The Digest: October 2020

By on October 15th, 2020 in Industry Insights

For this edition of The Digest, we’re taking stock of what we’ve learned so far from the economic impacts of COVID-19, its implications for collections and emerging fintech trends. Here are some headlines that caught our attention:

What to keep an eye on:

  • The New York Times recently published a fascinating data visualization report that shows that the number of job losses that are permanent is increasing, providing “a view of the dynamics shifting beneath the surface…of potentially lasting consequences of the crisis.” 
  • The future of upcoming stimulus payments remain uncertain, with this timeline of events explaining how we got to where we’re at today. There may be some movement made this month, as McConnell stated on Tuesday that the Senate will vote on a limited coronavirus stimulus bill.
  • We’ve seen the rise of many “buy now, pay later” providers, and on the heels of its $500M Series G round, Affirm has now confidentially filed to go public. Affirm will join Afterpay as the second pay-later fintech to hit public markets. While there haven’t been many fintech IPOs this year, Affirm’s listing could encourage others to do the same via IPO, direct listing or SPAC route.
  • In a long time coming, the CFPB is getting ready to update its rules around collections and technology, with text messaging and emails formally recognized as communication channels. We’re waiting with bated breath, and proud that the work we’re doing in pioneering digital collections meets consumers on their preferred channels.

What we’re excited about:

  • We’re honored that our very own Sheila Monroe has been recognized as one of the Top 25 Women Leaders in Financial Technology of 2020 by The Financial Technology Report.
  • We’re hosting a webinar next Wednesday 10/21 on the future of digital collections. TrueAccord’s Chief Product Officer Laura Marino & our team of product experts will give a behind-the-scenes look at TrueAccord’s latest product features that deliver peace of mind to consumers and enhanced results to creditors.

The Digest: September 2020, part 2

By on September 25th, 2020 in Industry Insights

In this edition of The Digest, we’re looking towards the future. After all, Q4 is right around the corner, and after that, 2021 will be here before we know it. Here are the headlines we’re thinking about as we look ahead.

  • TrueAccord CEO Sheila Monroe gave her thoughts on what’s next for collections in the latest episode of one of our favorite financial services podcasts, Credit Eco 2 Go.  Sheila shared her optimism on the potential efficacy of multimedia collections communications and emphasized how “the one-size-fits-all approach” is no longer a viable option for reaching out to consumers in debt.  
  • Chime is now the most valuable consumer fintech company. Speaking to Chime’s appeal, CEO Chris Britt noted, “Nobody wants to go into bank branches, nobody wants to touch cash anymore, and people are increasingly comfortable living their lives through their phones. We have a website, but people don’t really use it. We’re a mobile app, and that’s how we deliver our services.” The future of mobile banking is looking brighter than ever.
  • What does the financial future of American families look like? If the present is any indication, there may be painful times ahead. A new NPR poll finds “very substantial proportions of households reporting that their savings have been depleted by the pandemic (if they had any savings to start with).”  Robert J. Blendon, executive director of the Harvard Opinion Research Program, predicts that “it’s going to get worse because there is nothing for the people we surveyed who earn under $100,000 a year to fall back on.” 

3 Sessions We’re Excited to (Virtually) Attend at Lendit Fintech USA 2020

By on September 24th, 2020 in Company News, Industry Insights

The LendIt Fintech USA 2020 conference is just around the corner on September 29 through October 1, with an exciting lineup of industry experts from leading traditional banks, fintech platforms, and tech companies discussing innovations in lending, digital banking, embedded finance, and more. Here are the three sessions we’re most excited to attend:

1. The Next Level of Fintech: Building your Customer Ecosystem

When: September 29, 11:30am-12:00 pm EDT

The speakers: Craig Boundy, CEO of Experian North America, and Peter Renton, Chairman at Lendit Fintech

Why we’re excited: Customer loyalty and meaningful engagement matter more than ever as the landscape of consumer fintech products and services becomes increasingly crowded. Experian North America CEO Craig Boundy will discuss how his team leverages data and technology innovation beyond just customer acquisition but to also earn consumers’ loyalty for the long haul.

