Debbie: An Innovative Rewards Platform for Managing Debt

Jim Marous:
Hello, and welcome to Banking Transform. The top podcast in retail banking. I'm your host, Jim Marous, owner and CEO of the Digital Bank Report and co-publisher of the Financial Brand. Americans' total credit card balances reached 887 billion dollars in the second quarter of 2022 with a close to 50 billion jump since just the first quarter. The 13% increase since 2021 is the largest year over year growth in credit debt in over 20 years. Unfortunately, most people with an active credit card don't pay their bills in full with more than half carrying a balance. At the same time, the average APR for all credit card debt jumped in the second quarter 2022. So how can consumers get control of their credit card debt and other loans? My guests in the Banking Transform podcast are Frida Leibowitz and Rachel Lauren, co-founders of the habit-shifting rewards platform for debt payoff, Debbie.

Jim Marous:
They share how Debbie challenges the status quo of how financial institutions can use incentives to drive higher engagement that leads to better financial outcomes. With American credit card usage increasing exponentially and the economy worsening, there's a need to help Americans get out of debt. Unfortunately, most financial institutions benefit when bounces rise and minimum payments are made. A new FinTech Debbie encourages positive credit behavior with financial incentives for users to build better financial habits. I met our guests at this year's Finovate event in New York City where Debbie received the best of show designation. Before we start, can you share a bit about your backgrounds and how your various paths prepared you for the journey you're on today?

Frida Leibowitz:
Sure, I'm happy to jump in and get started. I'm Frida, of one of the co-founders of Debbie. For me, first of all, the passion for this space and for even attacking the consumer debt problem came more from personal experience. And I talked about this at Finovate, how I shared my family's story of dealing with debt ever since I pretty much could remember myself as a kid. I grew up in an immigrant single parent family that did not have access to financial literacy and struggled with credit card debt and various other types of debt along with 40% of other American families. And so I got to see the behavioral and emotional side of debt growing up over and over again. As an adult, I myself ended up falling right into the same trap and I struggled with credit card debt when I just started college. Rachel got to see a lot of that because we met in college.

Frida Leibowitz:
So she got to see me go into credit card debt trying to climb my way out. And as I got started on my own debt freedom journey, when I was about to graduate college, I was looking to make a career in this space and I became really passionate about trying to help others achieve debt freedom. And so I joined Marcus by Goldman Sachs on their credit risk team actually in the very early days when they were just starting to build this consumer digital bank. And we were working on our first offering at the time, which was consumer personal loans that our unsecured consumer loans mainly used for debt consolidation. And while I was there working on the credit risk team, I got to see the other side of it, which is on the lender side, what does it look like? And that's where I saw that there were a lot of gaps in how debt freedom products were served and the results were just really not as promising as I was hoping.

Frida Leibowitz:
So one thing that I saw was that more than half of the borrowers they got started and one of these debt consolidation or debt freedom products ended up rebounding back to credit card debt within less than a year. So a really high rebound rate. And on the other hand, we didn't have great retention for the borrowers who were doing very well, the ones who were paying off on time. And that started as a lot of venting to Rachel in our little New York apartment. And eventually we started thinking more about this problem and that's when we joined forces and started Debbie and I'll let her give her background as well.

Rachel Lauren:
Yeah, so I'm Rachel Lauren, co-founder and COO of Debbie. And in terms of my personal background, obviously frida mentioned, we went to college together, saw a lot of what was going on. Amex was my first card, Frida, she referred me.

Frida Leibowitz:
I took her down with me. I was like, well, if I'm going to go into credit card debt, I'll refer you too, that's right.

Rachel Lauren:
That's right. And before Debbie, I was working in venture capital at a corporate venture fund, which was fairly generalist, but I was focused a lot on FinTech and enterprise software. And as I was looking at FinTech, consumer FinTech and debt freedom was a theme that continuously popped up, whether that was credit repair or just debt management. And I think I kept seeing the same offerings over and over again. A lot of cash advance, a lot of automation. How can we get this off the user's hands? How do we automate the problem away for them? And I think that was sort of the big thing that I noticed that wasn't really working right. Because ultimately the problem was that people were spending more than they earn and automating the debt payoff away wasn't going to solve that problem. So that's when I got really excited about working on something new with Frida.

Jim Marous:
So it's interesting. Yeah, I also, younger years got into some real bad credit card and credit debt issues. And as you mentioned, the consolidation process doesn't solve the problem, it simply lowers your monthly payment, which as you said, you're used to a regular monthly payment. You go, oh, now I got some freedom to do what I was going to do before and do it bigger. But Debbie is a new organization and certainly in a very changing economic marketplace, both between COVID and our now economic situation that is somewhat uncertain, but certainly going towards a challenging time period. What are the challenges that both of you faced since your inception around getting funding, being able to build your organization, and let's state the obvious, you're both young women and that by itself brings its own challenges. So what are some of the challenges you faced?

