Charged Up! podcast: Financial tools to make your life better
Episode 62 with venture capitalist Bill Malloy
Venture capitalist Bill Malloy, with San Francisco-based Sway Ventures, talks about the latest tools in the marketplace to take your finances to the next level. From an app that manages all of your assets – money, investment funds, real estate – to a virtual credit card that consolidates your debt so you can pay it off faster, there are tools we can use to automate our financial lives. Malloy also discusses where the retail space is headed, what to expect when you shop in the next five years and how banks need to compete in today's space.
So, let's get Charged Up! about discovering the future of finance!
Jenny Hoff: Bill, thank you so much for joining me today.
Bill Malloy: Thank you for having me. I'm excited to talk about all things technology and fintech.
Hoff: Absolutely, I think it's a really interesting topic because we kind of hear Fintech being thrown around, but for a lot of people they're wondering what does that mean other than the app for my bank or maybe I use Mint or something like that, so we're going to get a little bit deeper into that topic. But first let's talk about your background and how you're involved in the Fintech and technology space.
Malloy: Yeah, I've been fortunate enough through my career to work with some great entrepreneurs, even today working with companies like Le Tote and Tally. But for me I started as an engineer, my first two companies were actually in the digital media space in Silicon Valley in California, a product in company called Rhapsody which we sold to Real Networks. And then a company called Music Match which was the first company or first software for the first iPod, we sold that to Yahoo.
Hoff: Oh, wow.
Malloy: So my kind of transition to the finance side was after business school I became a venture capitalist at DFJ's and venture, and I've always kind of approached finance and investing in a really from the product focus first, product and teams, and then I think having the financial and investment overlay has been really helpful as I kind of drill into Fintech, being able to understand team's product, as well as the financial services space.
Hoff: Absolutely, and a lot of people that are listening to this are interested in how to take better control of their finances or how can they achieve their budgetary goals or how can they invest better, and there are so many products out there in the market now really answering a lot of these needs, needs we didn't even know we really had.
I was at a conference recently where I just saw dozens of apps and tools being created to make banking, budgeting, and investing easier for people.
One thing someone said was that the way banks will compete in the future is by offering lifestyle type services instead of just traditional banking services. And I don't know if you've seen these, but Capital One now has these cafés where they have meeting spaces, they give you discounted coffee drinks, they have a banking person on hand to answer your questions. Do you see this as kind of the future of how we deal with our banks?
Malloy: Yeah, it's a great observation. I mean, I think if you use the Capital One example, in my mind they're trying to figure out how do they look cool and appeal to a certain target customer. From a strategic standpoint, and I go in from banking to a lifestyle company probably doesn't make sense from a profitability standpoint. But I think the honest answer is traditional banking, let's talk about it in terms of US bank branches, are struggling.
So since 2010, and then a negative net change, and it's basically the fastest decline on record since they started recording this. So I think the macro trend here is end-consumers are shifting to more of a digital product and digital lifestyle, and traditional banks, branches, retail are trying to figure out if you have a fixed asset how do you try to leverage that in some way somehow?
In the long run I don't think that's the answer, but in the short run does it help appeal to some certain target customer? Probably.
Hoff: Well, I guess from a branding perspective, right? So now you can go online and just look for the bank that gives you the best interest rates and you can just sign up with them. That doesn't have to be the bank down the street that you have to go meet with the person in person and do all of that, and so I think the competition got a lot heavier for those banks now, and so from a branding perspective it's interesting to me because as we do see things going digital, we also see now this trend toward - if it's not going to be digital it has to be a lot more personal with you and not a cold experience, do you see that? Especially, I mean, I'm even seeing this with shopping malls with shops, it has to be more of an experience than just a transactional relationship.
Malloy: Exactly, right? I think just to your earlier point, I think everyone's looking for unique ways to differentiate, like retail - how do you make it more personal? And honestly on digital it's also about personalization, right? How do you use data to make the experience more personal? And then I think the endgame for a lot of people is how do you bridge the gap, going to your Capital One example, how do you bridge the gap between the retail experience and data that you capture there and your online experience and the data that you capture there?
Hoff: Yeah, absolutely. And now like kind of going into we were talking about different products that are out there that can help people with their investment needs or their banking needs, and we may not even realize that they exist. I'm sure most people have heard of things like Mint for example where you can kind of enter all your bank information and credit card information and keep track of your budgets, but there's a lot of tools out there.
What kind of products do you see that could be game changers or at least extremely valuable to the consumer when it comes to credit cards, managing them, and maximizing them?
Malloy: Yeah, I've been really fortunate to work with an amazing team in a company called Tally, it's meettally.com. So we're an investor, I'm on the board, and it's actually staggering and I've been able to talk to a lot of end-consumers that are actually in this situation, but about half of all Americans actually have credit card debt. And it ends up becoming like a big emotional drain on them and on their families.
