How Technology Can Build Trust for the Newly Banked

In this episode of our series on financial technology, we sat down with Katie Macc, co-founder and chief operating officer of Juntos Global, a fintech company that serves as a bridge between financial access and financial inclusion for the world’s newly banked. Kate tells us about the ways technology can help solve many of the problems facing the unbanked around the world.

Some of the key takeaways from our conversation include:

  • Lack of trust is a key barrier to getting the newly banked to use their new accounts.
  • For fintech products to be successful, new users need to trust the financial institution, the product itself, and their own ability to use it.
  • Socioeconomic status can play a huge role in how people use fintech. The differences between users within a country can be greater than similar groups across multiple countries.
  • Necessity is the mother of innovation. Fintech in emerging markets has been forced to adapt to low profit margins and information constraints. These experiences could offer insights for firms aiming to fill gaps in financial inclusion in the United States.

Transcript

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Nicholas Borst:

Welcome to Pacific exchanges, a podcast from the Federal Reserve Bank of San Francisco. I’m Nick Borst.

Sean Creehan:

And I’m Sean Creehan. We’re analysts in the country analysis unit here at the San Francisco Fed. Our job is to monitor financial sector developments in Asia, and as part of the Fed’s public mission, share information and analysis with listeners like you. Today, we return to our series on fintech in Asia. We’re looking at the new and innovative technologies that are shaping finance in the region.

In today’s episode, we sat down with Katie Macc, co-founder and chief commercial officer of Juntos global, a financial platform that serves as a bridge between financial access and financial inclusion for the world’s newly banked, driving usage and engagement.

Katie Macc:

People need to trust themselves and oftentimes we find that particularly new consumers to the financial industry have very low trust in themselves. They’re afraid they are going to make a mistake. And so, “What happens if I enter my pin wrong? What happens if I go to send money to my mother back in a village and I send it to the wrong phone number? Is my money gone forever? Is there any recourse? Who do I call?” And when somebody exists with that level of mistrust in self and their own ability to use a product, oftentimes that will block usage altogether.

Nicholas Borst:

Juntos works in a number of different emerging markets around the world, including several in Asia. The company has a keen sense of the challenges consumers face in using new financial products. Katie tells us about the way her firm uses technology to help financial institutions better engage with customers who may never have had a bank account before. We talked about the unique challenges for engaging the newly banked and how firms like Juntos can leverage financial technology to better understand what drives the usage of new products and services.

Sean Creehan:

I was surprised to hear Katie talk about the more traditional analytical tools that Juntos uses. It’s not just about machine learning and alternative data analysis, tools we typically associate with fintech, but also ethnographic and cultural research to understand the role of money in people’s lives. This makes sense when you hear her talk about the important role of building trust in engaging the newly banked.

Nicholas Borst:

Yeah, it’s interesting to think about how often fintech firms, which typically operate online and can be headquartered thousands of miles away, can build trust with the newly banked. Okay. Let’s hear from Katie.

Sean Creehan:

Thanks for joining us, Katie. Tell us a little bit about Juntos and the technology you’ve developed.

Katie Macc:

Yeah. Juntos is a customer engagement platform, where we create two-way conversations with end customers of financial institutions in order to drive engagement and usage of their accounts. Oftentimes, that means partnering with a financial institution in order to drive adoption of digital financial services, either because these are the first financial services that customer’s ever accessing or because they’re transitioning from a more traditional banking relationship where most of their banking takes place in person and most of their purchases take place in cash, to digital financial services where most of their payments are being digitalized.

So, at Juntos, kind of the motivation behind the technology that we’ve created is that we see a trend in banking that I think everyone would admit they see too, that transactions are being digitalized, our banking is being digitized. We’re moving from a place where things take place in cash, they take place in person, to a place where much more can happen over the phone. I think I’ve used Apple pay three times already today.

But what’s being lost in that transition is that as payments are being digitized, we’re losing our close relationship with our financial institutions. And so, what Juntos is trying to do is step into that gap and say, “Those relationships can also be digitized.” We can move into digital, text-based communication that isn’t just alerts and warnings but instead, is also warm and conversational.

Sean Creehan:

So for example, making a loan, kind of a borrower interaction or more of a payments context or what sort of services do you think are most right for this sort of technological change?

