My guest today is author of the dramatic story of fintech’s major players, exploring how these disruptions are transforming even money itself.
He represents some of the most recognizable brands in finance and fintech, including Morgan Stanley, Bloomberg L.P., and Goldman Sachs.
Dan is author of The Money Hackers, focusing on some of fintech’s most powerful disruptors.
He describes these disruptors as a ragtag collection of financial outsiders and savants, telling their incredible stories to explain how the technology works and how it is changing the entire industry.
Here’s my conversation with Daniel Simon, author of The Money Hackers, in episode 492 of Informed Choice Radio.
Here’s the largely unedited transcript of Martin and Dan’s conversation, so apologies in advance for any weird spellings or typos![00:01:14] Martin: So, welcome to Informed Choice Radio. Perhaps you could start by introducing yourself. Tell us a little bit about you and who you are, what you do. [00:01:31] Dan: [00:01:31] Ooh, that is such a good question. So one is the one that’s the hardest to answer. [00:01:36] So I’m Daniel P. Simon, if you’re looking for me on the internet, you’ll find me Daniel. But you can call me Dan only. My mother really calls me Daniel and I am a writer. And a speech writer and a communications guy that spent most of my life on wall street. So finance, everything that money touches from government policy down to the money and people’s wallets is kind of what fascinated me. [00:02:02] And, um, I may have made a career out of writing stories about it [00:02:06] Martin: [00:02:06] and I’ll also eagle-eared listeners will pick up the fact that you don’t have a US accent. [00:02:11] Dan: [00:02:11] It’s like wrong exact accent. You didn’t notice my thick Bronx accent. Not from, I mean, I’m, I’ve actually spent more time in the States than I have anywhere else in my life. [00:02:20] I’m a bit of a global ma. I grew up not far from you in LA. I was born in Brixton and grew up in Southwest London. I traveled around, I went to school in Switzerland, and I. Came out here for business and I came out here very young in my early twenties uh, Boston was my first time, which is why I’m still a die hard Red Sox and pats fan. [00:02:39] And, and now New York is my home and has been for nearly 20 years. And then we’re going to be talking about how I did that. Is it 2020 years? [00:02:46] Martin: [00:02:46] So I knew I was, I slips in. It slips. [00:02:48] Dan: [00:02:48] There’s no, there’s no T on the [00:02:49] Martin: [00:02:49] 2020, but we’re going to be, so can stay about, about your book, the money hackers, we’re talking about fintechs. [00:02:55] Let’s, let’s start there with FinTech. What is FinTech for the uninitiated. [00:03:01] Dan: [00:03:01] So it means lots of different things. Um, when I, well, I’ve been working in FinTech, I like to say I was working in FinTech before FinTech was sexy. So when I first started that, you know, every, every industry has technology involved in it. [00:03:14] There’s nothing that we do today that isn’t, there’s a common refrain that every company is a technology company. And that’s more true today than, than ever. So finance has always had. Technology money is its own form of technology. Actually. Uh, and actually the, the, the banking industry was a big purchaser of financial technology wasn’t called FinTech. [00:03:32] Then when I started it was called financial technology. And if you want it to shut down a conversation a than a party, you, you, we would just tell them that you worked in financial technology and that was like two boring words combined. Um, and people walked away from you very quickly today. You telling you work in FinTech and they want you right. [00:03:51] You, they want your help setting up their Venmo or their Monzo accounts or something. And they, you know, they want to know the best, uh, the coolest apps to download. So the tables have turned. But back when I was doing, and it was just, it was just the business of selling technology to. Uh, banks. What we understand as FinTech today is something different. [00:04:11] It’s a generation of people, um, who didn’t grow up inside finance, who are using technology to try and help people better manage their money. And whether that’s savings or or sending it to people or sending it across borders or investing for their future or buying a house or saving up for college and university. [00:04:33] Um, all of that requires money. And, uh, and FinTech, as we understand today, is just the application of technology to solve some of these, solve