Finterview: Simple’s Susan Ehrlich

Susan Ehrlich, Chief Financial Officer at Simple, talks to Plaid’s Head of Strategy and Business Development Sima Gandhi on good versus bad profits, brand identity, and the importance of using both the left and right brain in fintech.

Susan Ehrlich is CFO at Simple, a Portland-based fintech company that blends budgeting and banking into a single app. Ehrlich leverages her experience in commercial banking, credit unions, consumer retail, and digital, to drive “good profits” at Simple and bring clarity, transparency, and a customer-forward sensibility to online banking. Plaid’s Sima Gandhi chats with Ehrlich about the importance of productive partnerships, simplicity in design, mission-oriented business models, and innovation in modern banking. This conversation has been edited for brevity and clarity.

Sima Gandhi (“SG”): Your professional background includes traditional banks, credit unions, and online financial services, as well as retail. Has that been a deliberate choice to traverse such different sectors and seemingly opposite experiences?

Susan Ehrlich (“SE”): My career’s guiding light is to take on situations that provide a challenge where performance isn’t optimal or ideal, or something needed to change or improve. At the start of my career I joined a corporate bank – as most MBAs do – only to make my way over to the consumer banking side of the business through a colleague’s introduction. This move set me on my path of operating at the nexus of consumer and banking/financial services.

What I love about this area is that it’s both left- and right-brained: on the one hand, you need to know the data and be able to glean insights from it. At the same time, especially in the consumer finance space, there is a need for clear, compelling, and creative communication.

SG: It seems to all very nicely tie into your position at Simple, whereas CFO you wear a lot of hats. What’s the imprint you want to leave on Simple?

SE: My imprint is two-fold, and reflects that left- and right-brained dichotomy. I’ve been calling on a lot of my prior experience here, as it’s not a traditional CFO role. On the one hand, I’ve been able to help with the data and analytics and provide business insights, as my credit card experience allows for extracting insight from transaction activity, and my earliest experiences in banking inform the way that we look at and tell stories from the data available to us. At the same time, I’ve spent the mid to late part of my career in strategic planning and investor relations, which is often focused on the big picture, on what you are trying to accomplish.

My role is to tell that story and keep it fresh for our employees, mapping the path to profitability and what we need to do to achieve it. It goes from 50,000 feet all the way down to where the transactions hit the consumer bank accounts.

susan

SG: How does Simple balance helping consumers achieve their own financial goals while simultaneously maintaining a sustainable business?

SE: Well, Simple has two consistent mantras: (1) Simple will not profit from customer mistakes, and (2) An organization that does good will do well. We look at everything we design and deliver from the lens of, Are we being clear and transparent? Does the customer understand the bargain? And, are we creating value? Because that’s going to be the metric of “good profit” for us.

Distinguishing between good and bad profits is a main theme for Simple. Traditionally, financial institutions have been incentivized to take advantage of their customers’ confusion or inertia, resulting in fees where the customer loses and the banks win – what we term “bad profits.” Bad profits are not in our model. We’re not going to charge nuisance fees, penalty fees, fees that are profiting from or take advantage of customer confusion.

The harder climb is to go for the good profits, where your consumers are thrilled with what you’ve provided, happily pay you, and happily tell all their friends and family what a great experience they’ve had. We make fees from a service that consumers value, and will happily pay, because they want the service. We’re committed to the view that good profits will always be rewarded.

SG: Your description of Simple’s operating modus suggests a strong mission-orientation, and it brings a unique dimension to banking that’s usually found in more tech-focused companies. As you think about tech-forward banking, do you think of Simple as more of a tech company or as more of a bank?

SE: I think that’s the existential dilemma that fintech companies feel. They deal with it by punting and choosing neither — or hey mush them together into the “fintech” hyphenate. At its essence, Simple is a technology company focused on changing how people bank and think about their finances. We are owned by a bank (BBVA), but we are the tech extension of that organization. Balancing that, drawing that fine line, is not always easy to do, but that is the magic of what Simple’s trying to build.

SG: As a leader among an increasing number of technology companies that are partnering with banks, how does Simple continue to set itself apart?

SE: I think Simple’s mission-orientation is critical — we want help people feel confident with their money. The cultural orientation to be tech, not fin, is important too.
And we pride ourselves on providing a human touch at scale, which influences the design and how we bring products to market.

Being a wholly-owned subsidiary of a bank that gives us a very clear and independent identity matters a lot, a bank that is very supportive of the work that we’re doing and understands that we’re working toward a pro-consumer view of what success, and consumer financial services, could look like. As with Plaid, you need to pick partners that are aligned with your goals and objectives. Those partnerships work most smoothly when you have the same view of the future, and the same view of what you’re trying to accomplish. My experience in partnerships is that you manage to a two-by-two matrix, trying to find the win-win solutions that create benefits for everyone.

SG: So you focus on defining partnership “wins” — the top right corner of a two-by-two matrix?

