Whitney McDonald 00:08
Hello, and welcome to the buzz of bank automation news podcast. My name is Wendy McDonald and I’m the deputy editor of bank automation news. I’m joined by Bryce Deeney, chief executive and co founder of Equipfi. He discussed how financial institutions can attract and retain millennial and Gen Z clients by offering automated services and desired products.Bryce Deeney 00:29
To understand how our technology works, you need to in my opinion, you kind of need to also know the business case or like why would a would a bank actually want to adopt this type of technology. So like at the very base level, most people know that by now pay later is it gives a consumer the ability to split up their payments over time, outside of a more traditional credit line, which is usually like a personal loan or a credit card. typically buy now pay later is tied to an individual purchase or a group of purchases, right. So it could either be you’re going to Jiffy Lube, buying something for $400, a service, or you’re buying a pair of sneakers, or sometimes even like you’re buying a trip to Hawaii and you want to bundle your airline ticket, your hotel stay and all your meals into like a 12 month installment plan. So that’s based on the what consumer buy now pay later is. Our platform enables financial institutions, banks credit unions in the US to offer this type of service to their customer base on the retail side. So we essentially built an AWS cloud platform that integrates into both core banking solutions and digital banking solutions as a white labeled service, enabling banks to have an automated workflow to where their card holders will go out and use their card every day as as they do today. As they have transactions and purchases that qualify based on the risk profile of that bank, those consumers will receive a text message push a push notification, or an email from the bank, notifying them that they have an offer. The entire user experience is actually baked into digital banking. So we built App Extensions into the majority of the digital banking platforms in the US to make that very easy adoptable platform for the bank. And then once a consumer accepts a plan, we then write that as a loan, micro loan back to the core banking system. So we automated the entire workflow. That way, the bank doesn’t have to have full time staff looking at these loans, booking these loans working these loans. They’re very hands off once the platform is set up.Whitney McDonald 02:41
Okay, great. Now kind of weaving into the automation that you were just talking about what can financial institutions do to make sure that they are providing automation that their clients are asking for?Bryce Deeney 02:53
Yeah, when I look at automation, I think there’s two different important topics. The first is from the consumer standpoint, right? So why do consumers like buy now pay later? There’s a lot of financial reasons why they like it, because it no longer ties them to I need to go get a $15,000 credit card, I can now just fractionalize Borrow money when I want to borrow money tied to this specific purchase that maybe is outside of my normal comfort zone. So automating that process versus just having the standard? Well, if you want to borrow 500, or $1,000, click this link on our website and apply, we’ll let you know if you’re approved. Right. So because FinTech like the affirms, of the world have removed that friction, a lot of consumers, especially younger consumers, consumers, millennials, and Gen Z’s really like that automation advantage that Silicon Valley has over their community bank. So that’s the first part, right, which is like removing that friction. The second piece is I actually was a banker in my previous life, and I ran lending and payment products. And what I found was anytime we offered a lending product alone under $1,000, we wouldn’t make money. And it wasn’t because the consumer didn’t pay back. It wasn’t because we couldn’t charge interest for it. It’s because too many full time employees, both in finance and risk in and collections and payments, had to touch these loans. So we would we would not actually net revenue on these small dollar loans. So that’s one of the biggest problems that equipped by what we’re solving is we’re fully automating the entire experience from the bank level. That way, once they have this program set up, they can literally issue 1000s of small dollar loans on short term payments, and they don’t have to have full time staff touching his loans at all.

Whitney McDonald 04:45
Now, if we can shift a little bit talking about the consumer experience itself, how can financial institutions make sure that they’re not losing that personal touch with their customers when and if they need it?

Bryce Deeney 05:00
Sure, by now pa leader is is a relatively new concept, right? It’s only been at least in the US, it’s been a, the dominant new player in payment trends for consumers. If you take a step back and think 20 years ago, when credit cards were really dominated by the big five banks, if I’m a community bank or credit union regional bank, it was at that time when I said, Hey, we need to start offering this type of product and service because our customers use it. And we see in within our checking accounts and savings accounts, we see the data, we see those payments going out to chase going out to Barclays and American Express. So we need to have a competing product to not just to just not lose the credit card relationship, but the entire relationship entirely, right? Because why would chase offer my customer credit card? Well, they also want their deposits, right, they want the most profitable pieces of that relationship. And I need to offer a credit card to have a competitive advantage and make sure that I’m offering the right products and services that my customer customers want. And you can say the same thing about personal loans, auto loans, he locks, mortgages, investments, insurance, etc. Right. So these are all different products that financial institutions wrap around to make sure that they stay competitive in the marketplace. Well, if you look at the younger generations, so I’m talking, you know, 18 to like 35 year olds, they prefer installment lending. And there’s a lot of data that backs this up, they prefer installment lending over more traditional credit products for all the reasons we talked about. It removes friction, there’s, there’s less personal reasons like if I’m declined for buy now pay later, a machine told me not not not a lender, not not not a banker, right? And that that is sometimes more comfortable for a younger person being declined, then actually applying for something and being rejected. So if I, if I’m a banker looking for ways to not only attract, but retain the next generation, I need to make sure I have the right products and services and buy now pay later is just one of those you can you can apply the same lens to setting up a 401 K right setting up an investment account, you can apply the same lens to peer to peer lending, right? Do I want to click a button and southern digital banking to send my buddy $30? Or do I need to go download, like a square app or a Pay Pal app to do the same? Because my bank doesn’t offer those types of technologies. Having that holistic experience baked inside of digital banking is really how you can attract and retain Gen Z.

