Financial Wellness Fintech Seeks Credit Union Partners
By John San Filippo
Debbie is a financial wellness app borne from personal need and modeled after the popular Noom weight-loss program. Debbie’s purpose is to guide consumers on what the company calls their “debt freedom journey” in a manner designed to change behavior and encourage long-term success, rewarding consumers as they reach certain financial milestones.
Co-founders Frida Leibowitz and Rachel Lauren, CEO and COO respectively, compare Debbie to the increasingly popular weight loss program Noom. Whereas Noom takes participants on a thoughtful, well-informed weight loss journey designed to bring about permanent, sustainable lifestyle changes, Debbie seeks to take consumers on a similar debt elimination journey. In fact, Noom’s director of product and growth has been one of the major contributors to the development of Debbie’s curriculum.
Firsthand Experience
“Debt is something that my family struggled with ever since I can remember,” Leibowitz told Finopotamus. “I grew up in a family that was immigrant, single-parent, non-college educated – a perfect recipe for falling into this behavioral cycle of debt.” She said that behavioral debt – using credit cards or buy-now pay-later options resulting in an inflated lifestyle – is the type of debt Debbie seeks to counter, noting that the current financial system unfortunately encourages poor financial behavior.
“Every time you get to Walmart, they're offering you 20% off your purchase today if you open up a credit card account,” she noted. “The system encourages you to spend.” Leibowitz said that when she was a child, she thought her family’s financial woes were unique. “Then I realized when I grew up that no, 40% of American families struggle with this.”
Later Leibowitz got a scholarship to New York University and studied finance, living what she called “the American dream.” Yet those bad habits she learned as a child followed her into adulthood. “By the time I was about to graduate, I had $15,000 in credit card debt,” she admitted. “I was paying around 25% annual percentage rate (APR) across my cards, which was very daunting as a 20-year-old, struggling and trying to make it out here. I ended up approaching the debt freedom market for the first time as a consumer.”
As Leibowitz began to research different strategies for extinguishing her debt, she realized that her options generally fell into one of two categories. The first was simply having access to more cash – debt consolidation loans, payday advances, etc. The second consisted of programmatic approaches such as curated debt consolidation.
“The problem with both of these approaches was that neither of them was targeting the underlying cause of why someone got into debt,” she explained. “Even though it could help them pay off their existing debt, it wasn't helping them stay out of debt.” She said her first job after college, working in the Marcus division of Goldman Sachs, really drove this point home.
“I went to work on [Marcus’] first product, which was that consolidation,” she said. “At the time, I started seeing this horrible trend where more than 50% of our customers who started at any of these debt freedom programs were going back into credit card debt within less than a year. We solved one problem, helping them pay off their debt, but then they're going right back into it.” She added that even for those who managed to get out of debt, it was typically a 3 to 5-year process with little reward along the way.
A Better Way
It was then that Leibowitz started talking with Lauren, her friend and former college roommate. By this time, Lauren was working at a fintech venture firm called BDMI.
“I was doing a lot of work sourcing fintech and software deals,” Lauren told Finopotamus. “I was looking at a lot of consumer fintech and everything looked the same. When we scoped out the market, we tried to understand why all of these companies that have tried to solve this massive problem of credit card debt had somehow failed.”
Echoing Leibowitz’s comments, Lauren explained that debt really isn’t the root problem. “The real problem is I spend more than I earn,” she stated. “You can help somebody pay off their debt today, but that's not going to stop them from swiping their credit card tomorrow and building it right back up. It’s like going on a diet and losing 30 pounds. If you don’t make sustainable lifestyle changes, you’ll put that much and more back on.”
How It Works
“With Debbie, we're building the first habit-shifting rewards platform for debt payoff,” explained Lauren. “We actually transition borrowers into wealth builders, motivating and incentivizing them along their debt freedom journey.” She said consumers work their way through various financial modules and tasks, and are rewarded as they achieve certain milestones.
“Right now those are cash rewards,” said Lauren, “but eventually they could be other kinds of rewards, like gift cards, stocks, or whatever. The idea is for Debbie to be their accountability partner along the way, giving them a step-by-step guide of how to get from point A to point B and really holding their hand.” The two executives claim that current Debbie users are highly engaged and, overall, have been paying down their debt even faster than expected.
Debbie tracks user progress by monitoring account activity through a Plaid connection to each financial account held by a user. A future enhancement, Lauren said, calls for credit bureau integration to ensure that users are not opening credit accounts not tracked by Debbie.
To date, Debbie has been paying these financial rewards out of its own pocket to prove the concept. The program has reached a level of success where the company is now seeking community financial institutions to offer Debbie to their accountholders and fund the financial rewards. The two said they favor credit unions because of the credit union “people helping people” ethos.
According to Lauren, Debbie offers an open API (application programming interface) for those institutions that want to integrate directly into the platform. However, she added that integration beyond the simple Plaid connection is not required to achieve basic platform functionality.
Leibowitz added that any participating credit union would also have access to a treasure-trove of data on Debbie’s users. “We can ask the users really anything we want. So in addition to engagement data from the platform, because of the modules that we have, [credit unions] can start understanding what else exists in that user's financial roadmap.”