Frida Leibowitz:
Sure. I mean, I actually think it's interesting because on the company formation side, I mean we're very lucky. We had, Rachel who came from BC so she at least knew how to navigate that world. Once in a while she'll put on her BC hat again and she had that angle and that was very helpful for us. And actually her former fund was one of our initial investors. So that was really helpful. I will actually say, I think where the challenges really lie is coming into a space that is so noisy. There are so many companies, you're pitching ideas, you're pitching an idea where before we even start, a lot of the time people will already be like, well, I've heard a million pitches about that freedom debt management, here we go again. And I think what's cool is that as soon as we've gotten people to at least listen to us, that's when people get their face lights up.

Frida Leibowitz:
But it takes a minute. And I actually think this problem is even bigger when you're trying to talk to the consumer. Because what we've seen is when you come into the space and you're trying to sell just another debt freedom product, people very quickly are like, well, I've seen this before and they're very likely to distrust. They very likely be like, well, I've already seen that consolidation, I tried it, or I don't want to try it and it hasn't worked for me, hasn't worked for my friends. You're just trying to get more money out of me or just trying to charge me more interest, whatever it is. I think overcoming that distrust has been a challenge or something that we've thankfully been able to do really, really well. And I also think it became an opportunity for us because we've noticed how if this is something that's happening, we have to repair that.

Frida Leibowitz:
How do we change the way financial institutions interact with our consumers so that we don't have distrust so that we can help more people make their way out of debt? And in truth, there are some great opportunities. Debt refinance on its own is not a bad thing, it can actually be a great thing. Cutting down an interest is probably one of the most impactful thing you can do for someone who's trying to get out of debt. The question is how do you do that and at the same time engage them, build the trust and help them actually make it to the finish line. How do you help them actually make their way out of debt so that then by the end they're like, yes, you've helped me. I feel supported, I feel like I got what I need out of this and I want to keep on doing business with you in the future. Right? That's been I would say the challenge.

Rachel Lauren:
I was going to say, I think what's been really interesting to see from our users, and we did a focus group on this, is we tried to understand so far the Debbie app has been entirely free, it's just been the curriculum. So really where folks can come in, they can start completing our curriculum, which essentially it's a combination of behavioral psychology alongside actionable financial tasks that they get rewarded for completing. That's all we really launched. And so we wanted to get an understanding of if we offered financial products, loans, things like that, how would that be received by our users? Is that something that they would take on negatively? And what we found that was super interesting was that people basically told us, because we know so much about them, because they've gone through the exercises, they've learned about themselves, their habits, they've hooked up their accounts, they actually feel like we know them better than other companies that they might be banking with and that they would trust and offer that came from us because it wouldn't just be like an email blast saying, hey, take out $5,000 or an Instagram ad.

Rachel Lauren:
It would be tailored to them and their specific situation and they would trust it more. So that's been a big challenge, something we were really nervous about and is critical to our business. And I think that obviously it's taking strides to get there, but it is promising.

Jim Marous:
So, Frida, how do you start, what's different, I should say, what's different about Debbie compared to all the other apps out there or programs out there that either reduce your interest rate or reduce your debt or consolidate? What sets Debbie apart? I know the entire platform is built differently. Can you talk a little bit about that?

Frida Leibowitz:
Sure. And here's where I want to talk a little bit about how we compare ourselves a lot to Noom. And I think that's where it really usually strikes a core for people. We strive to be the Noom for the debt payoff space. And the reason why we really Noom for those who are listening who are not familiar with Noom, Noom is one of the most revolutionary companies in the weight loss space. And we really relayed a lot to their journey because they also came into a space that at the time was super crowded, was full of all these companies trying to offer you crash killed diets and promising you that you'll lose 3000 pounds in one day if you just drink this shake or do that thing. And in the debt free space, if you look at the offerings today, it's very much like they're pretty much fresh kale diets.

Frida Leibowitz:
It's like, oh, just take out this loan, sign up within minutes, just take out this refi loan or just hook up your accounts and we'll automatically manage the debt repayment for you. I think what sets us apart from the rest is that we're like, no, actually, we're not selling you a quick fix. If you want to use Debbie and achieve long-term results, you're going to go to work, you're going to be very engaged in this experience, you're going to get rewarded for it, you're going to be very motivated and we're going to encourage you along the way. But really we want to make sure that folks are very much understanding that they're a partner in this journey and they own the journey. No one is taking that off their plate, no one is taking that away from them. And interestingly enough, in a weird way, that has actually been the reason why our users say that's why Debbie actually stood out to them amongst all the other offerings that they saw.