some of these challenges. [00:04:44] Martin: [00:04:44] And that that’s me. It’s particularly interesting because when we think about money and the finance sector, we often think about a very traditional sector. [00:04:52] You know, people who have been bankers their entire lives, but increasingly with FinTech companies, these are non finance people, often younger people who have come from a different direction. So is that a fair, a fair categorization of the sector? Is it, is it. Outsiders interlopers who are coming in and disrupts in the water finance. [00:05:11] Dan: [00:05:11] Yeah. I called the misfits in my book. So the book title is the money hackers. You have a group of misfits took on wall street and changed finance forever, and you know, whether you call them outsiders or interlopers, I think I didn’t call them outsiders because some of them. Had grown up eat inside the, the financial industry, but even those, the word misfits is a better word, I think because he takes someone like, like masters and she’s the quintessential financial person. [00:05:40] She’s a Brit, originally Rose to become the CFO of JP Morgan. I’m on their investment banking side. And, you know, ended up sort of becoming the poster child for the financial crisis, but she never really fit in. She sort of one foot in, one foot out, partly because she’s a woman and it wasn’t a very accommodating industry for women. [00:06:03] And partly because she’s just smarter than the white, boring finance men around her. Um, and more humble and just. Just more brilliant in a way. And so she’s a misfit. Even the ones that may have had finance on their resume, um, the help bring FinTech to bear. And I agree, a lot of them were not from inside finance. [00:06:26] Some of them were from, from way off. And I’m happy to talk about some of those people cause they’re all fascinating. But even the ones that came from inside never really fit in. In a way because of the color of their skin or their agenda or their opinions or their ideas. So yes, in that regard, they’re all outsiders. [00:06:46] Um, even the insiders were outsiders [00:06:48] Martin: [00:06:48] of all the tracks with them. SU, the world of finance and finance technology. Is it the simple answer money or what’s that [00:06:56] Dan: [00:06:56] new generation of FinTech entrepreneurs money. If you mean by you mean [00:07:04] was only one of the w was really one of the motivators. I think some of the modes, innovators are what attracts all entrepreneurs to something which is a, an inquisitiveness about changing things. So like for example, the founder of a company we have here called lending club, which is a publicly traded peer to peer lender. [00:07:25] It was a guy could rent out a Porsche. He was a technologist, he wasn’t a finance guy. And one day he got a, and he’s French, as you might assume, with a name like random, the Polish, and he gets a, he gets a credit card bill one day and he starts looking at it and he’s just thinking like, you know, I guess he had a bank statement in one hand and the credit card bill on the other. [00:07:45] And he’s like, so I lend you money, I give you my money and you give me one, whatever. A poultry in rate of return is on that right. So you, I lend to you at 1%. You lend to me at 7%. And he says, you know, I was an outsider in two ways. I was a technologist, but I was also French. So that, uh, that, that like, um, disagreed with my egalitarian view of the way that we just, it just seemed unfair to his Frenchness. [00:08:12] Um, he was living in New York at the time and so. He kind of started to wonder, what is the spread? Why is there this difference between what you, what I lend to you? You lend back to me. And the answer is infrastructure. And so he thought, well, what if we could build, you know, a technology that cuts out some of that infrastructure. [00:08:28] The branch is the bricks and mortar, the employees, and, and, and, you know, be able to pass more. You know, better, right zone to the, to the sabers and better returns onto the lenders. And so, you know, that’s how he came about it. Just pure inquisitiveness. Why is it broken? How do I change it? Right? So Bobby Kennedy said famously, you know, some people look at the world and they ask why I look at the way it could be? [00:08:53] And I ask, why not? And so just straight up inquisitiveness, and you see this in every industry. Healthcare, it doesn’t matter. Entertainment, you know, you name it. There’s always someone who’s like, well, why do we do it that way? Why can’t we do it differently? The other thing that