Whitney McDonald 07:41
No, outside of Gen Z. How else are like other age groups responding to the vinyl? Hey, leader?

Bryce Deeney 07:49
Yes, yeah, it’s a great question. The older I’m a millennial, and I guess I that would make me middle aged now. Which sounds weird saying out loud. I’m an I’m an older millennial. But my generation specifically, we aren’t part of the generation that was afraid of credit cards. So a lot of us do have credit cards. However, when we do make a purchase that’s way outside of our comfort zone. And I’m not talking about luxury purchases, I’m talking about an animal hospital bill, or a medical bill, or I went into Jiffy Lube because I needed an oil change. And turns out my engine was broke. So now I’m out $3,000 instead of 50 bucks. When those types of things happen. It might if I’m at the point of purchase, do I want to go apply for a loan? Or do I want a 32nd opportunity to split up that payment over time? Right? So that’s typically how Gen X and millennials look at buying calculators. It’s that point of purchase or really point of pain, financing that is immediate and seamless. And it integrates with my bank account. So it’s super easy for me to take advantage of.

Whitney McDonald 08:57
Great, thanks for explaining that. Any other automated processes or anything along those lines that clients are asking for right now that that you’re aware of?

Bryce Deeney 09:09
A big reason why most banks and credit unions have yet to get into by now pay later is because they’re LLS and their underwriting risk is all reactionary. So somebody fills out an application, it then hits my system, we try to automate the system process as much as possible. But more often than not somebody touches that alone. Right. So that’s one of the unique advantages of our platform. And I know that there’s others doing like aI underwriting as standalone products. But we’ve baked that into our platform, and automated the underwriting component and using the bank’s risk profiles. But turning that into an automated way, is something that we’ve heard over and over and over again, is the biggest hurdle to run faster and create a better frictionless experience for consumers. Is that automated underwriting process? So that’s one thing that we take to heart. You know, in our first year of business, we’ve signed up to 16 financial institutions in the US, and we work with all of them on automating these underwriting processes. And most of them have actually asked us, hey, you’ve solved this problem for small dollar lending? Can you also apply that to other types of loans? The answer is yes, we’re just really focused on Buy now pay later today. One of the common things I am asked is, what’s the value benefit of buy now pay later from these third parties from Klarna? Firm after pay? Not to the consumer, but like their business model? why did why did they choose Buy now pay later. And it really, if you look at the consumer money movement for a consumer, right, you have p2p lending, you have Savings Investments and checking account. And then most banks, try to become a super app and do all of it. Most third party fintechs start with one and then they one of those endpoints, and then they wrap around the rest of the banking services. So I think it’s important to note that just like PayPal, or square, or even Apple today, a lot of these third parties are trying to take the most profitable pieces of that consumers money movement journey. And that’s what they’re productizing. And if I’m, if I’m a bank, and I have deposits, somebody has their direct deposits coming in to me, if I don’t have the ability to offer those other services, I’m actually not taking advantage of the most profitable pieces of that relationship. And what I find is a lot of banks are really good on the small business side or the commercial side, right, because they have all the real estate loans, commercial loans, insurance and investment component. But when it comes to consumers, they tend to be a little bit behind the ball on offering the right types of products and services for the younger generations to turn those relationships into profitable ventures. And you can say the same thing about cryptocurrency or investments or in our case, small dollar lending. So that’s typically an area where when we do work with a bank, they send us all their data, and we actually comb through it and do a pro forma and show them out of all their younger generations. How many you’re actually using Klarna a firm afterpay sezzle. What are those dollar amounts and how much revenue are they potentially losing to those third party fintechs most banks, especially on the smaller side, have not done those types of analysis before.