2. New Approaches to Collections in Times of Crisis

When: September 29, 4:20-5:00 pm EDT 

The speakers: Ohad Samet, CEO of TrueAccord, Jacob Corlyon, CEO of Capital Collection Management, Hersh Shah, Sr. Director – Transaction Advisory at RSM US LLP and Praveen Kombial, Global Product Head of Business Applications at EdgeVerve

Why we’re excited: As the economic ripples of the pandemic continue, the collections industry is facing unique challenges. We’re looking forward to our CEO Ohad Samet sharing how TrueAccord has adapted to consumer needs during these times as well as learning from the other panelists on how they’ve rolled out new initiatives spurred by this crisis.

3. New Insights into Consumer Financial Resiliency Amidst Current Market Dynamics

When: September 30, 2:00-2:30 pm EDT

The speaker: Dave Shellenberger, VP of Product Management, Scores and Analytics at FICO

Why we’re excited: While we have insight into our consumer behavior in response to COVID-19, we’re interested in learning more from FICO on how they’ve developed a new analytical framework that can be used across the consumer lifecycle to better understand consumer financial resiliency. 

Technological innovations will drive consumer financial services to succeed during the pandemic and beyond

By on September 23rd, 2020 in Industry Insights
Microphone photo

Last week, Sheila Monroe, TrueAccord’s COO, was the featured guest on “Credit Eco To Go,” a consumer finance podcast hosted by Joann Needleman, a leading financial services attorney at Clark Hill. The theme was putting the “consumer” back into consumer financial services. Sheila had the opportunity to share TrueAccord’s perspectives and experiences working with consumers throughout the credit ecosystems. Here are some highlights from the discussion.

#1 Flexibility is still the key to helping consumers during the pandemic

With the pandemic still dramatically changing daily life and the economy, it’s no wonder that many banks and creditors are concerned about revenue and profitability. A way to address that and help consumers simultaneously is to offer flexibility during these difficult times. Sheila cites how TrueAccord’s first reaction was to think of ways to help people impacted by the pandemic who may not be able to afford their repayment plans.

“TrueAccord was born with this mission, not to maximize recoveries for clients (though we definitely do that), but how to help the 77 million consumers who are in debt in a humane way,” she said.

Sheila references how TrueAccord sprang into action, immediately sending out content to consumers on payment plans letting them know they could change the number of remaining payments to lower the monthly charge. She also notes how COVID-19 affected consumer behavior, such as when the government stimulus payments spurred an uptick in increased payments as consumers prioritized resolving their accounts.

#2 Consumers need urgent support throughout every step of the credit lifecycle 

TrueAccord is not just interested in helping consumers through its collections business. The company sees an opportunity to bring its industry-leading collections experience to all consumers in debt. 

“Consumers [that TrueAccord serviced in collections] say, gosh this was painless—I want to pay all my bills through TrueAccord. Well, the only way we can make that possible without clients giving us all their debt is to create a direct to consumer product, Engage, which allows consumers to come onto the platform, list their creditors and start making payment offers,” says Sheila. “They don’t want to be coerced into something over the phone that they didn’t feel comfortable with. They want to make offers to settle their debt or to pay monthly installments.”

#3 Banks and creditors need to leverage machine learning to meet the consumer preference for personalized communication

With video conferencing and digital communications becoming more prevalent as companies work from home, the financial services industry needs to better utilize technology to keep up customer engagement. Sheila predicts that consumer preferences will play a much bigger part in spurring technological change, especially with machine learning crafting unique customer experiences for each person. 

“A ‘one size fits all’ approach is not right,” says Sheila. “The current best thing that needs to happen is using machine learning, which enables us to know the consumer at a more personalized level.” This approach, according to Sheila, can help turn unwanted outbound communication (like disruptive phone calls) into communication that is welcomed by the consumer — and empowers them to resolve their debt.  

In addition, the use of multimedia communications is emerging as a more meaningful way of interacting with customers that naturally mimics conversations. For example, Sheila envisions, “We might start a conversation through a two-way text that then moves to a phone or even video call, where you can push a disclosure notification. A customer can upload a copy of their information that’s backing his dispute and we’ll handle it at the same time over the phone.” This mixed-channel, personalized approach gives the consumer an easy way to self-serve.

While the pandemic has certainly changed many things, including how many companies conduct business, one thing remains the same. There has never been a more crucial time for the finance industry to rise to the challenge of shifting consumer needs with innovative technology applications.

Check out the full recording here, and check out the other episodes from the Credit Eco To Go podcast.