motivated a lots of these guys was, as I said, that sense of fairness. [00:09:11] For the most part, the what you called at the outset, the sort of stodgy, traditional view of finance has a lot of problems associated with it. Engineered complexity. And if you find that it seems overly complex, that’s because it wasn’t built for you. It’s not made for you. You weren’t supposed to be there. [00:09:32] You, whoever the listener is, right. You know, not that wasn’t for you. Tax optimization isn’t for you, you know, and, um, and it’s always been this sort of secret club, and yet the power of the essential power of financial services is, is incredibly democratic, incredibly positive. Right. I’m on the board, uh, of the communications board at the museum of American finance and our CEO that they, Dr. [00:09:59] David Cowen, you know, says if we could just get people to understand compound interest, we’d be halfway there. Right. When asked what the most powerful force in the universe was, Albert Einstein said, compounding interest. You know, there’s something magical about finance. It’s a technology for moving money backwards and forwards in time. [00:10:19] You know, when you, when you get a mortgage, you’re borrowing money. From your future self. And when you, uh, you know, when you save for retirement, you’re taking money and you’re sending it into the future to your, to the, to the person that’s going to need it. You know, when you’re old and frail. So there’s something quite magical about the power of finance, but somehow that got perverted. [00:10:40] In the, in the hallowed halls of, of, of, of banks, right? And asset managers. So there’s this kind of David and Goliath. That’s the other thing. It’s the, the technology, the sort of technological curiosity, but also combined with this sense of democratization. And someone like John Stein who created betterment, which of you, if you’ve got mostly UK listeners, would be like a nutmeg. [00:11:03] Uh, you know, a robo advisor. Yeah. He’s like, why? Why does asset management work for, you know, just the wealthy. Why do I need to have 25,000 pounds of dollars before I can start investing in the stock market? What can I start investing on dollar one? You know? And, and so that’s that kind of like, that combines both of those things. [00:11:25] One sense of curiosity and a general kind of overarching sense of injustice. And wanting to fix both of those things at the same time. Can we make it, can I make it better and can I make it fairer at the same time? Money came second. Don’t get me wrong. Some of these guys ended up very rich. I think. Ken Lynn, who created credit karma, I think he just sold it for like 5 billion and billion dollars. [00:11:50] So now he’s not going to hurt for cash. But, um, that’s not usually, a lot of these guys didn’t get into it to, to get rich. [00:11:57] Martin: [00:11:57] No, no. And, and you mentioned an example though, of a chap from France, so it was involved in the FinTech sector, but from my perspective, it seems that FinTech has really grown up around, um, uh. [00:12:07] LA, San Francisco, and also around some parts of London. So other reasons why we got these, these FinTech hubs emerge around the world. [00:12:15] Dan: [00:12:15] Well, I think FinTech goes hand in hand with the tech part, right? So Silicon roundabout in London or Silicon beach in LA. Well, Silicon Valley and in San Francisco, by the way, we have Silicon alley in New York, so you can’t, I’m a, I’m a mentor at something called Barclay’s Techstars, which is one of the world’s sort of leading FinTech incubators, and it’s, it’s in New York and London. [00:12:41] So we’ve got a thriving to my colleagues in the FinTech industry in New York. I don’t wanna I don’t want to suggest it doesn’t exist there. Absolutely. Does. Well, you know, wherever you’ve seen tech it a, it didn’t necessarily originate in New York. You know where you’ve seen technology sprout up, you’ve seen FinTech because so many of the FinTech kind of pioneers are so have a technologist soul, if that makes sense. [00:13:10] Even if they were, even if they weren’t sort of West coast, straight up technologists. Originally. [00:13:17] Martin: [00:13:17] No, no, that makes a lot of sense. So how, how has this changed in our lives? I mean, I think FinTech is now, it’s fairly pervasive. It’s in all of our lives we’re using the apps we use and the banks, et cetera, that use the FinTech technology. [00:13:30] But what impact is it having on our daily lives? [00:13:33] Dan: [00:13:33] Well, I have one for good. Um, the, the answer to that