How tech can help us make smarter financial decisions

[MUSIC] 2020 had it all social unrest, political drama, and a global epidemic. And it all came together to spin up financial headwinds that affected all of us in very personal ways. A series of lockdowns, quarantines, and social distancing led to record unemployment that led to small business loans, federal stimulus payments, and eviction protections, personal finances where all of these issues intersect. In our bank account is where the rubber hits the road. This year at CES, Cnet is taking a look at some of the ways in which personal technology will help us navigate our finances in 2021. [MUSIC] [BLANK_AUDIO] Welcome To our panelists. We have VARUN KRISHNA Senior Vice President And Head Of Consumer Finance at Intuit in San Diego. We have JOSH WOODWARD the Director for Product, for Google pay. In the US, who is joining us from Oklahoma City, and we have Dan Egan, Vice President of behavioral finance for betterman in New York City. Thanks for joining me today. So let's dive straight in here. 2020 Was turbulent. Okay. What are some of the things that you all saw people struggling with from a financial perspective in 2014 that was different from previous years. Varun, want to kick us off Yeah, thank you for the question. You know, I would say a couple things. One, you know, people mainly struggled with the loss of income. And as a result, it kind of creates a domino effect, you know, dipping into your savings to cover a shortage gaps, taking on new job reducing expenses, as much as possible or even potentially leveraging your debt to get by. And so I think this just really reinforced the importance, Budgeting regularly having a cash cushion for times like these, and having good credit just to cover some of your living expenses. I think the other thing is just people also just struggled with uncertainty, uncertainty with the economy, the stock market and just what that could mean to their long term plans or goals as well. And I think all of this just created Just a high degree of financial stress and worry that just made the need for being on top of your finances a lot more top of mind. We all throughout last year's, a lot of financial uncertainty expressed itself in different ways. We saw a lot of different customers trying to find authors. When they were shopping, that was a huge behavior. We saw up shift. We saw a lot of online shopping obviously happen. But we also saw things where customers were watching every dollar spent much more carefully. So we saw a big. Big uptake and how people would watch fees or dispute fees. So really the big theme was every dollar mattered. And people we saw were looking for apps and also services that were in their corner had their back Obviously the first one is loss of income for a lot of people. amongst our client base, we saw a large number of people who actually already had emergency funds. So they were drawing down on assets that were meant to hold them out for three to six months. Generally what we recommend, and we're now looking at nine months a year of dipping into this. So things like the cares act allowed you to dip into your retirement accounts helped quite a bit to help get people over That sort of minimal line of sustenance. The other side of things was very strict for people who didn't lose their jobs who may be in a white collar job where they could work remotely was very different. You sort of see a lot of like, higher savings amongst those people, and also more spending and using their money and ways to entertain themselves, so. Online shopping went up, investing in your home went up significantly. There was a lot more online purchasing of things, obviously. And that's easier when you're on an app. So there's a lot more a friend of mine puts it is like a lot more people were trying to have a material solution to what was fundamentally an emotional problem about how long is this going to go on for Am I at risk of losing my job, etc. A lot more of what I call entertainment investing. So getting involved in the stock market as if it was your local sports team because you wanted something to keep you entertained through the course of the day. So, obviously, the big story of 2020 was COVID-19. Did you see things that were specific to sort of COVID that impacted people's approach to managing their finances? Yeah, it was interesting for us what we've seen, not only in the US but globally is that a lot of what we expected to happen at Google regarding digital payments was accelerated drastically. And it happened with consumers. It happened with merchants and it also happened with banks. And so for consumers, one thing we saw was a huge shift. Contactless payment. I think with merchants, what we saw is that merchants were trying to find creative ways to really reward their most loyal customers, but also still try to attract new customers because they were struggling too. And we saw a shift towards a lot of digital coupons and other creative ways for redeeming offers that way. The biggest change we noticed was the people started taking the idea of having an emergency fund more seriously, both in terms of funding it. We actually saw a large number of deposits of the original stimulus going directly into safety net or emergency funds. And people who already have them, but continue to be employed, actually grew it larger [UNKNOWN]. So we saw a lot more sort of preventative or savings behavior to deal with these. Kind of downsides that you have with the modern economy. When when COVID hit and the economy was forced into lockdown. When we looked at our mid user base, we saw an immediate drop in spending just both frequency of spending as well as the absolute dollars that were spent. Now I would say an aggregate a lot of that initial shock has normalized. But as we dug deeper into the data, there are definitely some positive and negative impacts that are lingering. But a lot of it is really dependent on the industry. Like for example, grocery and Home Improvement industries have been really thriving as people are leveraging this opportunity to work on their homes. At the same time, we've seen probably not a surprise a huge drop in air travel. It's been pretty diverse depending on