So I think everyone that is in debt, if one out of every two people that you come in in the contact with actually has and carries a credit card debt, is there a faster and easier way to pay off these credit cards? And I think Tally's come up with a digital first way to completely automate the process of credit cards, of payments, of getting the lowest interest rate, and frankly helping people save thousands of dollars along the way. So I'm really proud of what the team's done today as well as what they'll continue to build to help the people that are listening to this make their lives a little bit better.
Hoff: So what kind of tools are out there to make their lives easier? So as far as, okay, so Tally, what specifically do they do? And are there other apps that you've seen out there that people can keep track of all of their credit cards and get them paid off as quickly as possible?
Malloy: Yeah, so what Tally does, it's a mobile first credit card, so it allows you to consolidate all your credit cards to pay down your balances faster, to give you transparency in the fees and interest rates. And I think the reality is when you look at it it's almost a monopoly, I mean, there are really four companies that control the consumer credit space and those four are public.
And the fees that they're charging, interest rate and late fees, you end up getting them to 20 to 25 percent interest rate. So you can still have a great business while providing end-consumers more transparency, a better way to consolidate, a better way to pay down. So that's Tally's angle.
I think there's some other great companies that are more coming at it from - I'll call it the financial services space. We were one of the first investors in a company called Addepar. It's a platform that handles all of your assets, it's a way to connect all your financial goals and objectives into like actionable insights.
It sounds like a very easy and solvable problem, but it is actually very, very difficult. The first culmination of this company was a spin out of a company called Palantir, which kind of focused on solving big data problems for the government's financial services, so that's another kind of tool I think people can think about.
Hoff: So kind of putting all of your goals in there, your banking information, your assets, your 401K, everything in there so you can keep track of how your retirement fund is going, how your big budget goals are going, that kind of thing?
Malloy: Exactly, and doing that across asset class, and making it independent of where you actually house your assets. You may have an asset in your car, your Prius or your Toyota, whatever it may be; you may have assets that you've inherited from a family member or your 401K. So it's independent of custodian and independent of asset type.
Hoff: Interesting, and I know I've done several stories in the past and kind of just the issues people have where they have switched jobs several times and they have for 401K plans, or plans that they don't even realize they still have or know where they are, and it's a huge problem once somebody passes away in the family and if that information isn't all somewhere where it's easily accessible it can create a huge headache for a lot of people. So it's interesting to see if products like this that are enabling you to put everything that would be considered an asset not just liquid or not just money per se into one app to use. That's interesting to know. I encourage you to check that out.
Also now that we talk about investment services, I want to get your take on this, so Alibaba, the world's biggest online commerce company based out of China is now also the world's largest money market fund. Do you see that happening here in the US? For instance do you see Amazon starting to offer investment services and portfolio management based on all the data that they have on consumers? What changes do you see happening in how we manage our money?
Malloy: Amazon it feels like they are taking over the world. Jeff started with books and now he's doing everything. I think it's a fair question to ask. Who knows is the short answer given everything that Amazon has access to and can do.
But the reality is I don't see Amazon doing this in the short term. I mean, they're very focused on computer vision, what they call drones, anything falling from the sky, logistics to be able to deliver the end-consumer's goods and obviously Amazon Echo - kind of the whole voice personal assistant. So I think they have their hands full.
But on the investment services side I think it does go back to the companies like Addepar. Some of the things Palantir has been doing for large financial institutions that do give investors a place to get a clear financial picture, I'm just not sure Amazon's going to be the one to do it in the near future.
Hoff: You don't think they're going to follow in Alibaba's footsteps?
Malloy: I just think it's a different consumer base, and how we actually think about consuming technology as well as a different market, right? When you think about Asia, for example like on WeChat, like anything and everything is done through WeChat, so for you to manage your money or call your ride-share or to pay friends or to rent a bike, like it's all done through there. I'm not necessarily sure given where the US market is from a financial services standpoint if Amazon's the best company to go in and do that. But Amazon's an amazing company, so who knows, I just think they have their hands full right now.
Hoff: Yeah, absolutely. You also work at the augmented and virtual reality space, how do you see that impacting how we shop, how we interact with brands? We're already seeing shopping malls across the country going dark, but still the majority of shopping is done offline. So have you seen any really successful alternatives to traditional brick and mortar stores, one that are more experience-based and not selling the product there but just showcasing it?
Malloy: Yeah, so I don't think that virtual and augmented reality has hit mainstream yet, but I do think there's some encouraging technologies that we as consumers can start to think about in the future. So I think you can think about, and I'll give you some use cases, and then I'll apply it to an investment that we've made.
So, 3D scanning technologies, like how do you use the images and ideas in a 3D scan to predict the types of clothing that are going to fit? I think using augmented reality as a way to where before you buy, especially with what has now been enabled in Apple's latest iPhone with their AR Kit.