sort of partly depends where in the world you are, where you’re sitting in Europe, you guys have actually been. Significantly head of the curve on a lot of what America is only coming to grips with. I mean, you’ve had things like peer to peer payment, you know, where two roommates can split the rent, you know, for 15 years, 10, 15 years. [00:14:01] Um, you’d be amazed to kind of realize that’s pretty nascent here. Um, we have a thing called Zale, which is a consortium of the banks to enable peer to peer payment. Um, between, um, between individuals who make bank in different institutions. That’s only two or three years old. It’s, it’s, it’s pretty new. [00:14:24] And so for a lot of people, there’s been a lot of friction that’s is now getting, getting solved, right? Splitting a pizza with friends and new money to one another, sending money abroad, you know, uh, getting better data about your money, accessing parts of the financial world. Like investments that were previously closed off to all but the wealthiest individuals. [00:14:51] That’s what technology has, has brought about for the vast majority of people, and it’s sort of quite, in many ways, it’s sort of insidious and pervasive. It’s happened without kind of noticing. If you think about a shift in things like transport to like ride hailing, like Uber via or Lyft over here, you know, sometimes these, these changes happen. [00:15:12] Quickly, but subtly. And you realize one day you haven’t taken a yellow cab or a black cab in like a year and a half and you’re like, Oh my God, Oh, you haven’t, you know, you use a, what do you have? You have that bash in the UK. We have seamless and grub hub here in the States. You realize, well, this is the last time I looked at one of those menus from a re, you know, from a takeout, an I M or takeaway menu. [00:15:36] And I, I called and, and had them deliver it. I can’t remember the last time that happened. And I think that same. Sort of rapid, but subtle change is happening in our money, you know, and it bears. That’s why I wrote the book, because it bears sort of standing back and realizing that 10 years ago the, you know, investments were closed off to all but the most, the wealthy, or at least people with a minimum amounts of money. [00:16:04] It was a lot of friction. Between, uh, you know, if you were trying to move money between people, things like sending money abroad, which in the States is less of an issue. It’s just a very, very big country. It’s the same reason Americans, I remember when I was a Brit, we used to make fun of Americans for not having passports. [00:16:22] But you, when you live here, you realize it’s a very, very large place. And so, you know, you can live in Hawaii, you can live in Florida, you live in. American Virgin islands, you could live in Alaska. It’s, it’s still America. Um, uh, but, but when, you know, to the immigrants that live here, you know what’s called remittances, sending money abroad is a massive, uh, massively important part of their lives. [00:16:47] And for European, um, uh, people or people in, in, in. You know, um, AMEA region, it’s Europe, middle East, and Africa. It’s, it’s remittances are huge parts of their GDP and their way of life. And again, 10 years ago, companies like Western union were taking enormous chunks out of their, uh, out of their paychecks every month. [00:17:15] And today they’re not because is like world remit. And, and other remittance companies are using telco rails and using blockchain technology to sort of dramatically reduce the amount of money that they take and give back to people, to immigrants, hardworking immigrants. You need to send that money abroad a lot more money back to their families. [00:17:38] So, um, that’s what the book is about. It’s about how our lives have changed. Um, even while we didn’t realize it. [00:17:46] Martin: [00:17:46] Yeah. And this idea of removing friction from financial transactions is already a really good one. I mean, last week I had a check arrive in the post and we have a lockdown situation during the UK right now, and they shelter in place in the U S et cetera. [00:17:59] And I realized that I could pay in this check to my bank by scanning it through my banking app. And I was getting very excited about this and still tell all my friends and things as well, that’s been around for years. You could just go, I had no idea, but it was. So circumstances that forced me to explore what options were available in the fact that I could use this tech to my benefit. [00:18:18] Dan: [00:18:18] Yeah, absolutely. And you know, more people in