Whitney McDonald 12:39
You’ve been listening to the buzz, a bank automation news podcast, please follow us on Twitter and LinkedIn. And as a reminder, you can rate this podcast on your platform of choice. Thank you for your time and be sure to visit us at Bank automation news.com For more automation news

Whitney McDonald 00:08
Hello, and welcome to the buzz of bank automation news podcast. My name is Wendy McDonald and I’m the deputy editor of bank automation news. I’m joined by Bryce Deeney, chief executive and co founder of Equipfi. He discussed how financial institutions can attract and retain millennial and Gen Z clients by offering automated services and desired products.Bryce Deeney 00:29
To understand how our technology works, you need to in my opinion, you kind of need to also know the business case or like why would a would a bank actually want to adopt this type of technology. So like at the very base level, most people know that by now pay later is it gives a consumer the ability to split up their payments over time, outside of a more traditional credit line, which is usually like a personal loan or a credit card. typically buy now pay later is tied to an individual purchase or a group of purchases, right. So it could either be you’re going to Jiffy Lube, buying something for $400, a service, or you’re buying a pair of sneakers, or sometimes even like you’re buying a trip to Hawaii and you want to bundle your airline ticket, your hotel stay and all your meals into like a 12 month installment plan. So that’s based on the what consumer buy now pay later is. Our platform enables financial institutions, banks credit unions in the US to offer this type of service to their customer base on the retail side. So we essentially built an AWS cloud platform that integrates into both core banking solutions and digital banking solutions as a white labeled service, enabling banks to have an automated workflow to where their card holders will go out and use their card every day as as they do today. As they have transactions and purchases that qualify based on the risk profile of that bank, those consumers will receive a text message push a push notification, or an email from the bank, notifying them that they have an offer. The entire user experience is actually baked into digital banking. So we built App Extensions into the majority of the digital banking platforms in the US to make that very easy adoptable platform for the bank. And then once a consumer accepts a plan, we then write that as a loan, micro loan back to the core banking system. So we automated the entire workflow. That way, the bank doesn’t have to have full time staff looking at these loans, booking these loans working these loans. They’re very hands off once the platform is set up.Whitney McDonald 02:41
Okay, great. Now kind of weaving into the automation that you were just talking about what can financial institutions do to make sure that they are providing automation that their clients are asking for?Bryce Deeney 02:53
Yeah, when I look at automation, I think there’s two different important topics. The first is from the consumer standpoint, right? So why do consumers like buy now pay later? There’s a lot of financial reasons why they like it, because it no longer ties them to I need to go get a $15,000 credit card, I can now just fractionalize Borrow money when I want to borrow money tied to this specific purchase that maybe is outside of my normal comfort zone. So automating that process versus just having the standard? Well, if you want to borrow 500, or $1,000, click this link on our website and apply, we’ll let you know if you’re approved. Right. So because FinTech like the affirms, of the world have removed that friction, a lot of consumers, especially younger consumers, consumers, millennials, and Gen Z’s really like that automation advantage that Silicon Valley has over their community bank. So that’s the first part, right, which is like removing that friction. The second piece is I actually was a banker in my previous life, and I ran lending and payment products. And what I found was anytime we offered a lending product alone under $1,000, we wouldn’t make money. And it wasn’t because the consumer didn’t pay back. It wasn’t because we couldn’t charge interest for it. It’s because too many full time employees, both in finance and risk in and collections and payments, had to touch these loans. So we would we would not actually net revenue on these small dollar loans. So that’s one of the biggest problems that equipped by what we’re solving is we’re fully automating the entire experience from the bank level. That way, once they have this program set up, they can literally issue 1000s of small dollar loans on short term payments, and they don’t have to have full time staff touching his loans at all.

Whitney McDonald 04:45
Now, if we can shift a little bit talking about the consumer experience itself, how can financial institutions make sure that they’re not losing that personal touch with their customers when and if they need it?

Bryce Deeney 05:00
Sure, by now pa leader is is a relatively new concept, right? It’s only been at least in the US, it’s been a, the dominant new player in payment trends for consumers. If you take a step back and think 20 years ago, when credit cards were really dominated by the big five banks, if I’m a community bank or credit union regional bank, it was at that time when I said, Hey, we need to start offering this type of product and service because our customers use it. And we see in within our checking accounts and savings accounts, we see the data, we see those payments going out to chase going out to Barclays and American Express. So we need to have a competing product to not just to just not lose the credit card relationship, but the entire relationship entirely, right? Because why would chase offer my customer credit card? Well, they also want their deposits, right, they want the most profitable pieces of that relationship. And I need to offer a credit card to have a competitive advantage and make sure that I’m offering the right products and services that my customer customers want. And you can say the same thing about personal loans, auto loans, he locks, mortgages, investments, insurance, etc. Right. So these are all different products that financial institutions wrap around to make sure that they stay competitive in the marketplace. Well, if you look at the younger generations, so I’m talking, you know, 18 to like 35 year olds, they prefer installment lending. And there’s a lot of data that backs this up, they prefer installment lending over more traditional credit products for all the reasons we talked about. It removes friction, there’s, there’s less personal reasons like if I’m declined for buy now pay later, a machine told me not not not a lender, not not not a banker, right? And that that is sometimes more comfortable for a younger person being declined, then actually applying for something and being rejected. So if I, if I’m a banker looking for ways to not only attract, but retain the next generation, I need to make sure I have the right products and services and buy now pay later is just one of those you can you can apply the same lens to setting up a 401 K right setting up an investment account, you can apply the same lens to peer to peer lending, right? Do I want to click a button and southern digital banking to send my buddy $30? Or do I need to go download, like a square app or a Pay Pal app to do the same? Because my bank doesn’t offer those types of technologies. Having that holistic experience baked inside of digital banking is really how you can attract and retain Gen Z.