the customer base that we have as well as the specific industries themselves. Yeah. And you mentioned airline travel, I have to believe that that's going to come back, assuming that, you know, vaccination rollout eventually happens and we're able to clear the hurdle of COVID. I'm wondering what else from 2020 kind of brought to light some of the significant trends in personal finance that you think are gonna stick around. What are the biggest is the remote work situation or the ability to work from anywhere. This is more personal finance on the earning side. But the conversations that are being had about how much should you get paid if you do the same job in San Francisco versus Oklahoma City. The cost of living there. But also how that plays into people's priorities, do they value space or being near family? I think that's accelerated a trend that would have been slow and gradual into A tsunami of people moving away from cities or their home offices and being able to work remote over the next two or three years, especially as the ability to go back into the office come back. I think we're going to see this sort of ossification of where it matters and where it doesn't. And that allows people to have very different financial life. It might mean for some people, they can have a larger house somewhere else, but they also might invest more in having a home office and not going into this. So the work side of things, I think, actually has been disrupted as much if not more than the consumption side. Yeah, I think that's a great perspective. I would just add that I think. A lot of the lingering effect of this dynamic that we've seen this past year is really just awareness of what matters. You know, it's forced people to kind of reconcile needs versus wants. It's forced them to reconcile the importance of where they live versus where they work, the importance of family how they spend their time. I think that many of those are probably positive because it's kind of forced us to all realize what matters most. And so, I hope to see some of those trends continue to linger in terms of how people value the time and priorities that they have in their lives. Yeah, I think for us, we're really excited about, I think how people have adopted a lot of these personal finance, technologies and apps and. Some of its Google some of its other than I think what's happened is people now that they've realized that you can have your your bank on your phone you don't have to kind of dig through a purse or a wallet to check out. You can buy very easily online and increasingly more and more, making it simple and secure. I think these are behaviors that are gonna stick for a long time. I think one other area that we're really watching closely is also just how businesses are reacting to this. There's consumer trends that are definitely changing. But obviously businesses whether it's SMB or a very large kind of multinational The pace of innovation to change is happening in ways that these are investments that are gonna play out over many, many years. So I think we're seeing it on both sides and kind of trying to study on that where where the real innovation and insights are happening. It's a great point and you bring up sort of the convenience of apps, right? And apps are where a lot of Our personal financial decisions are being made right now. And convenience is a big part of that, but I've been thinking that convenience can also be an impediment in some personal finance scenarios. It's easy to make an impulse buy online It's so easy to move money between accounts,how should we be thinking about the trade-offs between convenience and caution?<< I think it's a great point and one that I often touch on this,I think we're somewhat aware that sort of social media apps, Facebook, Twitter, et cetera,we are not the actual customer where the user and,we're there to basically, Provide eyeballs for ad revenue. I think it's interesting to think about how that operates in the financial world. So we know that certain brokers have gotten fined because they sell their clients border flow on to high frequency traders. And that there's that same element of sort of like you as the user are actually getting sold to somebody else thinks somebody else in that fashion. So one thing that I'd like to see and understand is the degree to which we preview through our financial data and our actions should be benefiting from that directly. I understand how that might work with sort of targeted ads. So I get products and services that are relevant to me, but I haven't seen it quite as much yet for financial aid. Another element of it that I think is tricky and it's a very powerful trend, it can be good And it can be bad is the creation of sort of self selected but fractured communities. So if you're interested in day trading, there are multiple forums you can go on to will your heel about how much money people made day trading people often post about their successes but not their failures. And so there's a certain level of the ability to choose which communities you're part of, and hear stories from that community. This can be good. It can be like. Learning how to work. And it can also be bad in that you only hear perspectives that you already know you want to hear. So I think that that sort of social spaces that are widespread, they're not private. They're not even close friends. They're sometimes strangers but they allow you to share things on a specific focus, be it the fire movement or day trading is a really powerful trend that comes through apps and the internet. What we've learned is that when it comes to personal finance, one of the things that's really tricky is that people inherently have cognitive biases. They suffer from things like loss aversion, norms, a bias toward the present. And I think technology can really be a key to actually adapt to and correct for some of these cognitive biases specifically leveraging capabilities like behavioral science. For artificial intelligence, one of the areas that we're investing pretty deeply in is around just automation and AI to actually help people protect from themselves. We use that to basically deliver products that can help people make more money with less work. And so I think