Katie Macc:

Yes. We partner with financial institutions in any context you just mentioned and then some more. So if a financial institution is offering a savings account, they might want to have more of a digital way to interact with those customers to drive an increase in savings, to drive and increase and loyalty and relationship or customer insights with those customers who are primarily interacting with that institution over their phones.

Or it might be a transaction account, so it might be primarily payments based. Someone’s using bill pay using a debit card or a credit card or a phone based payment system at point of sale. Or it might be a loan, where the institution is looking to drive deeper engagement with their loan customers, either just to simply add to their relationship or to increase repayment rates, increased loan availment rates. There are all sorts of KPIs that institutions would partner with Juntos for.

Nicholas Borst:

Juntos is based here in Silicon Valley. But actually a lot of the work you do is in emerging markets. Can you talk about sort of what are the unique problems in emerging markets and how you adopt specific approaches to those markets?

Katie Macc:

Yeah, sure. So, emerging markets have these unique problems and unique opportunities when it comes to technology. And I think banking is no exception to that. And so, one of the unique challenges is that there’s very poor banking infrastructure in most countries where we work. We work in 11 places, 11 countries around the world, in Latin America, in Southeast Asia, in South Asia and in sub-Saharan Africa and also in Egypt. And in a lot of these places, there’s not a rich network of point of sale terminals, for example, or a rich card network or much history in using digital payments in the form of cards or checks and most payments take place in cash.

So that’s a unique challenge. But then the unique opportunity there is that in some places, you’re then seeing leapfrogging of technology where the US might be hindered at this point because every consumer has a card and every merchant accepts cards, and so we’re kind of blocked at cards and really struggling to get adoption of mobile payments, you’re seeing some countries, like Kenya for example, dive into mobile payments right away.

So cell phone based payments are really common there. So when Juntos localizes our work to different places, we take into account obviously the local challenges and opportunities there from a technology standpoint and from an infrastructure standpoint. But the primary thing that’s important for us in terms of localization is thinking about culture and context, and so we do deep dive ethnographic kind of primary research ourselves. We have a research team that takes care of that piece of the business.

We then also immerse ourselves in the secondary research available from that area. And what we’re looking for is, in this spot where we’re about to communicate with bank’s end customers, what are people’s relationships with their financial institutions like? How do they think and feel about those? How do they think and feel about money? How did they think and feel about cash, specifically?

Have the banks failed in their generation in this place causing massive distrust? But then also, what are people’s relationships like with payments and with planning in life, with goal setting, with their dreams? What are people’s relationships like with their phones?

So we do that type of research that then allows us to localize our content into that local context and customize it to a particular culture and a particular language.

Nicholas Borst:

So how do you help financial institutions build trust with people who this may be the first bank account they’ve ever had? So of going from no formal access to the financial system to complete digital transition. How do you help someone get comfortable with that process?

Katie Macc:

We think about trust on three layers that consumers need to have in order to have full adoption of financial services. And the first is they need to build trust with the institution. And so, we find that that varies from place to place. There are some countries where trust in financial institutions or even just large institutions in general is very low or is very high. And so we take that into account when we move into a locale and where localizing of our content.

So trust in the institution is first. Each brand also has a varying amount of trust, just sort of public trust generally, already among their customers. And so in banking in general, trust in institutions is actually quite low. I’m sure everybody is surprised. And so that that’s the first layer of trust, people need to trust the institution. And when we say trust the institution, that means basically people need to believe, “This institution is on my side. They’re not out to get me. They’re not trying to steal from me. They’re not trying to like slip something past me in like a fee or an overdraft or something like that.” But really believe the institution is for them.

The second layer of trust is that people need to trust the product. They need to … Say it’s a transaction account maybe somebody is trying to pay a bill, they need to believe before completing the transaction, “If I do XYZ, ABC is going to happen.” And so as soon as they use the product, if something unexpected happens, there’s an unexpected delay or they don’t receive the confirmation text or message they were expecting, then that decreases somebodies trust in a product in general. So people need to trust the product.

And then the third layer of trust is, and we actually believe this is the most important layer of trust and the most forgotten layer, is that people need to trust themselves. And oftentimes we find that particularly new consumers to the financial industry have very low trust in themselves. They’re afraid they are going to make a mistake. And so, “What happens if I enter my pin wrong? What happens if I go to send money to my mother back in a village and I send it to the wrong phone number? Is my money gone forever? Is there any recourse? Who do I call?”