Frida Leibowitz:
Because rather than just telling them like, oh, we're going to take the problem off your hands, they're like, I'm ready to work. I've tried these other things, they didn't work for me. Those fresh kale diets were not what I needed. I want to work, I want to do something and I need some structure, I need some help. And I think that's probably one of the biggest differentiating factors. And you couple that alongside the fact that Debbie is really mostly focused on the behavioral side of that and the emotional side of that, not on typical financial literacy that you would see out there. So a lot of apps will try to tell you, let's just educate you about what's an APR, how does a credit card work, all these things. And that's important, sure.

Frida Leibowitz:
But at the end of the day when I'm standing at Walmart and I'm picking between the nicer shinier TV and the smaller one that I should probably go for, I'm not thinking to myself, well, let me calculate in my head real quick, what's the APR, right? Most people are just going to go with their gut, they're going to go with how they feel, and in order to change that, you have to change their inherent relationship and emotional behavioral patterns with money. So I think that the fact that we focus a lot on the behavioral psychology education rather than the counting calories for people, that's been also a big reason why we get our users to engage at really, really high rates And keep going back to the app.

Jim Marous:
So Rachel, how do you build this, I'm going to call this behavioral science type based platform? Where did you get the insight from? How long did it take and how often does a consumer engage with your platform during their unwinding process if it were?

Rachel Lauren:
Yeah, so I think we actually didn't start with this concept when we first started Debbie. I think as we started realizing that user effort was going to be required to have the outcomes that we wanted, we needed to build something that was going to achieve that. And I think like Frida said, we saw Noom as an amazing example of that. And I basically took it upon myself to say we need someone at Noom to work with to build this. And so we were able to find the director of product and growth at Noom, Shane F. Blackman, who's an advisor of ours. He's been incredibly helpful in terms of us developing the curriculum, the interactions, the cadence, how everything fits together alongside a financial therapist as well. So Erica Waserman, who's a licensed financial therapist. There's not that many of them out there. It's a pretty new profession. Most people are our therapists or financial advisors. She very much focuses on that other layer of how do we dig into why you do the things you do when it comes to finance. Like Frida said, it's very emotional.

Rachel Lauren:
So using both of their brains and mine, we sat down and started developing the curriculum. And I will say it's definitely a work in progress. There's so much more for us to do and develop. Noom took, I don't know, five to 10 years to develop their program... We've been operating-

Jim Marous:
And it's still being modified as you go along. Correct?

Rachel Lauren:
And we do a ton of testing. Actually we're developing now our content management system for us to be able to create modules on the fly, be able to change the cadences. And to your question of how often do people come in? Right now we drop new modules every week. So there's this feeling of excitement and urgency whenever we drop one, people are like, oh, there's something new in the app for us to do. So what we see is our active users are coming in once a week on average to engage, whether that's to look at their debt payoff goal or actually complete a module. And I think it's something we're going to do even more often. So we're going to shorten them up, make it every couple days, release new ones. So that's the plan.

Jim Marous:
Yeah, it's important because the cadence and consistency are really the key for any kind of content that if you can keep a cadence going and if you keep consistency going, people will stay on the program. I mean, that's what I found really helpful. I'm a new advocate. I think I mentioned to you and Frida, I've gone through it three times, not because it failed, but because it succeeded. And I've gone through it multiple times with the same lesson, plan, and everything, but you miss something every time and you want to stay on target, you want to actually have the behavior change. So when you have consumers that are engaged with Debbie, what has been their reaction to the way it's doing and what are some success stories you could share?

Frida Leibowitz:
Yeah, it's actually interesting, I think, well, we also constantly ask business for feedback. And alongside the app, we actually have a very active community where our users get to talk to each other, talk to us, share their feedback, and we regularly ask them to tell us what drew them to Debbie, what they like, what they don't like. And a couple of recurring themes that we've seen. One, people, they like to be celebrated. And today if you're banking with any institution, you make your payment, the best you'll get is an email that's like, thank you for your payment of $356. And that's it. And it's like you just are like, well, I have to do this. With Debbie, every time you make a payment, there's this huge celebration about it and we'll constantly remind you of your debt pay progress. And we'll actually be like, yes, it's an obvious thing that you're supposed to do, but we're still going to make you feel really, really good about it.