it's about the intersection of. Not convenience for convenience sake, but it's convenience to deliver a tangible benefit to the customer that goes beyond just the speed at which you can execute something. I also think that this isn't just about technology, I think one of the biggest problems that customers face is confidence when it comes to making the right decision. Even with all the advances in Behavioral Science, artificial intelligence many people, at the end of the day just want to be able to connect with a real person to give them the confidence that they're making the right decision. And so, I see a world where the combination of technology, real people expertise can actually be combined to deliver customers. Not just speed, but also confidence that they're making the right decision and a decision that will give them benefits in the long term. I think that point about confidence is a huge one. And it's what we've seen in our customer research as well. Often when we talk to people, they want to make the right decision, the smart decision, but sometimes we just don't know where to start finances money. It's really complicated and messy. So one of the things we've been trying to do with Google pay is think about how can we deliver insights about your spending, organize all that financial information for you. So you can be informed you can make those decisions. And I think that's really one of the ways we think about our app and also about where people are right now. Cause they wanna be empowered to have that information, so they can decide. That's interesting. And I think that there's probably a difference between people's comfort level, and what they're willing to do in an app. That might be generational. So what are we learning from the way that millennials write that sort of next generation to kickstart their own sort of personal financial life? What are we learning about the way that they approach those types of questions? So a couple of things here, I think One is the general idea that tech as a tool, can be very useful. The common one I hear about, is the use of password managers, to have secure access to all of your websites, not worried about getting hacked as much. The number of times I've heard of people my age, teaching their parents how to use them, so that they don't repeat the same password over and over again, is pretty huge. So one is that general just like using tools, there are tools out there that you can use to improve your empowerment. Another one is this element of being open and sharing. So I think that older generations tended to have a very non sharing non transparent approach to money and personal values aside from like, how do you earn more money? with things like the financial independence, retire early movement, how people are spending their money Choosing to have jobs, that make them happier, rather than, get the highest paycheck. And that openness amongst younger generations, I think is good not only for them, but also leaks upward into older generations. And I think the platforms that are out there, that allow people to learn technical subjects, share this information, learn from each other. That's something that all generations are, benefiting from right now. One of the big behaviors we're seeing among this segment is how do they get insights about their spending. And I touched on this earlier about being able to kind of make smart decisions based on that information. It's not enough just to see a list of all your transactions. People want to know, how much did I spend last weekend? Am I tracking? You know, according to my savings goals, am I able to spend on this thing at this time? Or should I wait till later? These are the types of questions that I think are really hard to answer but are actually the most valuable and where people are really asking us to think about and you see it across To country across backgrounds all in this age segment of how can my phone give me these insights so I can spend in faith in a much smarter way. And millennials have become a major topic of conversation in the personal finance world. And I think one of the reasons for this is just in large part because they've been dealt a pretty tough hand. On average, they're making less money than their parents were at their age. They have to deal with incredible debts like student loans. And on top of that they're facing a recession pretty early in their careers. When you add to that the COVID epidemic, it's kinda further derail their financial independence, right and it's cemented their expectation of that financial uncertainty. Now I think the good thing is despite all these challenges, what we've seen is that millennials are actually more pragmatic and self aware when it comes to their finances. They're aware about the need to pay down their debt. They're aware of things like the fire movement. They care about things like saving for retirement and they work hard to stick to a budget. And what motivates us to create products like Mint, TurboTax, Credit Karma on the Intuit side is that we believe they can be empowering. They can be rewarding for people, we can help them establish and stick to those good habits, and give them a sense of progress that instills confidence. The idea of creating products that can allow you to Demonstrate progress in small steps is one of the things that we fundamentally believe in can really enable millennials to kind of endure and persevere through the times that we're facing now. So we'll Tread carefully here. But I do think it's worth bringing up because there's a lot happening that politically that has ramifications for people's financial lives. So what are some of the political issues that you're gonna be looking at as we make the transition into 2021? I think for all this, one of the things we're really interested in and where we're working closely with regulators to is How, how does banking evolve and adapt in this environment? I think what some of the things you're seeing from the Fed pushing forward with real time rails and other ways to make settlement much faster in the US. These are incredibly exciting projects. It really can change how the financial ecosystem works, I think in the US. And so we're we're interested