The Digest: September 2020

By on September 10th, 2020 in Industry Insights

As we begin to round out an unprecedented year, things remain…well…unprecedented. The world of collections is weathering the storm with new strategies and technology, all while staying focused on the rippling economic effects of the ongoing pandemic. Here’s the news we’re following at TrueAccord.

What to keep an eye on

• Slowdowns at the USPS will have ramifications for the debt collection industry. Longer mail delivery times may disrupt the arrival of collections notices, which will shorten consumers’ 30-day window to pay, which may cause chaos for collectors and consumers alike. (A possible workaround? Working with TrueAccord and sending email instead of snail-mail.)

• As of last month, debt collection profits soared. As we noted in our report Consumer Debt in the Age of COVID-19, consumers flocked toward paying off their debt in full, as a result of the cash payments of the CARES act. But with a lack of additional stimulus payments coming, the next few months will be unpredictable. We’ll be watching this news closely.

• In response to the coming economic uncertainty, many banks are “bracing for impact” by adopting new technology to help streamline debt collection. But beware of the challenges.

• Proposed updates to The Fair Debt Collection Practices Act (FDCPA) are likely to take effect in October. Read up on these changes to understand how they might affect you and your debt collection processes.

About 30 million Americans are “at risk” of being evicted in coming months. Debt collectors in the real estate industry may need to look towards new tactics to help tenants tackle their housing debt and avoid evictions.

What to look forward to

• The fall conference season is around the corner. And this year, for better or worse, we’ll be doing our panel-watching, swag-getting, and networking from home. We’re especially looking forward to LendIt and CBA Live, which have been seamlessly adapted into a virtual format. Our founder Ohad Samet will be speaking at Lendit in the panel, “New Approaches to Collections in Times of Crisis.” If you’re interested in attending, reach out to marketing@trueaccord.com for a code for discounted registration.

Between Two FinTechs with Hunter Walk

By on September 2nd, 2020 in Industry Insights, Industry Interviews
Hunter Walk

In our second installment of “Between Two FinTechs,” an interview series with leaders in financial technology, we have Hunter Walk, co-founder and partner of seed stage venture fund Homebrew. Previously at YouTube and Google, Hunter uses his startup and scaling expertise to help founders articulate their product/market fit, recruit stellar teams and build well-defined cultures. In this conversation with our CEO Ohad Samet, Hunter shares how he started his venture fund, his thoughts on major developments in fintech and his investment philosophy.

This transcript was edited and condensed for clarity. You can see all the interviews here.

Ohad Samet: Hunter Walk is one of the early believers in our company and one of the most outspoken leaders in the venture capital community, so we’re really excited to have you, Hunter. Can you start us off by telling us about the beginnings of Homebrew?

Hunter Walk: Thanks so much for having me! 

Homebrew came out of a partnership with my co-founder. Satya Patel and I had worked together at Google  and always wanted to work together again. At the end of 2012, I was thinking about leaving Google after almost a decade, most recently having run the Product team at YouTube. Satya had recently left Twitter where he had been running Product, so we finally started to talk about what we wanted to do together.

“We didn’t assume we were relevant just because we’d been around the Valley for awhile and had the ability to write checks.”

We didn’t assume we were relevant just because we’d been around the Valley for awhile and had the ability to write checks. We wanted to make sure we were committing to a relatively small number of companies that we would get up every morning and put sweat and reputation behind them, not just capital. My objective is to be able to look back and think about the impact the people we backed made. 

We think about who we’re going to be proud to be associated with—and TrueAccord checks off those boxes.

OS: You recently tweeted that your team is “big on banking as a service.” Can you tell us more about how you’re thinking about that sector?

HW: When we started Homebrew in 2013, we believed industries would experience innovation from how data that used to be siloed can now be pooled. Data analysis that used to be impossible or expensive had become more open and available for companies of all sizes.

Despite having no specific background in financial services, we were fascinated by the potential there as a tremendously large industry where its consumers didn’t feel empowered by them. We realized there were people taking a very low net promoter score industry to create something that was thought of more positively by its customers. We knew there would be very tough challenges. It’s hard as a startup to navigate around regulations. The incumbents have spent a ton of lobbying dollars. Old technology platforms are difficult to work with, and you essentially have to figure out how to partner with them or route around them. But the people who could do it successfully would build incredibly durable, important, and valuable businesses.