Frida Leibowitz:
And people like that, they want to feel good about themselves, especially when the majority of them are feeling bad about themselves. They're not feeling very positive about their debt payoff. And they always feel like when we've asked, we did early user research and we asked people to describe how they feel today when they make their debt payment. The majority of them said, I just feel like I'm throwing money into a bottomless pit. I just feel like I'm constantly just paying and paying and nothing happens and I don't feel like I'm moving. And that's really what we wanted to change about the process. We wanted to make people feel like they're moving, they're making progress, they're getting there. And the people have been really, really excited by that. And I think that's been one of the biggest pieces of feedback is like let's celebrate the wins. Let's use positive reinforcement as a tool to help people get to the finish line.

Rachel Lauren:
And to add to that, removing the shame out the experience has been one of the biggest things, I think that's a big reason why people don't succeed is because they have that shame of looking at their balances, looking at their transactions. And so we've been pretty non-prescriptive with our users in terms of the things that they can do to improve their situation. So for example, a lot of let's say budgeting or spending apps will say, oh look, you're spending so much money on coffee, maybe you should try to spend less on coffee. And we're saying no, what if you love coffee? What if that's the one time of day that makes you really happy is when you go to that Starbucks and get that coffee? We want to help you find the areas that where aren't happy spending rather than the ones where you are and being prescriptive about telling you where you should or shouldn't put your money.

Rachel Lauren:
So I think people really appreciate that there's that shame removed and giving them the power back to help them make better choices. In terms to answer your question about success stories, there's one woman, her name's Katie, and she's been incredibly engaged. We've been so surprised in terms of how her level of activity on the app, she's made her debt goal for the last seven, eight months, Frida, right? Something like that.

Frida Leibowitz:
Seven months.

Rachel Lauren:
Yeah, she's paid off at least a couple thousand dollars in debt at this point on the Debbie platform. She's earned a lot. So we're really happy to have users like that, that keep coming back, that want to achieve their goals and want to be celebrated for it, like Frida said.

Jim Marous:
It's interesting Rachel, what Frida mentioned about shame. And that's a major component of getting to debt where you all of a sudden have that wake up call that you've got the cold sweats in the middle of the night going, oh my gosh, I can never get out of this. And contacting one of the local consumer credit counseling services, just the name itself makes you feel like you failed. And so when people know they need to do something, but they're not sure how to do it, it gets down to even though you build something very powerful, it doesn't mean that people come, if you build it, they will come. It doesn't always happen that way. So Rachel, how do you market Debbie today in the marketplace in a way that consumers can find you?

Rachel Lauren:
Yeah, we try to make it really fun. So we're highly present on social media. We do fun TikTok's and reels where I make an fool of myself, our interns makes a full of themselves. We have a mascot, Debbie, so the mascot itself has the name Debbie. She's like this cute little D, and I think a lot of people really enjoy that and they associate with it and they find it fun, they find it easy, aesthetically pleasing. They don't see it as this rigid financial company. So we try to make it really easily accessible to people where the barrier to entry is very low. When you sign up, you don't have to pay anything, it's completely free. We're not asking you to do anything like that. That might be difficult taking out a loan or signing any crazy agreements. So like I said, make it super accessible.

Rachel Lauren:
Now what we will do is we will ask you a lot of questions about your financial behavior because we want you to feel like we're really getting to know you, we're understanding where you're coming from, what your situation is so that we could tailor the experience for you. So similar to Noom, how you've probably done the onboarding, they ask you a lot of questions about your diet, what time you eat, how certain foods make you feel, all of that. So we do like to ask those questions and I think people get this feeling that we are really getting to know them and trying to build that trust.

Jim Marous:
So Frida, part of the Noom program, and I'll keep on referring to that since you guys have referred to it, is the engagement of within others, the crowd discussion, the team aspect of it and actually feeling like you're not alone. Do you have anything like that with Debbie or is there a plan to do that?

Frida Leibowitz:
We do, absolutely. The community is a really important piece. And I mentioned this a little bit before, I touched on it. We do have a very vibrant community alongside the app where users who are on the app get access to this community and they can use that to either, again, share app updates with us or app issues or things that they want help with. But also more and more, I know this is my proud moment where I get to watch the users start helping each other. That's become really interesting. Actually one of the hardest things to do when you're building a company is build a community that how do you get people to talk to each other without you intervening? And I think that we are starting to see that now where one user will post something that they're struggling with and all of a sudden five users will be like, oh, I struggle with the same thing.

Frida Leibowitz:
And they'll start talking each other. Obviously we moderate all of this and we make sure that everything is done in a judgment free way and everybody feels comfortable and everyone feels respected. But I think we've been very surprised to see, and especially when it comes to, because our entire who we are, our whole ethos is about celebrating win, celebrating successes. That's also been a nice, our community, they've taken that upon themselves and they really celebrate each other, which is also really nice getting that validation. So yeah, I think that the community piece has always been important for us and continues to really, we're working a lot to grow that and make sure people feel, but also it's nice, that's where users become our partners and they're like I mentioned, they're helping each other. It's like you watch this little baby take off on its own and it's really, really nice to see.