And when somebody exists with that level of mistrust in self and their own ability to use a product, oftentimes that will block usage altogether.

Sean Creehan:

That’s interesting because in a previous conversation, I think we were talking about sub-Saharan Africa and mobile money, and one change that was made to—I don’t know if it was in Tanzania or another country—but users were persistently checking their balance on their mobile phone, and that was using up their data, so they had to make that mobile based account check free. And that gave them the confidence, and I think that’s related to what you’re talking about, the trust in themselves and the trust in the product. Like, “Am I doing something wrong? Do I still have my money in my account? This is bizarre. I don’t have cash.”

Katie Macc:

Absolutely. The transition from cash to digital money is one that we forget in our country has taken generations, but for many folks, they’re trying to make that leap all at once, and when they make that leap all at once, all of a sudden they can’t touch or see or smell the cash that they have anymore, they can’t count it. And so being able to check your balance is a really big way—being able to do it for free—is a really great way that institutions can help build trust with individuals, build trust in the institution that, “Hey, we’re not taking your money, it’s still there.” But also it does build that kind of confirmation trust in self.

Sean Creehan:

And do you see, are some of these issues just universal? It sounds like a lot of them might be universal if it’s a cash reliant economy, whether it’s in sub-Saharan Africa or Southeast Asia. But I’m wondering, we’re focused on Asia here, are there any specific issues you’re seeing emerging from your work in Asia that maybe need more attention than they would out other parts of their developing world?

Katie Macc:

I would say that one thing we’re finding is that people of different socioeconomic statuses in the same country are more different from each other than people from different countries in the same socioeconomic class. So for example, we find people who have high balances in their accounts in Colombia, in Tanzania, in the Philippines and Indonesia much more similar to each other than people who consistently have low balances in their accounts are like people in the same country with high balances.

And so that’s one thing that, as we study differences across the world, it might seem counterintuitive, but we find is really true. And then the second way that I would answer that is that there always in particular countries, there are macroeconomic conditions, which cause something very specific to happen in that place and I think demonetization in India right now is one of those things, where consumers in India and institutions in India are facing challenges that in other parts of the world people aren’t facing.

Nicholas Borst:

So not only the differences between different countries culturally around the world but also within some of the countries you operate, there’s huge differences linguistically, regionally. So could you talk a little bit about how, when you’re doing your research of going into the market or helping a company that already has a product in one of these markets but is dealing with such vast differences within a country, how do you wrap your head around that?

Katie Macc:

Yeah. We think about segmentation a couple of different ways. And I think some of the secret sauce as to why Juntos has been successful in driving usage is because of the different ways that we think about segmentation. And so from the get go, we assume that there might be differences among demographics slices, which is a pretty traditional way of looking at segmentation. So there might be differences among men and among women, there might be differences regionally, as you just mentioned, some people in rural areas versus urban areas.

There might be differences culturally and linguistically in different regions. The way that people think about the way they save for the future, the way they interact with their community or the way that they make payments might vary based on region. And so we collect them as much demographic information on users as we can before we get launched. But one thing that Juntos does when we launch is, we do not presume to know which of those demographic pieces of information will drive substantive differences in the way that people interact with their Juntos product or with our financial product.

For example, in some countries, we see really significant differences between men and women and the way they interact with Juntos. And then the way that they that the Juntos conversations influences their financial behavior.

In other countries we see no differences between men and women in our deployments. And so we don’t go into the conversations presuming that particular demographics will cause differences and will need differentiated content or conversations, but we allow the data to tell us which of those slices does actually prove to be significantly different in this market. The second way we think about data is from a transactional and a behavioral standpoint. And so we look at people’s historical transactional data and see, “Does this person fall into a group of people who makes a very small but very regular transactions on their account? Are they more the person who makes occasional large transactions?”

They may be a high balance person with low transactionality or a low balance person with high transactionality. And so we’ll begin to bucket users based on their previous behavior, and again do the same thing, let the data tell us in these different buckets and segments of users, do we see substantive differences in the way that they change their financial behaviors based on the conversations that we’re having?

And the places where we see statistically significant differences will then create differentiated content, differentiated experiences for those segments of people.

Nicholas Borst:

And just so, maybe all the listeners understand, when you say having conversations with Juntos, that’s through the chat bot that you create for each institution?