We’ve invested in and continue to invest in that sector. It’s an industry where depth of knowledge will really help you in a lot of areas. We’re always happy to bet on first time entrepreneurs, but no entrepreneur should underestimate the complexity that you encounter in this sector. That type of knowledge, mentality and accrued experience, makes a competitive moat as well.

“[Fintech] is an industry where depth of knowledge will really help you in a lot of areas. We’re always happy to bet on first time entrepreneurs, but no entrepreneur should underestimate the complexity that you encounter in this sector. That type of knowledge, mentality and accrued experience, makes a competitive moat as well.”

We also look for that little crazy gleam in the founder’s eye that says “Oh, if we can do this, then we can do that.” I call those iceberg startups. The 10% that’s above the water looks impressive, but then you realize there’s another 90% below the surface.  Maybe the metaphor is that the ship is the incumbent, and the startup is the iceberg. And that’s utterly horrifying if you’re a ship. I don’t know what makes the investor. Maybe like a happy penguin on the iceberg!

OS: That’s a really interesting point. How do you feel about companies expanding into new businesses? How do you think about balancing the legacy business, expanding that, doubling down, and then working on value-added services as a way to expand the product?

HW: Sometimes people assume that as companies grow, they’re de-risking themselves. And I actually don’t think that’s true of the best startups. I think the best startups choose to re-risk their business at various milestones because they know that they have the opportunity to expand the set of services or products they offer against a consistent mission.

During my decade at Google, I saw that if you are a successful company, in the near term it is always worth putting more resources on your core business and not in new opportunities because you already know that the ROI will be positive. But the reality is that that’s actually the right time to start placing those next bets because you have the stability of something that’s working. And so you say, “Well, what does that put us in a position to do next?” Is expanding into this new service aligned with the mission? Is it consistent with the capabilities and brand of the company? And is it a big enough problem worth solving?

OS: What’s your take on “lending as a service” type companies?

HW: It’s a very interesting and obviously a tremendous area. There are definitely challenges for companies trying to break into that. I think some of those horizontal plays and those essential infrastructure plays are interesting, but you have to figure out how to run a very lean, tight ship because it’s only going to make sense if you can get to a certain scale. You need to decide what sort of risk you’re taking on, what sort of value you add, and if that value actually catalyzes the underlying business of your partners. But looking at the Affirm’s and so forth of the world, it’s clear that there are very smart people in this space who can get and preserve some margin because they’re doing something their partners probably can’t do for themselves, and increase revenue by taking on some of that processing risk. We think it’s one of those businesses where value is going to accrue to a very small number of players.

We’ve seen some other areas that we think are less competitive that are more emerging in the infrastructure space of banking, insurance pricing, and reinsurance. When it’s an area like this, I get really excited when I hear somebody with a contrarian take. If that person is right, they are going to potentially have an outsized result versus a bunch of people who are like, “Oh, I’m going to do Square credit for influencers, or I’m going to do credit for Patreon.” I don’t think those are, by themselves, interesting, discernible big businesses. They don’t have the same vision mission objective that, for example, TrueAccord does. Sometimes if you build the right platform, what other people are calling companies, you can call features and products.

“Sometimes if you build the right platform, what other people are calling companies, you can call features and products.”

OS: Can you tell us more about your investment philosophy and what’s next for Homebrew: How do you balance pattern recognition and Diversity & Inclusion when making early stage investments? 

HW: We believe it really starts by being accessible—we respond to every cold email, work to meet new people and communities that weren’t just based on our own work histories, and bring a ‘pay it forward’ attitude to working with underrepresented segments in tech. That said, there’s still plenty of work to be done—while we’ve historically invested in female-founded companies at a rate 4-5x the industry average, I don’t believe our portfolio is yet representative of our ambitions when it comes to other underrepresented segments such as Black founders. Hopefully I’ll update this a year from now and we’ll have more to say there! 

Pitfalls on the Path to Digital Debt Collection

By on August 25th, 2020 in Industry Insights, Machine Learning, Product and Technology, User Experience

Banks are accelerating their adoption of new digital debt collection tools in anticipation of a “tidal wave of consumer debt issues” when government stimulus programs end and financial institutions stop offering forbearance and loan deferral options.

