Banking on Gen Z with Pluto Money
Generation Z presents a new challenge to financial marketers. This financially aware generation is about to blaze into the workforce and looks to avoid the mistakes of previous generations. In this episode of Bank-Fintech Fusion, Tim Yu, CEO of Pluto Money, speaks with Philip Ryan of CCG Catalyst about how his team is building a bank to cater to Gen Z. Though often confused with millennials, Gen Z has a different view on the world, and is all too aware of the financial challenges facing young people today.
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Phillip Ryan [00:00:02] Hello and welcome to Bank FinTech Fusion from CCG Catalyst. I’m Phillip Ryan, Director of Communications at CCG Catalyst, a consultancy serving banks and fintechs. This podcast is about the opportunities, risks, struggles and successes inside bank fintech partnerships. Today, I’m joined by Tim Yu, co-founder and CEO of Pluto Money, a mobile banking platform focused on helping GenZ college students reach their financial goals. He holds a BS in Cognitive Science, in specializations, in computing and entrepreneurship from UCLA. Good to have you here, Tim.
Tim Yu [00:00:35] Thanks for having me. Absolutely.
Phillip Ryan [00:00:37] So tell me briefly what problem Pluto Money is solving.
Tim Yu [00:00:42] Yeah. So we are building a banking platform that’s specifically going after or serving generation Z of college students. And the biggest problem that this young generation has is financial inaction. It’s basically the act of doing nothing with your finances. And it’s because they’re they’re really overwhelmed with their finances. They’re really stressed out or they have really busy lives and they can’t find time to do it. And really also that they’re just not really any solutions out there that are making it easy for them to take action and making money management approachable. And so the question is, how do we help this young generation take the first steps towards their financial goals and to get them to not make the same mistakes that previous generations made? So that’s what we’re solving.
Phillip Ryan [00:01:28] Do you have experienced first hand experience with trouble managing money? Is this did this come out of a personal thing for you?
Tim Yu [00:01:35] Definitely. So one of the reasons I started was because when I was in college at UCLA, I have some pretty good internships. I was making pretty good money for a college student, but I ended up spending all of my paychecks and didn’t save a single cent and got in credit card debt on top of the student debt that I was already in. And I actually saved more money in high school than I did in college, which is very embarrassing. But that that was a big driving factor into me, realizing what a big problem this was. And my co-founder Susie Kim, our Chief Experience Officer, she also struggled with finances around the same time, but she had dropped out of six, seven different colleges before UCLA for financial reasons. And when she got to UCLA, she ended up successfully graduating, but also had to give up on her dreams, study abroad, program in arts and language because she had a panic attack and realized she didn’t have a savings account or credit card and had no idea how she was actually going to be able to afford that program. And so we just got together and just realized that it wasn’t just the problems that we were experiencing, but millions of other colleges were to just from talking to one hundred of students, but also just a lot of secondary research that paints a very alarming picture of just the state of college students and their finances.
Phillip Ryan [00:02:51] So do you think this is different for young people of this generation? Because of obviously we know about the massive student debt burden that’s greater than previous generations? Is that the major differentiating factor? So that’s part of it.
Tim Yu [00:03:05] So there’s a lot of reasons why this generation Z and by the way, generation is ages 8 to 24 just for context. So they’re already in the workforce and millions are in college. But a big part of how they’re different is environment that they grew up in. And the rising student debt is a big part of it. Right. These generation Z of young adults and teenagers are growing up seeing the student debt crisis blow up. And so that’s already the back of their mind, which is why they’re actually trying to avoid getting into debt as much as possible. So they prefer debit over credit for that reason. And so it’s something that definitely undermined their colleges, trying to find alternative ways of getting education without having to pay so much money. Other environmental factors would also be that they saw the Great Recession happened. Right. If they saw their parents go through that and maybe saw their older siblings struggle to find jobs after graduating from college. And so just generally speaking, the mindset of this generation has is a lot more conservative and motivated around finances. They actually want to get ahead of their financial goals, meaning that they are consciously trying to avoid making the same mistakes that other generations made because they know what that negative impact can look like. But the problem is that the solutions out there are meeting the needs that they have. And so that’s why we exist. That’s why we’re building a platform that’s specifically designed to work and connect with this younger generation of consumers to help them achieve what they want to achieve.