in trying to understand where that's headed. And of course, some of the projects we're working on with Google, with the different banks, from very large banks like Citibank Down to sort of regional banks and community banks and credit unions. These are sort of ways we're trying to get involved in this, but I'd be really interested to hear how the other panelists are seeing it too. Those are some of the things we're seeing from from our seat. I won't go too deep into the political or regulatory issues, but as a company, you know, what we focus on is nonpartisan tools. I will say that as far as the financial industry is concerned, there's never been a higher currency on things like privacy, data stewardship, and just a more empowered and aware consumer and I think these will be the hallmarks of financial products moving forward. Our goal is to increase access for all to financial tools and advice that have historically been reserved for potentially higher net worth individuals. As a company, we believe in financial empowerment for the masses. And we also believe that the financial system itself doesn't need to be predatory in order to build products that are successful. So if we're doing our job well, managing your finances should just simply become easier, more accessible, and more rewarding. What are the big ones? I think this is a little bit more personal for each of us is being wary of allowing our own personal politics to cloud our judgment about things that might not be directly political. So one of the pieces of research that we've done in the past has looked at how people reacted to elections. And that if you tend to come from a county that mostly went for the winner of an election, you have this belief that the economy is going to do great, but the stock market's going to do great. And of course, that is not strictly true. It is mostly independent of which political party happens to have won the most recent election. The first one is to be a little bit wary of how your own biases can leak into your financial decisions in ways that aren't going to really help you in the long run. From a sort of legislative point of view, there's obviously the fact that the cares act was implemented which allow people to take money out of their retirement accounts more. It's interesting to see how and when that might get undone or is it something that will persist and people are going to start using their retirement accounts as emergency funds in the case of a break the glass, in case of emergency. I think there's also some interesting work to be done on the fiduciary rule, both for registered investment advisors as well as potentially for brokers. That was an issue that took a back-burner over the current administration, but it might be the new administration wants to revisit that and see about strengthening the regulatory oversight for consumers in those specific areas. So moving from the political to the personal and the more practical, let's let's talk about apps and technologies and some of the platforms that are sort of emerging Where are the most interesting intersections between personal technology and personal finance right now? We're moving into a world I think where a lot of these apps are tools that can work for you. Of course, at Google, we think a lot about how can people search for that information and think about it, and I think one of The features that I'm really excited about that we launched last year and our new Google pay app is the ability to search across your transactions in a way that you can deeply understand your spending habits and your spending behaviors that gives people real power, real information about their spending in a way they've never had access before. Yeah. I mean, I feel like the we're at a crosspath Have a really interesting inflection point, in the next generation of personal finance products. And I personally believe, that generation of products is gonna be fueled by the intersection of artificial intelligence, collaboration, and data. What I envision is, a world where more personal finance becomes implicit, versus explicit. Understanding your users behavior and actually making decisions on their behalf for their betterment. Understanding, for example, that you're going to overdraft your particular bank account and getting a notification in advance of that so it doesn't happen. There are two interesting aspects to it. I might take it a little bit off piece here,um, one is finding new or different or better income sources for someone so,um, it might be that you've been in your job for years and you are now really qualified to do consulting or some kind of side gate where you're helping other people might be for it And the platforms that exist now allow you to find and match with each other much more. So I think that more people can have a more diverse set of income streams. Another one that's kind of related is a book I read recently. It's called, I believe, 30 lessons for living. And the big thing there is like you're learning from people who are older than you about what they did right and wrong in their life and incorporate that into a financial plan and saying, like, hey, congratulations, you're 27 you just got married. You are at risk for kids, which means you are at risk for day care hoax. The ability to see around these corners using each others data and to give sort of a personalized look ahead to somebody, I think there's a lot of potential. Yeah, it's an interesting point Speaks to the fact that there are these blind spots that a lot of us don't see and know that we should be thinking about. What are some of those type of things that you're all seeing from your customers or clients? What are sort of the big blind spots that most of us aren't thinking about that we should be? I have already used up my power move of not saving it up for kids day care. Another one that actually thinks pretty important and if people loses is taxes and specifically tax planning throughout the course of the year. Taxes are not something you should think about once per year. I know nobody likes it, but doing incremental tax spreading through the course of the year allows you to make a little bit more money for yourself to know what's coming ahead. Another