That’s the premise of a new article in American Banker highlighting a variety of technology-powered strategies banks are using to make debt resolution more automated, conversational, and empathetic. These approaches range from the convenient (more flexible self-service payment options) to the high-tech (robotic process automation). 

The American Banker article highlights promising signs of progress, particularly for industry players that have not always been known for digital adoption. KeyBank, for example, is in the process of rolling out a self-service digital payment portal designed to offer banking customers privacy and flexibility in resolving payments. And Alabama-based Regions is implementing digital messaging and intelligent interactive voice response (IVR).

At the same time, the article shines a light on the massive challenges facing any financial institution looking to implement intelligent digital debt collection at scale. Here are three common hurdles on the path to digital debt collection maturity – and why they matter:

Challenge #1: “One-size-fits-all” approaches

The challenge: In its overview of Regions, the article makes reference to a single conciliatory messaging tone used in all outreach to delinquent customers. 

Why it matters: Consumers differ vastly in their preferences and responsiveness to digital touchpoints. For example, one consumer might respond to a friendly message delivered by SMS, while another might respond best to a straightforward message delivered by email. As a result, a one-size fits all approach falls short of realizing the potential – in both performance uplift and customer experience – of true one-to-one personalization.  

The TrueAccord approach: HeartBeat, TrueAccord’s patented machine learning platform, mines through tens of millions of data points to optimize digital outreach on the individual level within a programmed set of compliance rules  – and continues learning the more data it analyzes.  

Challenge #2: Narrow, channel-specific use of machine learning 

The challenge: Another challenge that banks face in scaling their use of intelligence – including artificial intelligence (AI) – is the limited deployment of algorithms and optimization within a single kind of channel, such as in a call center environment. The article profiles a collections and business process outsourcing company, for example, that developed an AI-based virtual assistant that can handle most inbound phone calls.

Why it matters: Machine learning and artificial intelligence (AI) are powerful tools for restoring intimacy and relevance to customer relationships at scale. At their most useful, these tools should be deployed to personalize the customer’s full experience with a bank – not just the limited interaction on one channel. 

TrueAccord’s Approach: HeartBeat captures a continuous data feedback loop and optimizes for each customer touchpoint across a variety of digital channels, ensuring that each customer is being reached on the channel that is most relevant for her.  

Challenge #3: Building a truly comprehensive and flexible self-serve portal

The challenge: Constructing a digital portal that drives consumer adoption and usage takes major work. To truly match the convenience of online banking, digital tools must also allow consumers to adjust the length and installment amount on a payment plan, defer a payment, dispute all or a portion of their debt, apply for a hardship pause on their debt, and much more.

Why it matters: Research suggests that customers want to be able to self-serve. But doing so requires the full, flexible range of interaction options that would be available to them through traditional analog channels.

TrueAccord’s Approach: Through a robust and flexible digital platform, TrueAccord offers  a best-in-class self-serve experience: over 95% of users resolve their accounts without ever directly communicating with an agent. 

Ultimately, digital debt collection technologies offer banks the ability to build lasting relationships with their customers. As Kimberly Snipes, consumer chief information officer at KeyBank puts it in the American Banker article: “We want our customers to say, I hate that I had that situation, but I felt like my bank was working with me, not against me.”

Being aware of the challenges on the path to digital debt collection – and having a plan in place to address them proactively – can help financial institutions ensure that they’re set up for long-term success. 

About TrueAccord

TrueAccord is reinventing the relationship between creditors and lenders with a machine learning-driven, digital approach to debt collection. Our technology personalizes outreach to each customer across digital channels, continuously optimizing for performance while delivering a customer experience that builds long-term brand loyalty. Schedule a demo today to learn more. 

TrueAccord discusses COVID-19 and collections

By on August 24th, 2020 in Industry Insights, Webinars

The COVID-19 crisis has ushered in an era of extreme uncertainty. As the country begins to slowly recover, the collections industry will face serious challenges. To help make sense of it all, we hosted a webinar with TrueAccord CEO Sheila Monroe and VP Customer Success Mega Rankin to discuss the impact COVID-19 has had on collections and what it means for the months ahead.

Read on to learn how COVID-19 impacted companies and consumers, how digital debt collection adapted, and what to prepare for in the coming months. You can also watch the full webinar here.