Phillip Ryan [00:04:33] Why do you think banks aren’t helping more with this problem or I guess put differently, fintech seems to be taking this on en masse. So you’ve got to stand out from a bunch of different apps that are targeting young people. But why do you think that the more mainstream of financial services is not doing the same?
Tim Yu [00:04:52] Yeah, I think the first thing is that banks could care less about the financial health of their consumers when you’re talking about their motive, is to make a lot of money and a lot of the revenue is going to come from making fees like overdraft and lending and all of that. So just naturally, those type of revenue streams aren’t aligned with the consumer financial. So that’s the very first thing in terms of this specific demographics. So banks actually do, not all of them, but there are plenty of banks that do try to capture the market, that we are going after college students. And you might be familiar with back in, I think the sometime the 2000s and even 90’s banks were at college campuses just handing out free stuff to get people to sit down, to sign up for a bank account on campus, get credit cards, et cetera. So they clearly see value in college students because they know that if they can get a college student as a customer during that live stage, they’re likely to stay with them for a long time. Right. I don’t know about you, but I know plenty of people that are in their 30s, 40s, 50s, 60s, whatever, that has the same bank account that they had in college is still there. And they might it might not be their primary but they still have it. And I’m guessing a lot of them are probably still paying fees without knowing it. But I think the problem is that they have to spend a lot of money to acquire customers. And when you’re talking about college students, it is true that they’re not going to have as many assets as someone that maybe might be in their late 20s, early 30s or 40s. Right. They’re just kind of starting out or becoming first time adults. They’re starting to be independent for the first time. And so the time it takes to realize that LTV of that customer is it takes some time for that to happen. And so when you take into account the cost of a bank to acquire that customer and the amount of time that can wait to get that value, it’s a hard one to reconcile. Right. And so that’s why a lot of banks end up trying to focus on people that have more assets or maybe people that are in a lot more debt, more likely to borrow money and all that. And so what we’re doing differently here, what’s unique about us is that because we’re not a bank, we’re not a traditional financial institution, we can require college students. It’s customers at a much cheaper cost and at a much bigger scale, too, because our focus isn’t on banking. We didn’t go to the money to build a better bank, we go through the money to solve real financial health problems that college students have, and banking just happen to be a piece of that solution. And so when we approach universities, we’re not going up to them to say, hey, we want to basically pay you millions of dollars so that we can get college students as customers. More like, hey, we are on a mission to help students become more financially healthy. And that adds value to the university ecosystem. It improves retention rate. The biggest reason a student will drop out of college for financial reasons. It will also increase the success of students that graduate from college and increase the rate of donations from alumni back to university. There are so many benefits from financial health perspective and also for university that we provide outside of just banking. So we’re just from the fundamental level, we’re approaching this really differently from a traditional institution.
Phillip Ryan [00:08:04] I do think it’s encouraging that young people today seem much more aware of their finances and maybe it’s the fact that they have a super computer in their pocket with their smartphone, that they have access to these things. But I do think there’s a lot more. And also, as you said, seeing their parents go through financial struggles. Do you remember yourself when you became aware of money as a thing or something that needed to be managed rather than just something passive in your life?
Tim Yu [00:08:31] Certainly it was certainly through family, right. My family my parents are immigrants and they immigrated from Taiwan in the nineties. My father has a classic Silicon Valley story, came here with very few dollars in his pockets and started a computer company, did really well with acquiring companies in the late 90s early 2000s, then the economy crashed. Right. And that certainly sent our family in a downward financial spiral and with two siblings. And so growing up, there was a lot of money that my parents have spent on our education and sacrificing their own selves for their children, which I have a lot of appreciation for. But they do things like even giving up on life insurance just to be able to fund our education, mean things like that. Right. And it’s just crazy to think about it. So it really started hitting me, I think, especially when I had to make a decision around college. Right. And we have two siblings in one of my sister was going to go to New York University, or that was her top choice for me UCLA and it’s in-state. So I save a lot of money. But for my sister going to a private university, it costs, it’s really expensive. And so just seeing the financial pressure that these kind of decisions on a parents certainly made me a lot more aware of just how hard money was to come by and I really started thinking about that and then the story that I shared in college, I honestly didn’t really think about money for the first couple of years of college in the sense of like, yes, I was always worried if I had enough money, but I never really thought about getting ahead of it. But it wasn’t really until that I literally realized at one point where I was like oh I’m making a lot of money this summer from internships. And then at the end of the summer, I took my bank account with nothing that was when it really clicked. I’m like, how did that happen? Right. And so, you know, for some people, it happens earlier. For some people, this happens later. I think it’s always been at the back of my mind. But it was really that instance through that internship where for me personally, that was where, that was the biggest trigger point where it triggered me to do something about it.
