Tech Opportunities Often Live in Gray Areas of Regulation
Real change requires a willingness to do things that haven't been tried before.
I'll give you an example from my life. When we started Credit Karma in 2007, we had a vision for providing truly free credit scores as a way of creating transparency and helping people take charge of their financial lives. There was a lot of pushback, however, from the three groups we needed to work with to be successful: credit bureaus, banks and potential members.
No one wanted to work with us at first.
This is true for a lot of innovative technology ideas. We were not looking for a free ride. We were willing to pay for reports, but credit bureaus didn't understand what we were trying to do. It took time for them to trust that we were real.
Consumers were flat out cynical. They had seen all the commercials for "free credit scores" and had been prompted enough times to put in their credit card information only to be charged a monthly fee after an introductory period that they didn't believe it was possible.
Banks thought our idea was interesting, but only once we could prove that we had enough scale to make it worth their time. They wanted to wait and see the quality and quantity of people we could show their offers. We had to reassure them that we are not competing with them to make loans. Our technology platform connects people looking for credit cards, auto loans or student loans with the traditional banks and alternative platforms who can best meet their needs. At our core, we build relationships.
We eventually won over all three constituencies and changed the definition of free credit score.
By telling the truth and delivering win-win-win solutions, we became one of the most widely used personal finance platforms in the U.S. with more than 50 million members who look to us as experts on best practices for managing credit. We are particularly proud of our consistently high Net Promoter Scores (NPS). We do what we say we are going to do. We give away scores for free. There is no obligation to do anything on our platform. We don't ever sell consumer information. We make money when a member gets a financial product suggested as a good option on our site.
In the process, we disrupted the multi-billion-dollar industry that tried to trick people into giving credit card info for a "free" score and then charge them a monthly fee in the hopes that they wouldn't notice and cancel. Now lots of places offer free scores. But we have become so much more than that. We are a trusted source that helps people find the right loan products and gives them the tools to optimize their credit.
Let Integrity be the Guide.
There are still a lot of opportunities in the "gray" areas of regulation. The Fair Credit Reporting Act was written in 1970 and much of it still predates the internet. That leaves a lot of areas where it is unclear if or how the regulations might apply. Where the law is unclear, we operate based on the spirit of the law and focus on what is in the best interests of real people. By making honesty and integrity the guardrails for decisionmaking, rather than what is expedient or the easiest way to quick revenue, we build trust with the people who visit our site, our partners and regulators. While we focus on doing the unexpected thing, we also make it a priority to do the right thing.
That consumer-centric attitude to making finances approachable leaves a lot of room for growth over the next 10-15 years. Many banks have moved toward mobile banking, but when a loan application still requires answering 50 questions on a small screen, that does not feel like innovation to the user. That is where our relationship-building and problem-solving culture can help.
I envision three strategies for modernizing the obstacle course that is lending.
First, we want to end the practice of banks showering consumers with paper offering credit cards only to turn some applicants down. If we can use data to match the right consumer with the right offer, that is a more efficient and enjoyable experience for all parties involved.
Second, we want to bring transparency and certainty to that process so consumers know exactly what their options are and how much they could be paying each month.
Finally, we want to simplify the application process by pre-populating the forms and using something as simple as a thumbprint to verify identity. Add proactive outreach to monitor credit and notify members when a better offer is available and we could become the personal digital financial assistant that can save people money every month.
All of that is possible only if you are willing to look thoughtfully at the gray areas to find pro-consumer solutions that work within the spirit of the law.