Bill Harris is doing his thing again: starting a digital financial services company.
His resume as an executive is long — Harris is a former CEO of PayPal and Intuit, and founder and CEO of the financial planning advisory firm Personal Capital — but he describes himself as more of an idea guy than a denizen of the boardroom.
On Tuesday, Harris and business partner Brian Hamilton, who was co-founder of the mobile marketing technology provider PushPoint and later a vice president at Capital One Financial, pulled the switch on a new digital bank called One.
The launch coincides with an injection of $17 million in Series A funding from Foundation Capital, Core Innovation Capital and Obvious Ventures, Harris said. One has raised $26 million in total.
In an interview, Harris discussed why he is starting a challenger bank, the market he is pursuing and what his company is doing that he says is a little different from the other neobanks and traditional banks' digital offerings out there.
What drives you to found fintech companies? Did you have a formative experience, or did you kind of stumble on this world of trying to help people with their finances?
BILL HARRIS: Some of both. As a kid, I was entrepreneurial. I had a lawn mowing service. I hired all of my middle school friends. We called ourselves, Have Mom, Will Lawn because we didn't drive. Every morning, I gave my mom a schedule, and she picked people up and drove them to clients.
A good part of my life was doing what initially my parents expected of me and then subsequently what I thought society expected of me. So, do well in school, get a good job, do well there. Eventually at Intuit I ended up being CEO of a public company with 5,000 employees.
I figured out that that was not what I was good at. I'm not a manager. I do think I have a way with ideas. That is what I see as fun. Since then I've been starting companies, probably seven or eight of them now, all in fintech or cybersecurity.
Finance should be entirely electronic with a human face on the end sometimes. But even that human face can be more effectively delivered with electronic tools supporting it than branches and people selling things over lunch or golf. It's a place where change, particularly technology-based change, is everywhere you look. It's a huge marketplace and just starting its transition from the physical to the virtual. So it's a great place to work.
Where did the name One come from? Is that a riff on Capital One?
Not at all. In fact, we think we're wildly different in what we offer from Capital One. The name One came from the universal nature of what we're trying to do. We're trying to put everything into one account. We're trying to give you one card that will give you everything. This is, we hope, for people who are willing to form the deep relationship with us and potentially put the direct deposit here. This is the one thing you need that will help you spend the way you need to spend, save the way you need to save, and get credit when you need it. So what should it be called? I think One.
I saw that you are focusing on people who are middle-income, with the idea that most banks target the affluent and challenger banks target young people with simple needs. How do you define middle-class?
We’re targeting people with $44,000 to $72,000 in household income. Of course that varies dramatically geographically. If you go to San Antonio, that could be $10,000 to $15,000 less, and if you go to San Francisco, you could be making a $100,000 or more and still have trouble making ends meet. It's a 30 to 50 age group.
We index high on married or partnered, with kids and owning homes. We have a bit of a skew towards the middle of the country.
Overdraft fees hit this market square in the face. They are, for the most part, living paycheck to paycheck. They’re very likely to get dinged with overdraft fees once a month or more.
How will you reach people in the middle of the country? Do you have any specific digital marketing strategies?
We're doing both paid and organic. On the organic, we're trying to hit a different set of what in the Silicon Valley world would be called influencers, but in the real world would be called people and organizations. For instance, mommy bloggers and organizations and associations that cater to the needs of mothers with kids.
What will you be able to offer that fintechs and banks aren't necessarily providing today?
It's full-suite banking in a digital experience and fair fees. Traditional banks will offer savings, checking, credit cards, things like that. But it's busted up into different accounts, and it's very difficult to keep track of. It's difficult to move money between the accounts when you need to. If you look at the average number of accounts per household in this country, it's well over 10. If you've got all of that in it within a family, it’s difficult to know what you’ve got where and what's happening.
We're trying to put all those functions in one simple account with different pockets and with a swipe of a finger — you move something from spend to savings or pull money out of credit. It's different pockets that are easy to access within the same real-time framework.
Are you working with a bank for federal deposit insurance and deposit-taking?
Yes, we have a partner bank. [Note: The bank has not given permission to One to disclose its name yet.]
Do people need to create new accounts with you, or could they tie in existing accounts and manage them under the One umbrella?
They need to open an account with us, but it's free. And we're attempting to do a two-minute onboarding.
Can you share what your savings and lending rates will be?
For high-yield savings, we're looking at 1%. The lending will be in the low teens. The people of this demographic bracket are more likely to see high double digits in a credit card.
Are you doing what's called cashflow underwriting, where you're basing decisions on the money coming in and going out of customers’ bank accounts, which reflects how well they manage their money and pay their bills?
To some extent. We're also using all of the traditional credit indicators. We combine these in a way where you have this continuous flow of information.
How much effort went into building this app? How many people worked on it, how long did it take, did you get any help?
Frankly, I'm exhausted. It has been a long haul. We've got 40 people on the ground, most of them developers. We've been at this for more than a year in earnest, and we’ve been in planning significantly longer than that. This is the opposite of the traditional Silicon Valley notion of MVP [minimum viable product], where you put a couple of people in a garage, whip something up, put it out there, see what people like, what they don't, and then try and iterate. That's not a bad strategy if you're doing photo-sharing. If you're building long-term financial services, with the operational components, the transactional components, the customer service components, and then the security components, it's just not a place to go that direction. We've tried to spend the time and the money upfront to build something that is deep, robust and can handle not only the products that we're putting out today, but also multiple different products for multiple different customer sets that we may offer over time.
You mentioned that you’re helping financially strained families with more complicated financial needs. I know you've got account sharing, that seems like one example. What are some of the examples of more complicated things that people can do at One that they can't do elsewhere?
Savings is deeply integrated with the digital checking account, and they can both have as many pockets as you want. So you can save for vacation and save for long-term goals. We want to help our customers develop healthy financial habits of saving, so we offer automated savings in small amounts the user hardly notices. Study after study shows that the only way that most American families can save on a consistent basis is with an automated plan of this nature.
The One card can function either as a debit card or a credit card and you can default it one way or another or you can change it instantly when you're doing a purchase on your phone. This demographic is typically not getting credit card rewards, and they struggle to pay on time all the time.
There's account sharing. It could be a family member, even could be a roommate, anywhere there's a regular need to share money: for rent, mortgage, groceries, whatever it is. And the banking world gives you no way to address that; the best they have is the joint account, which is tough to set up. Often you have to go to the branch, get dual signatures. And it's only really germane for people who have a legal relationship.
We have put together something that makes it drop-dead easy to share money. In the same way that you can set up savings pockets, you can set up a sharing pocket, put a little money in it. The person you’re sharing with gets their own card and both of you can spend out of this shared pocket. You still own it, and you can shut it off anytime you want. So it's great between spouses, it's good with kids. And it's a great way to help elderly parents and their money. It could be used to pay caregivers. You can create a pocket for the parent and create a pocket for the caregiver. Even at a distance, you can not only share the money, you can also know what's going on, see every transaction in real time.
There’s a chat function in the product where you can talk about money. Talking about money is so hard for most of us. Certainly sitting down and having one of these big summits is tough. But the ability to just talk about it quickly in context, in real time, whether it's with a family member or a caregiver or whatever, I think is revolutionary.
The same could apply to kids in college, middle school or high school — increasingly they need the ability to buy things. What most people do is end up giving their middle children their own credit card number.