And then there's this idea of kind of the virtual personal shopping, kind of remote purchases of clothing, real-time assistants, and to me that's more of like in a social interaction component. So there's a company called Penrose, there was a company called Oculus which sold a Facebook for over $2 billion, and one of the heads there, Eugenie, who headed a story studio within Oculus launched Penrose.
So Penrose Maestro is a tool that allows social collaboration. Today it's really around building a unique worlds, but you could kind of fast forward in the future to say, "Once the devices both augmented and virtual reality start to proliferate through the end-consumers that you could have that social world for a personal shopping.
I think the limitation today in virtual and augmented reality is just honestly the use cases. I think mainstream consumers are using it every day. So my prediction is that augmented reality is actually going to leap frog virtual reality, just because of the accessibility, because if you just look at the iPhone when they launched AR Kit in the latest SNX, what that enabled almost overnight dwarfed anything from a market size and what had been happening within virtual reality. It's different use cases, but I think augmented reality will hit the mainstream consumer a lot faster than virtual reality world.
Hoff: So an example you said was let's say if you're shopping at home for instance and you want to buy an outfit, because I think up a problem right now for online commerce is that things like clothes and stuff you want to see what it looks like on you before you buy it, and getting it and returning it is a bit of a hassle. And it's not a store that gives you free returns it's also expensive. So do you see augmented reality then playing that role where essentially you can just use your phone or use something like that to see how the outfit looks on you and how it fits before you had to purchase it and that would help increase sales online instead of having to go to a store to try to on?
Malloy: Exactly, right? It could be a virtual shopping experience, it could be a social interaction with a personal shopper, instead of having to go into the store you could go into this world, imagine me using quotes in virtual reality where you could try them on because you have your measurements, I mean, you kind of have to close your eyes and imagine the future, but the technology is starting to be there.
Hoff: Very interesting. Recently an Amazon Go store opened in Seattle where customers can go in, pick out the products they want and leave, all without standing in line for register or having to scan their items themselves. Obviously this removes the barrier to spending even more, and it's a risk to the consumer in a sense that we could easily overspend without realizing it. What are your thoughts on that?
Malloy: Yeah, look, again going back to Amazon, I got a lot of great friends that work there and I think a lot about the company. I think it's less about removing barriers and really about removing cost, right? Like how do you take this software, a logistical infrastructure and remove a lot of the fixed costs so Amazon can continue to provide low-cost goods to the end-consumer while still making margin.
So I think it's then using technology to drive better commerce from a consumer standpoint. We made an investment in a company called Le Tote, which has a mission to make fashion accessible to everyone, right? And they have a unique way to leverage data to provide a fashion experience to female customers, you can rake clothes, you can buy clothes, but it goes back to the same theme, right? How do you remove barriers by using technology to allow people to interact with commerce in different ways?
Hoff: That's true, and while that may not be what their ultimate goal was we do know that with credit cards people tend to spend more than if they just pay with cash. And so as to be kind of remove barriers, the pain to pay for example, from the equation do you see that impacting how much people spend? For example I think this one professor from NYU, he mentioned that right now people spend about $1400 a year as Amazon Prime members, but that could go up to $8,000 a year if the technology gets up to speed where Amazon can predict and deliver to your door what you need even before you know it. Have you heard of anything like that? Or I mean, do you see this as the future?
Malloy: I do, right? I think a lot of companies, going back to Le Tote and Amazon, that are using data - how you interact, how you buy in order to make better and more personalized recommendations to you. I mean, it's amazing to think that Jeff started with books, right?
And part of the reason he started with books back in the day was like your copy of “Gone with the Wind” that you buy online is going to be the same copy that you buy in a store. You don't have to worry about is this the color red that I like for this blouse or this tie, so he's been able to expand not from things that don't need to be personalized into personalized, and I think with Amazon and with Le Tote you'll continue to see this drive of using data to drive personalization so that you can get goods that you want faster and cheaper, right?
Because that a part of this is you can start to some extent, you can start to use technology to make things more affordable and kind of eliminate that last mile of delivery, which is a key component where we're investing today - how do you since this wave of commerce has been happening, there hasn't really been big investments in unique infrastructure to deliver those goods. So I think in the next five to ten years you'll see a lot of investments in infrastructure.
It'll happen behind the scenes, but what it means is we as end-consumers will get things that are better personalized, that are quicker and frankly that are going to end up being cheaper, because software and technology can help.
Hoff: Yeah, and I mean, that's even a whole another discussion about how brands can compete with companies like Amazon and other companies that are really like driving hard on getting stuff delivered to as quickly as possible, that's a hard place to compete in and consumers are now used to that. How do you see us interacting with our credit cards, our investments and our bank accounts five years from now? Do you think that there's going to be an Uber for banking that will essentially upset the entire industry and change how we interact with banking? Or do you think we'll just have more app choices but more or less do the same thing as we're doing now?