SE: Exactly, let’s work in the win-win space, to the best that we can. And if we can’t, then we’ll trade off with one another, but we’ll continue to move everything up and to the right. And I think that makes a huge difference. Our partners are the consumers we’re doing business with, the shareholder who owns us, and the chartered financial institution that we’re partnered with. And we’re doing the best we can to try to keep moving everything up and to the right for a win-win.

SG: What features enable Simple to stand out from other banks? How do you think about your brand?

SE: Fundamentally, our key features are “Goals” and “Safe to Spend.” We’ve created a beautiful wrapper that sits on the core functionality of traditional banking, changing the experience to make banking easier and more available. We changed the user experience so that people didn’t have to balance their checkbook to figure out how much money they had available to spend each day through factoring in goals, bills, rent, etc. Consumers manage to their “safe to spend,” meaning they don’t really need to pay attention to the full amount of money in the account, just to what’s available to spend. And that’s the number that we make most prominent to consumers, which has the intended consequence of preventing people from overspending. We have a head of design who has been here from the beginning of the company, who is the defender of our user experience, and a head of brand who feels very passionately about who we are. I think it matters that you have humans as the vanguard protecting this user experience.

SG: In a Simple way?

SE: Exactly, the goal, truly, is to make banking easier. As a society, we’ve gone from having to walk in to a branch with a passbook, to using an ATM with a card, to now just doing everything on a mobile phone. But the account didn’t change, only the access and use, and that’s where we have the opportunity to apply technology to continue to make that part easier for consumers.

SG: Why do you think that this idea of beautiful banking – of a simple white debit card, or a clear user interface and experience - is so important to consumers?

SE: Such a good question. I really applaud the work that Josh [Reich, Simple’s CEO] and the early founders of Simple did in stripping the experience back to its essence. Getting back to the basics of what these bank products are supposed to be, and how are they’re supposed to help consumers, makes it a lot easier for folks to figure out. Money management automatically sets up this belief that, “I’m not doing it well, someone is doing it better.” Simple has built tools to make money management easy, and to side with the consumer to make the process user-friendly. I think making it beautiful is keeping in essence with the brand name, which is to keep it simple, and allow it to just do the thing that it’s supposed to do, and no more.

SG: You’re also on the board of the credit union BECU - the credit union originally established to serve employees of The Boeing Company - and are the chair elect for the credit union for this year’s board election. How do you reconcile your role leading Simple’s digital experience when advising a credit union, in reassuring them that their business is still viable in this marketplace?

SE: The beauty is there are thousands upon thousands of financial institutions in the United States. I think everybody gets to choose, to pick the way that they want to have their banking experience operate, and this highly diversified system is an advantage. Not everyone has to have things delivered the exact same way for the system to work. I love the credit union experience; in Seattle, BECU has a very collaborative, consumer-first approach, while at the same time very tech-centric in terms of how you make an appointment, where you wait, how you’re called up to a desk. BECU has fundamentally changed the nature of the experience; it’s also one of the largest financial institutions in the Seattle market, number one in consumer deposits.

SG: What would you say BECU’s differentiator will be going forward?

SE: Ultimately, it is the culture of an institution that is very member centric and is just passionately committed to its members. With BECU sitting in a very vibrant, innovative city like Seattle, where you’re watching the evolution of retail customer experiences with Starbucks and Costco, or the digital customer experience with Amazon, there’s just a lot to learn and apply.

SG: Before we had this conversation, I would have thought of a credit union as being quite opposite to a digital bank like Simple, and yet as you speak about it, they seem more similar than they are different.

SE: Definitely. It’s an exceptional user experience with a tech-centric approach.

SG: Do you see the adoption of technology, as BECU did, with a digital-banking-first orientation like Simple’s, as the future of banking? What does this mean for traditional banks?

SE: Well, you see it already happening, right? Last year’s statistics from the Federal Reserve indicated that 10,000 branches have closed in the United States since the financial crisis. So, we went from over 90,000 to, maybe, close to 80,000, right, and that trend is only going to accelerate. If I imagine the future of banking, it’s so highly tech enabled. Bill Gates has a famous quote for saying something like, “banking is necessary, banks are not.”

SG: It’s almost impossible to discuss banking and innovation without touching on the role regulators play. What guidance would you offer regulators about enabling innovation in this space while still protecting consumers?

SE: I don’t underestimate the difficulty of the challenge in front of regulators, since there is very limited upside, and they are managing almost exclusively for downside risk. But the zero risk tolerance is really tough, as innovation is very difficult to support and sustain in a culture of no tolerance for risk of any kind. I don’t have a silver bullet answer, but I do think a main theme is moving beyond a one-size-fits-all model. A 100-million dollar credit union is not the same thing as a trillion dollar global bank. There has to be some variety in the regulatory regimes that sit on top of that. And there has to be some tolerance for experimentation to help banks and other financial institutions try new things, working toward the goal of making this better for customers.

SG: Finally, parting words for Plaid?

SE: Well, I think we share a passion and a vision for this notion of an open API world, of democratizing banking, and I think that’s for the benefit of all. My advice is to continue to fight the good fight to bring opportunities to developers and innovators so consumers can benefit.

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