Whitney McDonald 07:41
No, outside of Gen Z. How else are like other age groups responding to the vinyl? Hey, leader?

Bryce Deeney 07:49
Yes, yeah, it’s a great question. The older I’m a millennial, and I guess I that would make me middle aged now. Which sounds weird saying out loud. I’m an I’m an older millennial. But my generation specifically, we aren’t part of the generation that was afraid of credit cards. So a lot of us do have credit cards. However, when we do make a purchase that’s way outside of our comfort zone. And I’m not talking about luxury purchases, I’m talking about an animal hospital bill, or a medical bill, or I went into Jiffy Lube because I needed an oil change. And turns out my engine was broke. So now I’m out $3,000 instead of 50 bucks. When those types of things happen. It might if I’m at the point of purchase, do I want to go apply for a loan? Or do I want a 32nd opportunity to split up that payment over time? Right? So that’s typically how Gen X and millennials look at buying calculators. It’s that point of purchase or really point of pain, financing that is immediate and seamless. And it integrates with my bank account. So it’s super easy for me to take advantage of.

Whitney McDonald 08:57
Great, thanks for explaining that. Any other automated processes or anything along those lines that clients are asking for right now that that you’re aware of?

Bryce Deeney 09:09
A big reason why most banks and credit unions have yet to get into by now pay later is because they’re LLS and their underwriting risk is all reactionary. So somebody fills out an application, it then hits my system, we try to automate the system process as much as possible. But more often than not somebody touches that alone. Right. So that’s one of the unique advantages of our platform. And I know that there’s others doing like aI underwriting as standalone products. But we’ve baked that into our platform, and automated the underwriting component and using the bank’s risk profiles. But turning that into an automated way, is something that we’ve heard over and over and over again, is the biggest hurdle to run faster and create a better frictionless experience for consumers. Is that automated underwriting process? So that’s one thing that we take to heart. You know, in our first year of business, we’ve signed up to 16 financial institutions in the US, and we work with all of them on automating these underwriting processes. And most of them have actually asked us, hey, you’ve solved this problem for small dollar lending? Can you also apply that to other types of loans? The answer is yes, we’re just really focused on Buy now pay later today. One of the common things I am asked is, what’s the value benefit of buy now pay later from these third parties from Klarna? Firm after pay? Not to the consumer, but like their business model? why did why did they choose Buy now pay later. And it really, if you look at the consumer money movement for a consumer, right, you have p2p lending, you have Savings Investments and checking account. And then most banks, try to become a super app and do all of it. Most third party fintechs start with one and then they one of those endpoints, and then they wrap around the rest of the banking services. So I think it’s important to note that just like PayPal, or square, or even Apple today, a lot of these third parties are trying to take the most profitable pieces of that consumers money movement journey. And that’s what they’re productizing. And if I’m, if I’m a bank, and I have deposits, somebody has their direct deposits coming in to me, if I don’t have the ability to offer those other services, I’m actually not taking advantage of the most profitable pieces of that relationship. And what I find is a lot of banks are really good on the small business side or the commercial side, right, because they have all the real estate loans, commercial loans, insurance and investment component. But when it comes to consumers, they tend to be a little bit behind the ball on offering the right types of products and services for the younger generations to turn those relationships into profitable ventures. And you can say the same thing about cryptocurrency or investments or in our case, small dollar lending. So that’s typically an area where when we do work with a bank, they send us all their data, and we actually comb through it and do a pro forma and show them out of all their younger generations. How many you’re actually using Klarna a firm afterpay sezzle. What are those dollar amounts and how much revenue are they potentially losing to those third party fintechs most banks, especially on the smaller side, have not done those types of analysis before.

Whitney McDonald 12:39
You’ve been listening to the buzz, a bank automation news podcast, please follow us on Twitter and LinkedIn. And as a reminder, you can rate this podcast on your platform of choice. Thank you for your time and be sure to visit us at Bank automation news.com For more automation news