The COVID-19 Impact

The spread of COVID-19 ushered in a wave of unprecedented health and economic uncertainty that rapidly changed daily life across the country. These changes affected almost every aspect of daily life, including finances. 

This uncertainty caused a disruption to tax season, typically a time when consumers pay off their debts at a higher rate than usual. As businesses across the country closed, there was a dropoff in consumer engagement with their debt (anything from opening an email, looking at plan options, calling into a call center, etc.), as well as payments. 

However, the coronavirus-caused recession turned out to be different from every other recession we’ve experienced. While unemployment skyrocketed to record levels in April, individuals actually saw an increase in personal income on average due to stimulus checks and increased unemployment benefits. With stay at home orders in place, spending on things like travel, entertainment, and dining decreased, which led to a record high personal savings rate. 

Many consumers took this opportunity to clear their financial slate. In addition to a higher level of engagement with debt, there was a substantial increase in lump sum payments in late April and early May.  

Of course, the impact of the virus was not consistent across all consumers. For this reason, flexibility was key during this time. We saw many consumers modify their plans to fit their new financial situation in late March and early April. And those consumers who did create new payment arrangements opted for longer plans with lower payments. Consumer choice is always a crucial part of any debt collection communications, but all the more so during a time of unprecedented uncertainty. Luckily, 90% of webinar attendees allowed consumers to modify their plans in some way. 

How digital-first debt collection adapted

As consumers shifted their behaviors to match a new reality, businesses were also facing some serious challenges. Specifically, companies needed to shift to a work-from-home environment. For most debt collection agencies, this was the very first time they considered having the majority (if not all) agents working from home. Many companies struggled to make that shift, especially around taking payments in a compliant manner. That means that at the same time as consumers actively wanted to pay off their debts, many of them were not able to reach an agent to do so. 

As a digital-first debt collection agency, TrueAccord was able to rapidly adapt to best serve both our clients and consumers. Our cloud-based environment allowed us to seamlessly and safely shift our workforce to work-from-home, while our automated collections platform and self-serve payment portal, which allows us to carry agent workloads that are more than 50 times our competitors, ensured that consumers could self-serve payments, plan adjustments, and disputes while consumers who needed to talk to an agent were able to do so. 

Additionally, as consumer behaviors shifted, our machine learning-driven outreach was able to adapt to these new patterns to ensure the best customer experience. And as always, our digital communications and self-service tools enabled consumers to engage with their debts when it was most convenient for them. This was especially crucial as consumers were also shifting to working from home, often with spouses and children in the same spaces. With packed schedules, the ability to explore payment options on their own time, even outside of FDCPA hours, was key.

What’s next?

While no one can be certain of what’s next, businesses must plan for multiple possible scenarios to best meet consumer needs. There are many factors to consider that will impact the future of the U.S. economy, including the unemployment rate, any possible additional government stimulus, vaccine development progress, individual states reopening and closing, schools reopening, and major employers going out of business. 

While the exact timeline for recovery may not be known, according to a FiveThirtyEight survey, 73% of economists believe there will be a reverse radical recovery, meaning after a sharp decline, there will be a sharp partial rebound followed by a slow recovery. Similarly, the Fed is predicting that unemployment will remain in the double digits through at least the end of the year. Perhaps for this reason, the audience’s two biggest concerns for the next 12 months were lower liquidation rates due to high unemployment and pre-charge off delinquency rising. 

That means that we can expect a few things to happen. It’s likely that there will be rising delinquencies through the end of the year, as a recent survey by the CFPB showed that 52% of households couldn’t cover expenses for more than two months after a loss of income. Additionally, as forbearance programs and hardship programs wind down, and government assistance becomes less regular, we can expect to see higher levels of charge off, and see generally lower levels of collectability while the economy slowly recovers. 


To learn more about how these changes are affecting the industry, watch the full webinar.

Between Two FinTechs: An Interview Series with FinTech industry leaders

By on August 5th, 2020 in Industry Insights, Industry Interviews

Perspectives from Melissa Guzy, Co-founder and Managing Partner of Arbor Ventures

At TrueAccord, we are motivated by how our work impacts consumer finance through technology. Given how broad the landscape is for fintech products and services, we’re excited to introduce a new speaker series on our blog, called “Between Two FinTechs: A Chat Series with FinTech Industry Leaders.” Hosted by our Founder Ohad Samet, these conversations will provide unique industry insights and a chance to highlight notable players in this space.