Malloy: I think if you look into the future what are some of the things that I see, I think definitely this concept of plastic will go away. I think there's been a lot of companies including Tally that are approaching this from different angles. I think we're going to have better transparency, and I think financial advisers will go down kind of two paths, right? I think some of them will just be replaced by computers because many consumers may want to just manage their own money as they get tools.
Or, for financial advisors, their lives will just be much easier. It's this idea of advanced enterprise where people or analysts or advisers can use technology to let them focus on things that they enjoy doing more of – education and relationships with the end-client. So I think they can impact plastic, it can impact transparency, and it can impact the financial advisers that are managing or helping us manage our money.
Hoff: Have you seen anything being out there in Silicon Valley that seems like it could really upset the industry or not yet?
Malloy: I go back to two of the companies that we mentioned. I mean, Addepar has really disrupted the financial services space when it comes to reporting analytics transparency. And, I think Tally while it's early, I think at the end of the day is providing end-consumers with a better way to manage down their credit card debt.
And if you think about one out of every two people you meet on the street is actually carrying credit card debt, it's a massive problem. Unfortunately I don't think it's talked about enough, so I think thanks to you, Jenny, and what you're doing here, it bubbles up some of the things that I think can be a big emotional burden to individuals as well as to their families.
Hoff: Yeah, absolutely. And can you go into a little bit describing how Tally works? If I'm somebody who has no idea what Tally is but I've got five credit cards and three of them are carrying a balance, how would I use Tally to help me with that?
Malloy: Yeah, so you could go to meettally.com, and the overall concept is they're still lending, right? They're lending you money but it should be fair and APR is right, or the interest rate should be low. So you can download the app on an iOS device. It consolidates all of your credit cards basically into a mobile application.
And then depending on what your credit scores are and where you are from a state standpoint, they're not licensed in every state yet, they will be able or not to provide you credit. So then you can manage to continue to use your credit cards every single day or never, and then it will automatically pull the balances while you're paying a lower interest rate than you would have from those other five cards.
And their goal in what they're doing is really to help you automate your financial life - how do you get better transparency in the fees that may be coming? And then how do you start to pay down that debt? And eventually it'll expand beyond credit card debt, but today that's the easy way to solve. Take your five, keep using them the exact same way that you're using them, and you use the application to get lower interest rates, lower fees and make your financial life easier.
Hoff: So you would just make your payments through Tally, and maybe just make one payment a month and Tally organizes paying off those cards?
Malloy: Yeah, exactly.
Hoff: Okay, very interesting. Well, you've mentioned Tally a few times, but what tools could we be using right now to better our financial lives? What other ones do you know of that you think that we're missing out on if we're not using them?
Malloy: I mean, it's interesting, I mean, I think I will give kudos to a lot of the banks or financial institutions that a lot of us are probably working on. They continue to roll out new products from a digital standpoint that most of us probably don't even know about, so I would encourage you all whether you take with a traditional bank or a financial adviser, call them and just ask them - what are the tools that you're operating on your platform that I can be using that are going to help provide a better and easier financial life?
Because a lot of them they release them, but we don't end up finding out about them. So I'd encourage everyone to kind of ask your bank, ask your financial adviser what are the new tools that we could be using, because my guess is that a lot of them are available today and we're not even utilizing, they're offered for free from our existing financial institutions.
Hoff: Well, that's true. A lot people don't even realize that their banks or their credit cards even offer an app where you can cancel your card immediately or stop spending on it if you lose it or misplace it, and even just like slight little things like that if you know that the tool is there and you use it, it can save you a big headache down the road. So yeah, that's good advice - call your bank and find out what tools they have available that you should be using to better manage your money right now.
Finally our show is called charged up, what gets you charged up about technology and how to change the traditional way we've dealt with our money?
Malloy: We have a theme internally called advanced enterprise, and I think what really gets me charged up is the idea that there are all these old line of industries we've been really focusing a lot on the financial space and financial services, and I think the right corporations want to do the right thing for end-consumers and technology is a way that they can leverage their existing infrastructure, going to the Capital One example, and use technology to help make our lives better, help make our interaction and our daily interaction in our businesses or end-consumers' lives.
So I think for me what gets me fired up is over the next 25 years I think technology will transform in advanced enterprises, which will eventually lead to how we interact with the world. So I'm excited, that Sway ventures, that we're able to invest in great teams, whether it's Addepar or Tally or Zanbato that's powering private markets or Le Tote in making fashion accessible.
So great teams build great companies, and I think it will eventually trickle down to us in how we interact in our daily lives.
Hoff: All right, Bill. Thank you. Great insights. I'm excited to see what the future has in store for us, and I really appreciate you giving us your time today.
Malloy: All right. Thank you so much.
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