Phillip Ryan [00:10:40] Yeah, I think there’s definitely an awareness that hits everyone at a different a different stage of life. Some some younger, some older. So Pluto graduated from TechStars. Can you tell me a bit about that experience?
Tim Yu [00:10:54] Sure, yeah. We were part of the Barclays Accelerator powered by TechStars in New York City last fall. It was an incredible experience. It wasn’t until early 2018 where we started thinking about banking. When we first started back in 2016, we were just really focused on financial health. Right. And it was really a layer on top of our finances. And we were using and we still are using behavioral science to change people’s relationship and money. But over time we quickly realized that in order to make a real impact on people’s finance and to really change their behavior, we have to integrate into banking and be in that kind of cash flow in their day to day lives. Otherwise, it’s really easy to show things like show information to them. But to turn that into results is a really difficult task to achieve. And so it kind of came a perfect timing in terms of the program. Right. Barclays is one of the biggest players in New York City and they have a great fintech ecosystem. And it was just an opportunity for us to really immerse ourselves more into the banking world, in the fintech world and to start understanding how we can partner with banks. Because we were looking for bank partnerships, we were exploring a white label solutions like Lala and all of that. But we had also heard about the path of being able to directly partner with banks, which was our preference. And so we thought that this program would be really helpful for that and it indeed was really helpful for that. Barclays is one of our backers and we were able to meet our current bank partner and NBKC Bank through the TechStars program, actually. And so it certainly helped take Pluto to a whole nother level.
Phillip Ryan [00:12:26] Yeah. Can you tell me about what you’re doing now with NBKC I know you’re in Kansas City at the moment, I think.
Tim Yu [00:12:32] Yeah, I am in Kansas City right now. Yeah. We so basically I mentioned earlier our initial product was really focused on just helping people reach our financial goals, but a layer on top their finances. So we weren’t moving any money. So when someone saving money through our platform, we’re actually moving it. It was just first track that they would have to go into their bank account to move the money or to maybe they would choose not to do that and just kind of look at it kind of eyeball it. And and so the next phase was to be able to actually turn those into real deposits into Pluto almost like a Venmo like experience for receiving money. That’s kind of what we like to call it. And so it’s NBKC. We’re specifically working with them to launch a FBO account called Pluto Safe. So it’s going to be FDIC insured. And our goal is just to make it really easy for people to stay from the game if I challenge it on a platform, into their goals, into this Pluto Safe account. And so we’re really excited about that. We’re hoping to publicly launch that within the next couple of months.
Phillip Ryan [00:13:34] So NBKC’s been very active in the ecosystem lately. What conversations, if you have with them and what have they said to you about their interest in fintech and what have you seen, I guess, directly since you’ve been there?
Tim Yu [00:13:47] Yeah, so I’ve never heard of them prior to the TechStars program when I met them. And that’s not surprising because they didn’t really start getting big on a fintech scene until I think just over a year ago or so, something like that within the past one or two years. And I think what really stood out to me was that they were there the first I believe they’re the first community bank to launch a accelerator program. And so they really made a huge effort to get out into fintech world and to meet as many fintech companies and founders as possible to understand how they can partner with them and not only achieve their bank objectives, obviously they want to get more deposits right as any bank, but they also genuinely have a mission to improve the financial health of Americans. So if you take a look at the city website for the list out the three core missions that they have around that and our conversation with them wasn’t just around how do we increase our deposits. It was really around, how does it fit into this changing landscape around fintech in terms of helping to improve the financial health of Americans? All the things I mentioned earlier about bank struggles to understand, acquire customers like we saw the big pain point there, too. Right now we’re very focused on B2C building that brand. But, you know, in the future, there could be potential ways for us to be able to work in closer with banks in terms of scaling Pluto onto more people. And so everything was just really aligned when we talked to them. And so we wanted to join because of their mission focused approach.
Phillip Ryan [00:15:17] Do they have a dedicated team of fintech engagement team or is it how is that structured your your engagement with them?