For our inaugural interview, we’re honored to have Melissa Guzy, Co-founder and Managing Partner of Arbor Ventures, discuss her perspectives as an investor focused on fintech companies.

This transcript was edited and condensed for clarity.

Ohad Samet: We’re really excited to be launching this new series of virtual fireside chats. The goal of these chats is for us to meet with folks from across the industry, learn about the issues they care about, and gain new perspectives on the fintech space. Today, we have Melissa Guzy, general partner at Arbor Ventures, and board member at TrueAccord. Welcome Melissa!

To start, can you tell us a little bit about yourself?

Melissa Guzy: Thank you very much for having me. It’s really an honor to do this and to chat with everyone on the team.

My story is not that unusual. I did a startup in my 20s and it was a very colorful ride, both up and down—at one point, we even went public. After that, I joined VantagePoint Venture Partners as a partner. I spent 12 years there and then decided I really wanted to do something entrepreneurial again. So in 2013, I decided to start Arbor Ventures. It was very much like doing a startup all over again. We only invest in financial services, which is something that I’m tremendously passionate about.

OS: Why the focus on financial services?

MG: I always think you’re a better investor when you’re truly personally passionate about something than just thinking, “Hey, what’s the latest fad?” An early experience has made me very passionate about debt collection in particular.

When I first started my company, I had to put expenses on my personal credit card. which is what you do when you’re completely and insanely committed to something. Eventually we received funding but it was quite stressful for a period of time.

When I think about what TrueAccord is doing, I’m quite passionate about giving people a chance to get back on track There are so many unexpected events that have happened to all of us in our lives—including now during COVID. But that doesn’t mean you’re a bad person or that you’re a bad risk. It just means at some point, you needed more flexibility than what the system was offering you.

“When I think about what TrueAccord is doing, I’m quite passionate about giving people a chance to get back on the rails.”

So when the opportunity came up to invest in TrueAccord, I said, “Absolutely.” I think Ohad probably remembers we made a decision in two days. We never looked back and we’ve been fortunate to continue to invest in the company.

OS: Thank you, and likewise we’re lucky to have you! What are some more qualities you look for in a startup that you would invest in?

MG: It’s about the people. I always say your relationship with a team or your investment lasts longer than the average marriage in the United States. When you think about investing in a company, you need to think, “I’m going to be working with this person through ups and downs for a long period of time. Is this someone I want to work with and spend my time with?”

“Your relationship with a team or your investment lasts longer than the average marriage in the United States. You need to think ‘I’m going to be working with this person through ups and downs for a long period of time. Is this someone I want to work with and spend my time with?’”

The second thing, of course, is the idea, but what we have found is that really good entrepreneurs can learn to pivot and change. Every company will go through ups and downs. So it starts with people and from there it’s about industry and sector—what gets us excited. 

OS: Based on your experience, why do startups fail? Can you differentiate those who fail quickly versus those who fizzle out later?

MG: That’s a great question. Startups never fail because of one issue. Startups fail by consistently making bad calls and judgments. We’ve been studying this for quite some time and usually it has to do with not wanting to deal with the core problem at any given point in time.

You don’t want to deal with a problem or a challenge because you’re fundraising, or you don’t want to make a change on engineering because it’ll slow something down. What happens is people start to put bandaids on decisions, and then all of a sudden, the next decision is based upon something you’ve already put a bandaid on, and that just keeps building. And to me, that’s absolutely a point of failure.

I think later startups fizzle out because people forget that you’ve got to innovate and iterate every single day. We live in a very competitive world that changes at hyper speed. Often, companies will reach a threshold and then stop growing because they actually stopped innovating. And they stopped innovating because they stopped taking risks.

OS: Why do you think some fintech companies become successful versus others?

MG: The most successful startups in fintech have not been technologically revolutionary. They’ve just solved something incredibly messy. Take Stripe as an example—a couple lines of code to be able to accept credit card payments on a website so an e-commerce company didn’t have to hire a payments team. That was really simple. It wasn’t rocket science. It was messy. What they solved first was very sticky, and then they were able to build around it. 

“The most successful startups in fintech have not been technologically revolutionary. They’ve just solved something incredibly messy.”