Rachel Lauren:
We don't make it mandatory because I think that there's still this feeling for a lot of people that I don't want other people to know I'm in debt. It's actually a big barrier for a lot of financial companies for them to get referrals because people don't want to admit to other people that they have a problem. So we make it optional. It's something that people have the option to join, but at the same time, everybody who's in there, most of the people that are there are not anonymous, which is kind of cool. So they're starting to take down some of those barriers as well.

Jim Marous:
That's interesting because as you get part of the community and you can just be a listener and not participate. In Noon, what's interesting is as more people are celebrated, more people come into the fold. In addition, as more people have challenges but other people help them out, again, it brings more people into the fold and the community really becomes a very powerful element overall because everybody's in the same boat and you can participate or not participate based on what you want to do. But I think that the encouragement, misery loves company is not a bad thing when you talk about credit debt in that if you know other people by these same problems and oh, it can be as simple as saying I have a payment of $1,500 coming up next week and I have $1,000 in my account. What have you all seen happen before?

Jim Marous:
And you could have taught them that in your lesson plan, but to hear it from others saying here's how I handle it. And as you said, you get a lot of education yourselves from this where you say, oh, I never thought about that way of dealing with it. But that really plays out really well where they take away this or they add this. And I think the community aspect is really a key component and one that at the end of the day, Debbie's an app that really requires engagement. It's not a set it and forget it, it doesn't work very well that way. It's really the ongoing engagement back and forth. So let's take a short break right here and recognize the sponsor to this podcast. Welcome back to Banking Transform. So I'm joined today by Frida Liebowitz and Rachel Lauren, co-founders of the debt reduction platform, Debbie. We've been discussing the needs of the credit trap segment and how Debbie hopes to build scale. So Frida, how do you measure success around the customer experience, engagement, and content delivery?

Frida Leibowitz:
Sure, I mean our north star has always been and will continue to be seeing consistent debt payoff for borrowers. Seeing that long-term consistent sustainable behavior where people are like, okay, I'm actually able to get on top of my debt payoff, I'm able to build those better habits. And that's really what we're tracking to. Now, leading up to that in order to get there, like you mentioned, engagement is important. So we do check to see, we like to segment our users into groups and actually not all users are... It's not like a one-size-fits-all. Not all users have the same need. Not all users engage in the same way. Some of our users like to come in every single week. So we see we have a group of users that are coming in every single week and completing what they have to do in the app.

Frida Leibowitz:
Some users prefer to come in every other week, some users prefer to come in and check their balances and then maybe not complete their curriculum until a different time of week. So we do see that. What's nice, and I think what's been very helpful is we created this very bite size experience where there's no way for you to binge on the content. It's not like everything's available for you, you come in and you don't know where to start and where it ends. It's you come in every time you have a maximum of two to three bite size tasks to complete and when you're done we're like, great, you're done, you can leave now. We'll let you know when something new is available. And that's actually helped us have a benchmark of, okay, when should people be using the app and are they actually coming in when they're intended to?

Frida Leibowitz:
So I think that's really been for us about, like I mentioned, measuring that path outcomes and then measuring per the amount of content that we're giving, how many users are able to complete it within a given timeframe and being able to understand that different users behave differently. So for some users we'll measure weekly, weekly engagement is really important for some users we'll make sure that they're coming in at least once or twice a month. That's been the most important things that we've been tracking.

Jim Marous:
So, Rachel, when you look at what happens, almost every consumer comes in somewhat similar to the process. They're all in debt, they're all having challenges, but almost immediately upon entering your platform, they start to differ. They start to have different reasons why they've gotten in debt. They have different obligations, they have different levels of income to start with and to end, they have different family structures. So our research shows that almost every traditional financial institution does not feel prepared to effectively use data analytics for the personalization of communication and engagement and for the recommendation of solutions. Well, the really foundation of how Debbie works is you have to figure out what these people's individual engagements are. How do you use data to not only build the platform for engagement but also to improve their financial wellness.

Rachel Lauren:
So where we really start, and this is one of the first exercises that people do when they come into the platform is what's your why? And this speaks to your question of people have kind of different goals and actually this is an exercise that you probably have done in Noom. And what we do is we ask you why do you want to get out debt? And we ask that to you three times to get to the real answer why you want to get out of debt. Because usually the first answer is never really the real answer. And so what we've been trying to do and what we're starting to do now is actually looking at a lot of those freeform answers and using natural language processing to really extract some insights. So let's say a lot of people will say that they want to get out of debt because they want to start saving for a home cause they want to support their family, they want to give their family a safe and secure place to be.