Tim Yu [00:15:25] Yeah, so they do. They do. I think it’s a little bit informal. I don’t want to speak for them, but they do have a team in fintech and specifically with the Founding City Fintech Program that’s kind of one of their primary vehicles. We’re engaging with startups. It’s a program where they take four to six startups to invest in 50 grand each. The focus is entirely on building out that partnership with the bank. And some of the companies already had a partnership with the bank, like we already had a partnership with NBKC prior to joining this Founding City Fintech Frogram. NBKC definitely is really specific in their fintech strategy.
Phillip Ryan [00:16:03] So you’re very specific about GenZ. So because you’re dealing with college students, the industry as a whole, I think tends to lump millennials and GenZ together, but obviously you see a difference between them. Do you see a slightly older cohort as your potential customers as well, or are you really sticking to that to the college age specifically?
Tim Yu [00:16:27] Yeah. So ultimately our goal is to be able to grow as our customers. College is kind of a starting point because we believe that’s when you that’s where finances really start to matter in terms of the actions that you’re taking, more so than any other other part of the life stage from a universe, from a behavioral standpoint, our approach is certainly universal for any financial novices or anyone that’s looking for more approachable way to start managing your finances. But just in terms of our branding and our strategy reaching and just the details of our product and some detail features that we have, we purposely try to focus on the college. One example is that we have a feature that’s called a peer comparison, where our users can actually anonymously finances anyone else like them, even on a state college campus. And that’s an interesting behavior shift because the older generation are going to be a lot more hesitant in wanting to even share their finances, even if it’s anonymous, like they’re just a lot more concerned about that. But this younger generation, because they grew up in this world of social media, Instagram and all of that, they’re actually a lot more social validation driven than anyone else has ever been, that we built that future actually because of users and that people were asking us, hey, look, I don’t know what it means when I’m told that I spend an average of one hundred dollars on eating out each week. It is that bad? Is that good? You don’t really have the context. And so the whole point of this feature is so that we give them that contextual data that they never had access to before, help better, better benchmark their behavior. Or maybe they see that they’re doing a lot better than everyone else. And if they feel good about themselves, there’s a lot of ways to do that data. But generally speaking, that is more of a GenZ feature than it is of a millennial feature.
Phillip Ryan [00:18:11] How are you managing user feedback? What are the feedback loops that you have set up to hear from customers?
Tim Yu [00:18:20] So we have Intercom on our app, so we will trigger messages based on their usage frequency to that just to ask for feedback at different points. And so we just try to automate as much as possible based on the actions that they’re taking and who they are.
Phillip Ryan [00:18:36] You mentioned earlier that banks are fee driven and a lot of cases their interests aren’t aligned with users. How do you and other startups that you’ve talked to in the fintech space, how do you view then working with banks? Is it you want to drive them to build better products or how do you want that? How do you want that to work?
Tim Yu [00:18:59] Right now, a lot of revenue for banks are going to come from lending from all these fees and everything. Right. But there is a paradigm shift happening. Banks are realizing that the world is changing. Right. That’s not customer first. They’re losing customers because of the business models that they have and they’re conscious of that. But the problem is that it’s really difficult for a bank to just suddenly shut off the stream. And so the way we see that is banks like they know the world’s changing. They know that they have a lot of practices that are morally or financially aligned with customers. They’re very well aware of it. But they kind of had to fight back against infrastructure and a history that they already have. And they have to run a business. They’ve got to make a lot of money. And so startups kind of provide an intermediary for them to achieve that without having to do it all themselves. And so for us, yes, we can bring things more aligned with this new generation of consumers, which I think is really important. I think, on a broader level. We specifically are working with a we’re not working with a big bank, we’re not working with a Bank of America. We’re working with NBKC, which is a community bank. Right. And so, naturally, the incentives are a little different in that community banks, they certainly are more empathetic and caring about their customers and their financial health and helping the community and having a bigger mission. And so that’s certainly a big part of it. Like the bank itself wants to be a part of a world where it’s almost like an anti bank. And so it works really well in our partnership that aligns with exactly what we’re trying to do by building a banking experience for this new generation.
Phillip Ryan [00:20:29] Right. Very interesting. Tim, thank you so much. Best of luck with Pluto Money.
Tim Yu [00:20:33] Thank you so much.
Phillip Ryan [00:20:34] Thank you, everyone. Thank you for listening to Bank FinTech Fusion from CCG Catalyst. We’ll see you again soon.
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