who are really committed to you and the vision much more than the idea.
Allow yourself room to pivot, to make mistakes, to know that not everything’s going to go perfect.
This is a seven- to 10-year commitment that not only you have to take, but your VC has to take as well.
I think especially for a lot of founders out there who raised capital in 2020 and 2021, they’re finding that their investors now are passive, they’re dismissive, they’re writing it off. It was just a 2021 mistake.
But there are some good VCs who think that this is still a seven- to 10-year journey, and luckily, we have a number of those on our cap table.
Yeah. That’s great because I’ve been hearing people’s apprehensions of, “Oh, we’re getting into...” Well, at least the banks and credit unions are more afraid. They’re praising themselves for being boring.
That’s, of course, in response to the bank runs that happened.
But it does open up that risk of, if you’re not being creative, you’re not trying to fix what are so many broken processes in financial services, you’re really missing an opportunity that will be realized at some point, I think.
Yes, strongly agree.
I feel like banking itself is just an archaic process.
We had so many innovators come in in 2020 and 2021 who wanted to change that and realized it’s not easy to change the banking system.
I think we’re at a point now where people are much more conservative in this space, but the innovation is still needed.
Yeah, it’s still needed.
I have two questions left for you, and I want to leave it open to you too.
One, just to dial back into the pervasiveness of building your credit score, the challenge of that. Were there any surprises to you in building Altro, like, “Oh, these are all the reasons why someone needs help building their credit score”?
Were there any particular ones that stand out to you?
Yeah. There’s a big educational element, of course.
People who lived through the financial crisis and even what happened with the dot-com bubble have a very conservative mindset when it comes to credit. Credit is bad, right?
I think that there’s an educational element that we have to go through as a company, and that’s where a lot of our focus is, teaching people that credit is very empowering.
We use the slogan “Financial Power for All” because we’re giving you financial power by having good credit.
There’s that educational element. I would say that’s the biggest thing.
But other than that, I think credit is kind of at this point where people are somewhat trying to be dismissive of it, but it still impacts so many things.
We had one user, back when we were in only a couple states, who went through a divorce, and the divorce actually tanked his credit score.
He was like, “I didn’t even think that a divorce could impact my credit.”
But he was stuck in this, call it, a four-bedroom household because his kids used to be there. His family moved out, and he was paying for this, which he used to pay on a dual income, by himself.
He couldn’t afford it, so he was behind on his rent payments. He couldn’t afford his rent. He wanted to move, and he couldn’t get a new apartment without a good credit score.
He was put in this rabbit hole where he never thought he would be because of a life-changing event altering his credit score.
We helped him. He was able to get a new place. He was able to lower his expenses. Now he gets to see his kids regularly.
It completely changed his life, having a good credit score. He just never correlated the two.
Michael, I’m so glad you brought up this anecdote because I realized I almost missed a very important part of this session.
On the show, we like to do “That’s What You Said.”
You were interviewed in Authority Magazine, and you said, essentially, “Without credit, Americans are doomed to a reality in which they cannot build wealth and access the perks that come with it.”
Sounds like that still rings strong for you.
It is. It is.
I think credit is empowerment. It’s the same thing as stocks. It’s the same thing as investing in yourself personally.
You want to use all the tools that you can to become the best self and version of you.
Also, Will Lansing is completely correct. Your credit score isn’t based off of your income. I think your income can be based off of your credit. It could be in the reverse.
I think there are a lot of opportunities for Americans to empower themselves through having great credit and great credit habits.
One last question, but before that, any last things you want to mention to listeners or how to reach you?
Yes. You can follow me and the company’s journey. We’re very transparent about what we’re building.
You can follow me at @mikealtro. That’s A-L-T-R-O.
You can follow us at @altrofinancial on all socials.
My personal contact is mike@altro.com if you have any questions or thoughts.
Awesome.
Last question, which I saw in another podcast that you were asked too, so I was like, “Damn, this is my final question.”
What is the image on your phone’s lock screen?
Oh wow.
I know. Can you believe you got asked that twice?
It’s the only standard question I ask.
It’s a really good question.
I actually only change my lock screen whenever I have a major thing I can’t forget.
I’m terrible at taking notes. I’m terrible at tracking myself.
But if there’s something I really can’t forget, I’ll change my lock screen.
So, I change it maybe five to six times a year.
I just changed it.
What do you mean? Like someone’s birthday, or do you mean something with the startup?
It could be startup. It could be a birthday.
It’s just something where I’m like, “I can’t miss this.” A big one is, I’ll change my lock screen for it because you look at your phone in the morning and you’re like, “Oh yeah, I can’t forget.”
I just changed it, actually, because I just got back from Tokyo last year, to a Godzilla micro... I don’t know how to explain it.
It’s like it’s burning a clock, and the clock is illuminating the time that it actually is on my phone.
Oh, really cool.
Okay, I’m going to take your pro tips because what I do for the important things, I write it on my hand, and then I sweat and it’s faded.
I’m like, “I guess that was supposed to be important. Maybe it’s not.”
Yeah. It’s a little bit less ink too.
A little bit less ink too.
Well, Michael, thanks so much for being on the show today. Truly a pleasure to have you here.
Thank you, Mary.
Okay, so what I learned most is that the industry still needs to break through a stereotype that high credit scores are only for rich people, because that’s not true.
Also, that tracking sound in the Slack group can really mean you got that many users.
Two weeks from now on Money Isn’t Everything, I talk with Lamine Zarrad, the founder and CEO of StellarFi, that is rethinking bill payments to give people a shot to build their credit.
We get into one of his earlier fintech acts, when he worked at the OCC and was building a P2P payment startup, and that had a lot of tension.
We also explore all kinds of unusual ways to help a startup grow.
See you then.
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