Rachel Lauren:
A lot of people will say it's because they grew up unstable, they want to give their children some of that security, there's a lot of different reasons. And so using that is really, really critical when we start thinking about what is that user's trajectory, are they looking to bold an emergency fund today? Are they looking for security? Is that building up that emergency fund? Are they looking to start investing? Are they in a position where maybe they have an emergency fund, they want to start building up some of their wealth in addition to taking down the debt? So a lot of this data, it's hard for us, it's hard in general to get this data because a lot of it's very unstructured, it's all free form people answering. It's something we're just now starting to work through. One of the things I will say also on the debt payoff goals is every single goal that we help people set is based on their existing situations.

Rachel Lauren:
So we evaluate their income, their existing debt levels, the types of debt that they have, debt levels across different types of debt and help them set a goal based on those numbers. So we're not saying to everybody, hey, pay off 500 bucks a month of debt and if you do that you get a reward. Because everybody has different income, everybody has different debt levels. So it wouldn't make sense to do a one-size-fits-all challenge like that. And I think we approach that everywhere. So similarly we do, like I said before, we do this transaction exercise where people will run through their last 20 to 30 discretionary transactions and we'll do this Marie Condo kind of exercise. We'll ask them, does this bring you joy or does this not bring you joy? And so they'll swipe left on the things they don't like, they'll swipe right on the things they do. And so the next exercise that will do is a no sad spend challenge.

Rachel Lauren:
So we'll take the number one category that you said did not bring you joy, let's not spend in that category for the next week. So again, all of this is very personalized to really give the power back to the user, that's ultimately what we want them to feel is that they're empowered to make their own decisions.

Jim Marous:
And sticking with you, we keep on mentioning rewards and I keep on going back to how much do I know about it, how much do I want my listeners to know about it, try and make it so everybody knows everything about your platform. What are some of the rewards and how do they get funded?

Rachel Lauren:
Right now it's pure cash. And really what we did when we started the company as sort of a purely standalone direct to consumer offering is we set aside a portion of our fundraise towards a beta. Basically we allocated a certain amount of money and said this is the money that we are going to pay out to rewards to really run this as a true experiment. If we paid people to accomplish this, will it have an impact? Now in terms of our trajectory and where we're going, obviously we can't afford to just continue to pay people forever while not generating revenue. And so really the goal is-

Jim Marous:
It's not a great business model.

Rachel Lauren:
No, not a good business model. But really what financial institutions that are excited about Debbie are seeing is that they're seeing higher engagement, better debt payoff outcomes and this is something they want to pay for. And so that's where the place that Debbie is moving towards now, but it continues to be cash for now. But in the works I definitely think there are areas for other all kinds of rewards, whether that's a financial therapy session, stocks, crypto gift cards. We survey our users and ask them all the time things that they're looking for. Generally they like cash, but there's always room for other options.

Jim Marous:
So Frida, we went around the circle here a little bit, but do you see Debbie as a standalone digital platform that's direct to consumer, or do you see this being integrated within the offerings of a legacy or non-traditional financial institution going forward? Or both?

Frida Leibowitz:
So in a way both. I think we are speaking to various potential partners and every partner might have different needs, different things that they want. And so there are different levels of integration. What I do think is key though is the Debbie brand and what we built is super important and that's where I think that we will always want to be seen as very much visible partners as opposed to white labeling or things like that. And really the brand brings a lot to the table. The easiest way to explain Debbie, like what I mentioned before is think of the Delta Amex. In this case, Debbie is the delta, the financial institution is the Amex. You kind of get the best of both worlds. The user will get an experience that's very much co-branded where they understand that it's being offered empowered by their financial institution, but they also kind of get this nice little tool, Debbie, that's very personable and young and fun.

Frida Leibowitz:
And I think that has worked really well for us so far. Yeah, I think there's also, in the way we're building ourselves, we're always going to have a direct to consumer angle. We will have an app that's available to everyone. I think that also one of our key beliefs is we want to at least make the tools and content available to everyone. Not every user will earn rewards, especially if they're not banking or using products from one of the partner financial institutions, but they will always be able to access the resources. On the other hand, I think for the financial institutions that we're working with right now, they're not only looking to tap into our pool of users that we built on our own, but they actually want to send us their existing members. So that's where we get to that really nice partnership where financial institutions can offer Debbie to their members or customers and see the lift there. Like Rachel mentioned on the engagement side, on the retention side, on the debt payoff side.

Jim Marous:
So sticking with you Frida, did you see this as eventually being a subscription service very much like Noom?

