The Braintrust: Ben Katz on How Fintech Has Changed Since CARD.com
When Ben Katz entered the Fintech space in 2011 it was hardly a space at all. The Fintechs of the moment focused on prepaid cards for customers the banks didn’t value or ignored completely. Katz launched CARD.com with a theory that customers wanted to display their affinity on their cards. His company would pair a great mobile banking experience with your favorite brand design on your Visa or Mastercard. Aaron Rogers, Marilyn Monroe, a state flag or many more designs. “We learned that one way to differentiate a product is by respecting people’s personal passions,” Katz says.
Nearly a decade later, CARD.com continues to compete in a much more robust Fintech space. Katz moved on from the company in 2016; he’s now President of TestMax Inc., CMO at Realty Mogul, and Executive Chairman at room share and coliving leader Haven Coliving in Los Angeles. We gave him a call last week to talk about what Fintech looked like when he was starting CARD.com and how it’s changed today.
Unifimoney: What was the Fintech landscape like when you founded CARD.com? What were you hoping to disrupt?
Katz: It was 2011 and it was really just Green Dot and Netspend. They were massive already at retail; tens of billions of dollars in gross dollar volume each. There was an up-and-comer called AccountNow that later got bought by Green Dot, as well as RushCard. There were a few little companies focused on different sectors of the Latino market: cross-border transfers with cards and solutions for migrant farmworkers, and things like that for payouts — lightly regulated consumer payroll cards for the 1099 migrant farmworker industry. There were also solutions for truckers. Much like now, a Brex will allow you to only let the salesperson spend money at restaurants and only up to $200 and only on weekdays between 11 a.m. and 3 p.m., that was already a thing for truckers because trucking companies needed to make sure the trucker spent the gas money on gas and not at the restaurant across the street from the gas station.
Unifimoney: It sounds like most of the products were focused on customers the banks had devalued or ignored completely.
Katz: Yeah, neobanks first succeeded in pockets where the banks just simply weren’t servicing. There wasn’t an appetite from the core consumer to switch in spite of the bad experience. There wasn’t enough of a trust level. As you probably are aware, I believe banks up until recently have had single digit annual churn numbers. And especially when you had to drive to an ATM that had a logo on it, and when you didn’t have a map in your pocket to show you where an ATM is, ad hoc, without a logo on it in a new city. When everyone got Androids and iPhones and could take a picture of a check and then simultaneously find a pin on a map to get cash out, that was the unlock for mobile banking.
The iPhone is 13 years old, give or take, and that opened up the Fintech space. The iPhone and the Android could tell you with GPS where to find a 7/11 in an unfamiliar neighborhood to pull your cash out. And then on the deposit side, taking pictures of checks, underwriting the fraud risk on checks through the cloud through backend datasets, automation of KYC through the cloud really opened it up. Then, finally, the API-level layers of companies like Marqeta, as well as other processors, led to service companies like CARD.com, Chime, Simple, and other early neobanks in the US which led to where we are now.
Unifimoney: If you were starting a Fintech service or challenger bank today, what customers or what slice of banking would you target?
Katz: You know, I’m still a believer in affinity. There’s a company that launched a Grand Reserve World Mastercard for wine enthusiasts, with dionysian regards. Cardless is a credit card company I advise, and they’ll be launching some massive affinity partnerships in 2021. It’s a cool thing. The answer is, I think consumer-facing Fintech space is incredibly tricky in a modern era. The winners on all this are going to be the immediate portals that Facebook and Instagram and Google and YouTube, and to a degree, influencers. People should be partnering more with influencers as a way of differentiation, the way Cash App has, for example. But in general, I think consumer banking is becoming incredibly competitive, and also the customer lifetime is getting lower and lower.
Unifimoney: We view the next step in Fintech as a rebundling of services and using tech to build a targeted product for a specific customer. If you had to look forward, what do you see as the next frontier of Fintech/challenger banks?
Katz: Well, my friend Hooman Radfar just left to be CEO of Collective, another company like Unifimoney that’s focusing on rebundling. It’s a Fintech for independent contractors that’ll be your starting point for your bank, but also your legal and for your tax. I don’t want to put words in their mouth, but I picture that it’s for a graphic designer or a coder who probably doesn’t have the best tax advisor and doesn’t know that he or she can write off their laptop or even their coffee when they’re meeting with a client and things like that. By optimizing that, by scaling it, by having AI that scans receipts and prompts you to make the right choices on spend each time you go somewhere. Using that to tunnel into all your data about your transportation, your spend, and your QuickBooks is a highly value-added service that will pull valuable customers out of a bank and into a new high-quality Fintech service. And it’s kind of an interesting thing because it’s marketed to an end consumer that’s probably a one-person company, but it’s, technically speaking, an enterprise solution.
I think another company worth noting is Realty Mogul, where I serve as Chief Marketing Officer. We offer crowdfunding for equity investments in real estate. You already know 30% of your money goes out to rent, but what you don’t quantify properly is that also you get paid a little bit less by your employer because they might be paying rent for you to sit there. And when you buy an apple, that piece of fruit sat in a warehouse, it sat on land known as a farm, it sat in a Whole Foods in a bougie neighborhood, right? So actually when you buy a $1 apple, like 13 cents of that is real estate cost. So, it turns out real estate truly makes up about 40 or 50% of everyone’s spend.
And so, if you’re trading in the market or with a service like Robinhood and you don’t have 10 to 20% of that money in real estate, then that’s not the right wealth-building strategy as an inflation hedge. Our goal is to democratize access to solid real-estate deals with great yields.