America have a mobile phone than a, than a bank. So, you know, we still struggle with a massively underserved part of the population. And the, the barrier to that friction, which for us, you know, relatively cosmopolitan, urban, elite, you know, expresses itself as kind of, you know, moderate irritation is for the bottom 50% of the population life and death. [00:18:53] Just, you know, access to credit, you know, for the vast majority of, of people that are in. The UK in the U S is no longer a luxury. It is absolutely key. If we’re going to have a gig economy, if we’re going to have a shift work economy, if we’re essentially going to pass on the, the volatility of income from the employers to the employees, that is to say you used to show up to a store and whether the store sold anything or not, you drew a steady paycheck and now. [00:19:25] Through the evil genius of Amazon’s, you know, warehouse policies and tech tracking, and you know, Uber’s apps. You know, we, we are able to say, Oh, income volatility, that’s your problem. That’s your problem. That’s not the employer’s problem. In fact, I’m not even unemployed at all. I’m like, I’m like the strip club. [00:19:45] You pay to come here and you know, what you make is yours. Uh, if we’re gonna live in a world like that, then we’re going to have to address. Um, things like access to credit, because, you know, again, as a, as an urban elite, you and I use credit for things like purchasing very large things that we can’t necessarily afford all in one go like a house or car or fancy, you know, honeymoon. [00:20:10] Um, for the vast majority of people, at least for, um, a plurality of people at the bottom third of society. Credit is literally what smooths over the, the peaks and troughs of income volatility that society is forcing on them through a go, a growing shift, work economy and gig gig economy. And so, you know. [00:20:34] For every pizza that we split on Venmo, right? As a sort of like, Oh, it’s so convenient, Amazon, you know, drones, the sushi into my mouth now, right? For every, you know, for, for every, when we talk about technology and really it’s important to remember that, like. The most of the readers of this book are going to experience these things, is just making their lives a little bit easier, but there’s an entire cohort of, of Western society where this is literally critical to their ongoing existence, [00:21:08] Martin: [00:21:08] life or [00:21:09] Dan: [00:21:09] death. [00:21:11] It’s food or rent, that sort of thing. Um, and in America it’s, you know, it’s food or, or diabetes, medication, insulin. And that’s a whole separate thing. But we’ve architected well, you know, we, for better or worse, we’ve architected societies that reward capital and penalize labor income. And if we’re going to live like that, we have to use technology to address. [00:21:36] The needs of this, of the bottom 50% of our society, because right now we’re just using technology to screw them. So Uber screws, drivers, Amazon screws. It’s warehouse employees. Technology is only being used to. Uh, actually disadvantage that segment of the population. FinTech believes that technology can be used to improve the lives of that, that population. [00:22:02] Martin: [00:22:02] What are some of the FinTech innovations at the fringe that we may not have heard of that, uh, you know, probably the next wave of FinTech innovation, if I can put it that way. [00:22:12] Dan: [00:22:12] Yeah, I mean, I think, you know, my, my view of that is that there’s the fancy stuff and then there’s the, there’s this, this is the one and there’s the steak. [00:22:20] Hmm. You know what I mean? Is innovation theater, and then there’s the real, there’s the real stuff, and the real stuff is quite boring. So the, the, the, the seasonal stuff is, is things like block chain and distributed ledger technology. Right. You know, you’ve heard about the blockchain and you kind of know peripherally about this Bitcoin and cryptocurrencies. [00:22:46] Um, and that’s about as much as most people got. There’s this fancy thing called blockchain. Somehow it’s connected to this thing called Bitcoin. Some people got rich investing in Bitcoin, right? So, um. Underpinning all of that, that distributed ledger technology that the blockchain technology or theory and technology has enormous potential to sell off some of the world’s problems. [00:23:13] Right. Um, it could possible have a savings onto people. Um, it can. Um, you know, validate to people in a really interesting way. So for example, you know, land registry is a big issue in certain