Frida Leibowitz:
No. One of our key beliefs is that in the debt freedom space specifically, it doesn't really make sense to ask someone to eat a cookie so that they can lose weight. You can't be like, look, we'll pay you some money so that you can diet. And most people, they don't, right? They're like I can't. And the demographic that we're dealing with, you're talking about folks who are making an average income of 40 to 60K and are paying off large amounts of debt. For them it's actually a big barrier to entry and it's one of the best competitive edges that we've had is that we can actually offer this for free. And so I think really we'll have to be able to monetize on the financial product side and then there's a lot of room there. There's a lot of ways to serve align incentives and work with financial institutions so that they can benefit and their borrowers can benefit with little or no upfront cost to the borrowers.

Jim Marous:
So that's a very good point where in partner with financial institutions, it benefits them for their customers or their non-customers that are in on the platform to reduce debt because it increases the risk while actually in a way increasing the revenue because they're going to get paid back. You're in a beta situation right now where you're still learning and building. And I will tell you that I think, I'm not positive, but I think you're the very first beta we've ever interviewed. The closest to beta might have been Viral that we interviewed two years ago at the very beginning, but they had already become a bank, they had just gotten a charter. So really I think you're the first beta we've ever interviewed. And I think the reason, no, I know the reason was is I was really impressed by the foundation upon which you're building this whole platform.

Jim Marous:
It is very different from what I see as any other debt reduction program out there in that number one, it does make you feel bad. Number two, it encourages positive behavior. Number three, it does use the community and there're rewards going forward. What have you learned in the beta side that has really maybe shifted where you thought you were going to go and taken a new direction? Rachel?

Rachel Lauren:
Yeah, one of the super interesting things that we learned is we always believed that our value was on the post origination side. So once the financial institution book the loan, we always felt like, okay, we were going to use our program to help improve the performance on that debt because people were going to be more engaged and they'll pay back. But what we realized was happening in the space, when you look at the debt freedom space in general, or even debt consolidation, a big issue for a lot of lenders is that most of the people who apply don't qualify. If I have a debt problem, I likely have a credit problem and I'm not there yet.

Jim Marous:
I'm not asking for help if I'm not already in trouble.

Rachel Lauren:
Exactly. And so CAC, CAC is incredibly high in the debt consolidation space because they have to turn down so many people. And I think what we realized as we of built out this direct to consumer app is that we're getting so much data, not just behavioral data about what these folks want to accomplish, but also consistent debt payoff behavior. So what's interesting for us, when you look at of underwriting, most of the time lenders, they get a single snapshot of that borrower with their existing credit score. But what's interesting is that a person, let's say you have two people both at 700 [inaudible 00:40:01], one person was at 750 six months ago, the other person was at 650 six months ago. Those are two very different borrowers and the person who came down is probably going to perform way worse than the person who built themselves up. And so what we'd rather do from an underwriting perspective is compare the user to themselves rather than comparing them to all the other people in their credit box that sit where they're at.

Rachel Lauren:
And so I think it's a much better way of determining risk and understanding is this person going to do the things that they say they're going to do? Are they going to fulfill their obligations? And so we really started thinking about Debbie as a way of qualifying folks for refinance. A lot of them are paying very high interest on average 20 to 25% APR. They're looking to reduce their interest rate significantly and they might not have the credit for it. And we really see Debbie as the way for them to achieve that.

Jim Marous:
So, Frida, I look at everything you're doing and I spent a lot of time with you at Finovate. In fact, probably spent more time with the two of you than I did any other single company because I related to what the challenge was, but also the way the solution was. And I think one aspect of this that really was enlightening was the use of rewards to build better behaviors. And financial institutions really struggle in doing this because they make money on bad behavior. They make money on continuous building credit until they lose money on the relationship, they make more and more money, they make higher interest rates. We've talked about this before and you're really building better financial behavior. Now let's take the other side of the equation, savings and investing. Can you imagine or envision possibly expanding the Debbie platform to maybe encouraging savings to do the other side of the equation on what really is financial wellness?

Frida Leibowitz:
Yeah. So a couple of things and I think it's very interesting that you mentioned it's very important to talk about looking at this as something that is actually going to increase your profitability, not decrease. Because I agree with you. I think that until now financial institutions have been very shortsighted and they're just like, well, in the interim I can just squeeze them out, high interest out of my borrowers, squeeze some fees out of them. But what they're not seeing or what took them a long time to see is that over time you're losing a lot more than what you're getting because I like mentioned what you end up with is folks that are higher risk are sticking around and then building up more debt and struggling even more and more likely to go into default. And the folks that are doing very well, they're probably going to leave you. If they're squeezing high interest out of them, they're going to go to the next lenders going to offer them a better rate.

