In between eating your leftovers and watching football games, we invite you to check out two recent interviews conducted by The FR’s Gregg Schoenberg. The first is with a highly respected Silicon Valley fintech and tech entrepreneur, Max Levchin. The second interview is with Robert Jeanbart, CEO of SIX Financial Information, a global provider of mission-critical financial data. We hope you enjoy these two conversations. Next week, we’ll be back with a regular edition of The FR.
Max Levchin, Co-Founder & CEO of Affirm
Max Levchin may look as though he could still be a student in the computer science school of the University of Illinois at Urbana–Champaign. However, the co-founder of PayPal has evolved since his early days into a kind of disruptor adult who balances boldness with a thorough understanding of business realities. In recent years, those attributes have been on full display as Levchin has steered Affirm into the start-up big leagues, building considerable traction with merchants and consumers alike. But Levchin seems to appreciate that despite Affirm’s momentum thus far, the linear, engineering-centric mindset that contributed to his other successes including Yelp and Slide won’t be sufficient for his latest challenge. Instead, the former CTO has transformed into a highly effective salesperson who is able to articulate a new model for borrowing money that cuts through the siren calls of credit card rewards programs and flashy ad campaigns. Recently, The FR’s Gregg Schoenberg spent some time with Levchin to hear his mission-fueled pitch in person. Along the way, he couldn’t resist the opportunity of being with one of Silicon Valley’s most respected entrepreneurs to broach other topics too, ranging from Bitcoin to Amazon to politics.
The Financial Revolutionist: Max, it’s good to speak again. To kick things off, I’ll note that unlike many fintech start-ups that can raise a round or two but then encounter scaling challenges, Affirm has raised $500 million of capital and has originated over a billion of loans. Your fintech and tech experience are unrivaled, too. So from my vantage point, when Jamie Dimon famously warned about Silicon Valley a few years ago, he was talking about you. With that in mind, I’d like to first discuss your combativeness towards the credit card industry, which, as you know, is a cherished business for several large banks.
Max Levchin: (Laughs) All right.
FR: Has your posture towards the credit card industry ever made it difficult to secure funding for your assets from some of those same banks?
ML: No, it hasn’t. First of all, I’m discerning in my combativeness, and it’s not as though I have a beef with the credit card industry at large. I think the credit card as a user interface is fantastic; as a business model it’s pretty brilliant. But it may or may not have outlived its usefulness in a sense that the Internet provides a lot of what the original private networks provided. But the short answer to your question is that the world of traditional players is divided into those who are going to dig in. And those players don’t fight through lobbying; it’s done through obfuscation and complicated lock-in deals.
FR: And the other half?
ML: They know that in the age of social media, the ‘no one’s going to get hurt by what they don’t know’ approach is no longer okay. I think those players are actively re-examining how to achieve more profitability through driving efficiency, not increasing fees.
FR: So you’re not out to get the industry per se?
ML: Well, Gregg, it’s not as though I woke up one morning and said, “I’ve got to figure something out about these credit cards because they’re bad.” I actually think that they served several purposes. But what we’re trying to do is bring a return to the days when the banker or the lender was fundamentally aligned with the customer.
FR: Which is not the state of affairs today?
ML: If you look at a majority of the credit card products today, an embarrassingly large percentage of profits come from things that people don’t expect to be charged for. Take private label card issuers: half their profits come from late fees, but no one expects to pay them. You ask 100 consumers and 100 will say, “I’m always on time, I’m very responsible. I don’t expect to pay late fees.” Yet the industry feeds itself on late fees.
FR: But late fees can serve a role…
ML: Yes. Late fees are fairly useful because it slaps people on the wrist and says, “Hey, you’ve got to be responsible,” except the incentives are so badly misaligned. You wind up with an arbitrary decision around how much more I can charge, which of course is a 100% gross margin profit. Any fee is fundamentally all about, “I should just take your money, and maybe I should just take a little bit more of your money.”
Robert Jeanbart, CEO of SIX Financial Information
SIX Financial Information, a subsidiary of SIX Group, is a global financial data company that provides mission-critical data to financial institutions, asset managers, insurers and other corporations in over 20 countries around the world. That reach extends to the US, which has become an increasingly large market for the Zurich-based company. That’s because regulatory and compliance demands have grown in scope and complexity in the wake of the financial crisis. And with several new EU regulations coming into effect over the next few years, US-based entities that do business in Europe will need to up their game. Given the rise of blockchain, regtech and AI-related financial applications in recent years, SIX Financial is also a name to know for fintech start-ups seeking to develop their solutions on the back of reliable reference and corporate actions data. The company’s CEO, Robert Jeanbart, was recently in New York, where he and The FR’s Gregg Schoenberg sat down to discuss his company’s positioning in the US marketplace and his take on the current global financial regulatory climate.
Note: SIX Information is an ongoing events client of Financial Revolutionist Holdings.
The Financial Revolutionist: Robert, thank you for making time during your New York swing to sit down.
Robert Jeanbart: It’s my pleasure, Gregg. So I understand that you want to discuss pasta with me. Is that really what you want to talk about? Spaghetti?
FR: Yes, because SIX Financial Information likes to talk about spaghetti regulations that wind their way through financial institutions.
RJ: Actually, we invented the reverse pasta machine. We take all the pasta and turn it into dough so that clients can have full control over all of the regulations they have to confront.
FR: Ah, I see now. Can you describe how compliance offerings became such a big part of your business globally?
RJ: When I joined this company, we were a good athlete, a company that could execute ten disciplines pretty well. But then we asked ourselves what the core assets of our company were. We concluded that compliance and corporate actions solutions were where we were truly best in class. And thanks to regulations that started to pop up everywhere, we believed that our reference and corporate actions data could be transformed into a good value proposition we could offer to our clients.
FR: What was your first big stake in the ground with this new strategy?
RJ: The first attention grabber came with the PRIIP investor protection rules.