If fintech companies start with something weaker, they’re not going to be able to build around it. I think that’s one of the benefits, again, of TrueAccord. We started with something really hard and now we can add everything around it to serve the consumer in the right way.

What’s so interesting is that many financial services are consumer-centric until someone’s late on a payment, and then they don’t like that consumer anymore. They fail to realize that it’s always going to be consumer-centric. As long as we understand that everything we do, at the end of the day, is to help the consumer, we will definitely succeed massively.

OS: How do you think COVID-19 is going to change funding and the overall startup environment?

MG: I think Silicon Valley has had a hold on being the startup capital for a long time that’s well-deserved. During the 2000 downturn in venture capital, VCs on the East Coast pulled back and got scared. The venture capitalists in Silicon Valley never did, and I think that’s why the Valley has the reputation it has. It’s part of the fabric of the community to take risks and to back entrepreneurs.

I think that’s going to change as more startups and more people are moving out of cities, especially with COVID, and we’ll see much more diffusion of startups across the United States —and across the world, for that matter.

We will pull through, and we’ll be in a new norm, and there’ll be new opportunities. And you can be nothing but excited about the future.

What Debt Repayment Trends Can Teach Us About Consumer Needs

By on July 22nd, 2020 in Industry Insights

The collection industry has come a long way since local door-to-door agents tracking their accounts on index cards, and yet there is still a dearth of data. Most agencies rely on age-old adages or instinct to make operational decisions. 

Our six years of working with millions of consumers to resolve their debts digitally has given TrueAccord unique insight into consumer behavior. We turned to our data—aggregated across more than 12 million U.S. consumers—to better understand how consumers were engaging with their debts and what it tells us about the future of the industry. 

Consumer confidence in the economy matters

Before consumers even consider paying a debt, they start engaging with the debt collector. This engagement can take many forms, from clicking a link in an email or a text message, listening to a voicemail, visiting a debt collection website, or even calling into a support center. All of these actions indicate that a person is reviewing their options—a serious first step toward payment. Our work with consumers has shown us that engagement tends to increase when consumer confidence about the economy (and their own financial situation) is high and decreases when consumers are more uncertain about their ability to pay. 

For example, the graph below shows click-through rate (CTR) trends for TrueAccord’s collection emails through late 2019 and early 2020 (the blue line), alongside the monthly change in U.S. personal income levels (the grey dotted line), based on data from the Bureau of Economic Analysis. While CTR is a more volatile metric, the overall direction mirrors the changes in personal income. 

Engagement metrics, like CTR (shown here), trend positively with monthly changes to personal income.

Payments are scheduled around paydays 

Based on TrueAccord data, it’s clear that consumers prefer to make payments on Fridays more than any other day of the week. Fridays accounted for only 14% of the days in 2019, yet 35% of payments from payment plans were made on Fridays. The first, fifteenth, and last of each month also have large surges of payment volume. It makes sense that consumers plan their debt payments around when they receive their paychecks each month. 

In a typical month, payment volume is highest around popular paydays: Fridays, the 1st, 15th, and last day of the month.

Tax season is the busiest time for paying off debt 

Nearly 80% of U.S. households receive a tax refund each year, amounting to about $2,800 on average. This influx of cash can be a lifeline for many families struggling financially, so it’s no surprise that a survey by the National Retail Federation found that 34% of consumers who expect a tax refund plan to use it to pay down debt.

For this reason, late February through early April is the busiest time of the year for paying off debt (as shown with TrueAccord data below). In fact, we generally see a one-day peak in the last week of February, the first possible time to get a tax refund. After April, debt payments generally slow down again until Q4, when seasonal employment and gifting once again provide many American households with additional boosts of income.  

Payments peak in March due to tax season, then slow down in Q3. There is another surge in payments during the holidays. 

These trends all point to a simple truth—consumers choose to pay their debts when they have the money and confidence to do so. Rather than coerce consumers into making payments immediately, debt collectors should provide flexible (and ideally self-service) payment options. Especially in times of economic uncertainty, it is important for consumers to feel confident that they can adjust their payments to accommodate uneven or unpredictable cash flow.  

To learn how these behaviors have changed during the coronavirus crisis, plus 4 specific actions collection agencies can take to adapt, download our report, Consumer Debt in the Age of COVID-19.