developing countries. They kind of lock the Capitol because they don’t have accurate land registry. Um, blockchain, you know, can be used, is being used to solve some problems every day. [00:23:42] I suspect that this current crisis that we’re in right now, we’ll pull was a lots of. Blockchain projects, it’ll, it’ll slow the rate of blockchain adoption. Blockchain is, is a bit like the internet in as much as. You know, if you remember back as far as sort of 1996 the internet was coming and everything they said about the internet was right. [00:24:04] It was just 15 years too early, right? We didn’t really realize, we didn’t know what the internet was, and we didn’t start to live our lives on the incident until, as we talk about in the book, the advent of the iPhone and really putting it into, in a workable way in our, in our pockets. In 2008 and then now we, now we live in the internet, right? [00:24:28] Blockchain will be the same thing. So, so those will probably slow some of that stuff. So do you want us to look in the fancy end of, of, you know, what’s around the corner? You would talk to people like Michael Casey at MIT who’s also in the book about the real promise of. Smart contracts and blockchain technology to transform venture capital and private equity and investment and solve some of the inequalities that I just talked about. [00:25:00] But I’m much more pedestrian in my view. I think, you know, the stuff that excites me is things like same day pay. Uh, if we’re going to have a, if we’re going to run an economy of gig workers. The least we can do is pay them on the day that they do the work or in real time, minute by minute as they clock it in. [00:25:24] So right now we have the worst of all possible worlds. Sorry about my language by the way. I’m sure [00:25:28] Martin: [00:25:28] complete the Atlas. No problem. [00:25:31] Dan: [00:25:31] As you can see, I get passionate about this sort of stuff. I mean, right now we have a system whereby, you know, Uber drivers have to bring the factory to work. If it breaks, it’s their fault, their problems at the always, and we’re still not paying them in real time. [00:25:45] Um, Amazon workers still not getting paid in real time. You know. So we’ve got all of the worst. We’re giving them all of the income volatility. We’re not even giving them an income. So, so moving from a world where people get paid in two weeks shifts or monthly shifts and getting paid in real time, why can’t you go and do a day’s work and get paid as your, as you’re working, that that would solve, that would solve some problems. [00:26:10] So, so a lot of the areas that I’m kind of interested in it in FinTech or not. Overtly the sexiest, but to me they’re kind of more important. [00:26:21] Martin: [00:26:21] Yeah. That, that makes a huge amount of sense. Dan, it’s been a pleasure chatting to you. Um, tell us a bit more about the book before you go then. So we can get it all, all good bookshops we get on Amazon, [00:26:29] Dan: [00:26:29] etc. [00:26:29] Bookshops if bookshelves still exist, but online, you know, Amazon, Barnes and noble, anywhere books are sold. Uh, wherever you like to pick up your books wrong. There’s an audio book, there’s an ebook, and there’s a, a Hogback book. It’s published by HarperCollins. It’s called the money hack is, uh, how a team, [00:26:48] Martin: [00:26:48] uh, of [00:26:48] Dan: [00:26:48] a group of misfits, um, uh, took on wall street and changed finance forever. [00:26:54] Um, it’s, it’s a good read. I can promise you that it is not technological. It’s really about the fascinating individuals who brought this revolution to life, many of whom, as you said at the top of this conversation. You know, uh, not finance people or even technologists that, um, that they’re sort of wacky individuals call it college dropouts, uh, Somali refugees, uh, music industry, um, uh, aficionados. [00:27:28] Uh, one guy invented the category of soft rock before he invented the world’s largest bank for the underbanked. So, um, you know, I tried to build a book that was coming for the com for the innovators, they, for the innovation. Um, uh, and, and each chapter is broken down into two or three of these individual stories. [00:27:48] Uh, some, it’s extremely easy to pick up and, uh, and put down. Um, and I hope everyone enjoys reading. And as much as I enjoyed putting it together, [00:27:57] Martin: [00:27:57] Hey, we’ll put a link in our show notes so our listeners can grab a copy nice and easily as well. But Dan, thanks for your time. It was a pleasure. [00:28:03] Dan: [00:28:03] Thank you.