one that's been alluded to is these blind spots that come up with recurring payment subscription plans, especially sort of annual ones. Being able to make sure that you don't end up spending money that you're not benefiting from simply because you forgot about something that's sort of monitoring Ability to see I need to cancel that subscription before it goes ahead again. I think that's a blind spot that I definitely have. And I really appreciate it when, personal finance apps warn me about it ahead of time there's too much reactivity, to previous spending, and not enough kind of pay in two weeks this is gonna happen. Are you sure you want to go down the way that it's scheduled to go down? Yeah, I think there are two big blind spots that I would call it. I think the first one has to do with long-term consequences of short-term actions. A lot of people don't realize that, when I take that auto loan and I take a hit to my credit score that has a compounding effect that matters years from now. If you have a reduced income or a higher debt level, let's say you had a drastic cut in income for a year or two, you depleted your cash. Maybe you took on a little bit of consumer debt to cover your living expenses. As a result, you're not able to get to your financial goals but maybe that makes you Take a payday loan or get a cash advance. And a lot of consumers don't realise that these short term decisions have a massively compounding effect that can trap them for years. And the ultimate impact of that is just their financial goals in the long run get delayed. So I think it's important that everybody sort of reviews their entire financial situation and tries to think ahead and personal finance apps Like meant and others can definitely help with that. Another big blind spot that I think is more macro is just that we haven't yet seen the total effect of the economic state in the stock or the real estate market. You know, with all the stimulus money in programs, you know, there's a chance that could impact inflation and cause the purchasing power of the dollar. To be affected. We haven't seen how the real estate market is going to be affected long term. You have many people today they're protected by things like renters eviction protection or mortgage forbearance elite relief programs. So you could see more and more people not being able to afford where they live. You could see more foreclosures. We have changes to the way commercial real estate have been operating. I think Dan talked about this earlier but as more companies and workforces continue to work remotely from home, with many people deciding to stay at home. These are potential blind spots are going to change the economic structures of how we operate today. I'm interested in what your top sort of financial tip would be for people who are struggling to navigate this space. One that I've already alluded to that I think it's really powerful is not trying to have to come up with it yourself. You're not the first person to find yourself in this position. The next one is to try to make sure that it's fun and interesting. So You know, like, set a time when you're going to do it, make sure that you have, I don't know chocolate for a drink to sit down to do it and do it in chunks. So to say like my only job to think about this today is to think about, okay, what kind of insurance Do I need, I'm not going to buy it. I just want to figure out what kind of insurance I need. And that's my only task. So do it in little slices that feel manageable and make sure that there's some fun some positive aspect to getting that done at that point in time. Yeah, I had a similar instinct, I think this is, for a lot of people, a really, really hard time, and there's a lot of fear and uncertainty and I think Finding people that you can kinda go through this with together you can do online you can find people that have been in a similar situation. And I think that's probably the number one thing I'd pass along is don't do it alone. Have a community you can find it and connect with. Looking forward, maybe beyond 2021, even 2022 and sort of into the future here. Is there one app or technology for the personal finance space for that people use or take advantage of that you really want to see invented or perfected. Finances are personal, right? It's an incredibly emotional area for people. And I think products that understand the user, but are also empathetic, are going to be key. So I imagine a world where a product can not just understand where I'm at or what I need to do, but how I feel and what it takes to actually motivate me. So I would love to see a new breed of apps that are not just focused on efficiency or outcomes, but also on some of the more intangible things like psychological safety and emotional awareness which. Wouldn't it be great if there was an app that was your financial coach that you could turn to in any moment and ask a question and be able to understand, hear your options and hear the trade off. And I think being able to automate that and scale that in a way that was simple, that was safe. It was helpful. For me that would be a game changer. One that I'd like to see, and this actually touches on a point that Josh made is sort of inverting the relationship between client data and who uses them stores that didn't have access to it. So, I think it's a little bit of an infrastructure play to say if they were standardized formats for all financial transactions and data and where If the end user had access to, like, my, I don't know, like my previous years and current year's tax forms and all this information that goes into good financial advice and planning, and I could selectively allow, other apps access to it to give me advice or let me know about recommendations they might have But then, I'm in control of it. And ideally, I'm the one who gets to decide who has what information, that sort of change in the power structure of the data could unlock a lot of opportunities for people to come up with apps that are built on top of that. This was a super fun conversation. This is a very important topic you've given us a lot to think about. I want to thank you all of our panelists. For a really lively and engaging conversation. [MUSIC]