Frida Leibowitz:
And when they're ready to open that saving account investing account, they're not as likely to trust you because if you've charged them fees, you charge them high interest, they're going to go to somebody else. And that's really where our job comes in. What we came up with is we built our model, the rewards model in a way where we actually built it backwards. We started with the bottom line. We said, in a perfect world, if we can increase profitability on a credit product by increasing the retention and decreasing the default rates, how much does that give us on the margins? That actually gives you quite a lot because those are the two biggest line items, the interest income. And on the other hand, the defaults, right? If you can improve performance on those, and then some of that goes back in rewards, but you get to keep a lot of it.

Frida Leibowitz:
So overall you're still more profitable than you would've been otherwise. And to your second point, we actually are already encouraging our users to save. And one of the key keystone of the program is we do help people build their emergency fund. We give them savings goals every month. We track those goals and for the partners that we work with. The nice thing is that the rewards that they're paying out are actually going directly to a saving account with that. So if you're a financial institution that wants to drive higher deposits for loan customers or people who are in debt, you can actually do that by depositing the reward funds directly into a deposit account. And not just that, but you can encourage the users to save even more to add their own savings. And it's something that we've actually seen our users do really well. Our active users are on average adding a $100 to their savings account every month. And these folks who are debt-

Jim Marous:
That's a lot.

Frida Leibowitz:
Yeah, that's a lot. That's a lot. So these folks who are struggling with debt, but they are actually excited about the idea of starting to build their savings and starting to build that financial security even before they're debt free, right? Because that is very important. And so that's actually been one of the things that we've led with and continue to believe in. And so to your point, definitely a place where we want to be very, very active going forward as well.

Jim Marous:
So Rachel, we've learned in this business not to go too far in advance because things change so quickly in the financial services' arena, but where do you see Debbie, let's say one to two years from now, where do you see this platform going?

Rachel Lauren:
I see us-

Frida Leibowitz:
IPO.

Rachel Lauren:
Number one on that. That number two, I think we want to be that name, that brand name to consumers that when you're in debt, Debbie is the place that you go. Not to some credit repair guy that somebody recommended to you that's trying to charge you $500 in fees. Not all these sort of automation apps. Not cash advance, not overdraft protection, Debbie, because we want people to feel like they want to make a change in their lives, they want to get out of the situation, they want to be out that situation long-term. And so again, the same way that Noom, anytime I tell people about Noom, most of them have heard of it, even if they've never used it, they've created that brand name as a trusted weight loss partner. We want to be that number one name in the debt loss space.

Jim Marous:
Oh, it's interesting too because Noom is so different except for weight watchers. So it's an automated or digital weight watcher. It basically used the same behavioral modification. But again, you said it in the presentation at Finovate, if I can't change behavior, I'm simply doing a short-term fix. There's nothing that really is going to change over time. And we see that every New Year's Eve, where we have a whole lot of people on diets during January, but the overtime is where who's still on them in July and August when the summer is at the end and you can start wearing sweatshirts and baggy clothes again. Frida, where do you see the company? And maybe you can elaborate more on where you see your company going as well.

Frida Leibowitz:
Sure. I mean, like Rachel mentioned, I think we want to definitely have that brand, the trusted brand, and I think more on the other hand, and not just on the consumer facing front, but I think on the partnership side, we want to be seen as a trusted partner for any financial institution that really wants to partner with their customers or members and help them, really genuinely help them and not just help them out of the goodness of their heart. Because at the end of the day, we are not building a charity business. It's very important to say that. We're trying to build a business that really aligns incentives for the financial institutions and their constituents, right? So that they can help them and at the same time drive better business outcomes.

Frida Leibowitz:
So we want to see your customers or members eventually be able to get a mortgage with you, eventually start investing with you, eventually start saving with you. That for us, I think will be the best success story and it's really a happy ending for everyone. And so I think if Debbie can be the trusted partner to do that, and of course the trusted brand on the consumer side as well, that'll be a dream come true and help a lot of people get out of debt. That's the number one thing.

Jim Marous:
Hey, both of you, thank you so much for being on the show today. I'm so glad we were able to reconnect and I wish you both tremendous luck because if you're successful, then there's going to be a whole lot of people out of debt, which is all good news. Thanks.

Rachel Lauren:
Yep.

Frida Leibowitz:
Thank you so much, Jim.

Jim Marous:
Thanks for listening to Banking Transform, the winner of three international awards for podcast excellence. If you enjoyed today's interview, please take some time to give our show a five star rating. Also, be sure to catch my recent articles on the financial brand and the research we're doing for the Digital Bank Report. This has been a presentation of Evergreen Podcast. A special thank you to our producer, Leah Haslage, audio engineer Sean Rule Hoffman and video producer Will Pritts. I'm Jim Marous. Until next time, remember, rewarding customers for making smart finance institutions is the key to customer engagement and loyalty.