Katie Macc:

It is. Yeah. These are automated two-way, text message based conversations. Often times, we can be lumped in with a chat bot, we often don’t like that language because we think what we do is actually pretty different than what often gets called the chat bot. But it is an automated text based conversation. So its humans interacting with our machine or our computer.

Sean Creehan:

This sounds like it might be more of a challenge in a country or a sector where maybe it’s a completely new product and that the entire demographic base has essentially never used it before. There’s no transaction history. I’m just wondering, what are the challenges there, the data challenges, can you even really have a sense for the market? You see this with financial inclusion around the world, you deliver new accounts and then there’s a huge gap between the number of people that have been given an account but are actually using it and you might not know that until you really dive in.

So I’m just curious how you address that challenge.

Katie Macc:

Our data scientists are the most happy when we partner with institutions whose products have been in the market for a long time and there’s a rich history of data on every single person. Like you said however, because we work in the financial inclusion market abroad, oftentimes that’s not the case. And even if somebody has had an account for several years, the amount of data we have on that person is usually very, very slim.

The implications that has for us in terms of our analysis and our segmentation is that the data doesn’t exist, obviously, we can’t segment based on that data. The other thing that we can’t do is match people with like pairs. And so when Juntos works during the testing phase is what we’re doing is creating dozens of randomized controlled trials. Randomized controlled trials get their power out of the control group and the test group having similar and like people in them.

But if you an absence of data, then you don’t know what’s similar about people or what’s different about people. And so that does make our analysis more difficult. But there usually is one or two pieces of data, we usually have one or two pieces of data that we can use. And so we might use an account open date, so that we know how long this person has been dormant. We also might have some demographic information about that person that we can use to match on, and then we may also watch that person over a period of time in order to see if their transactionality changes, in which case we will end up with more data on that person in order to analyze. But it does pose a significant challenge.

Nicholas Borst:

You mentioned you go into a market was sort of a blank slate and kind of let the data speak for itself. Any surprising findings you can share with us of things that were outside of your expectations?

Katie Macc:

That’s a good question. I’m consistently surprised by the differences around the world in gender because I think my instinct would be that gender would make a big difference in the way that you talk to people and that that might drive significant differences in the way that we would design our product. And yet, we find in so many markets that it really does not make a difference and that the financial behaviors look very, very similar for men and women in the product. And then our conversations for men and women look very similar as well.

And that has been surprising for me. That would not have been my expectation. I think the other thing that’s been surprising for me is that we originally also thought that we would be making more segmentation decisions based on where somebody lived. And that also does not end up being very true. And I think the thing that drives a lot of behavioral differences in account usage has to do with the type of income somebody has. And so if people are salaried employees, they’ll act very differently with their financial tools than if they are either contract employees or perhaps are selling or buying on the side or running small businesses themselves entrepreneurs. And so I thought regionally there would be more differences.

Nicholas Borst:

And as you mentioned, relatively well-off people in two different countries can be more similar than people within …

Katie Macc:

Much more.

Nicholas Borst:

That’s fascinating.

Katie Macc:

That is also fascinating and not something we went in assuming either. But as we aggregate data across countries, really beginning to see that the content that resonates with people who are relatively well-off in the segments that we have looks much more similar across different markets than we expected.

Sean Creehan:

So in some countries we see more public driven efforts to—maybe you’ve already given access to the financial system through bank account—put an extra effort to get people to use the accounts. In India, all sorts of programs to make these accounts maybe more useful, to transfer welfare benefits directly to the holders of these new accounts so they say, “Oh well, now this is the way I’m getting my money. Maybe I’ll take a look at this product to actually use this bank account as opposed to my old ways of just using cash.”

Do you think that’s a necessary component of successful financial inclusion in a lot of these markets or can a lot of that just be done by a successful campaign by the private sector financial institution that maybe you’re advising? Just curious, the dynamic there.

Katie Macc:

Yeah. I think that what we see is, there are a couple of pieces that really need to be in place for products to be really successful in the market place. And one of them is regulatory support. And so in some cases, that’s very, very proactive, like in India. In other cases, it’s wise but maybe not quite as proactive. But there does need to be regulatory support because, for example, KYC regulations need to take into account that these are low income populations and many of them might not have a national ID card or they might not have a birth certificate or there are certain things that people might not be able to bring to the table in order to access their financial accounts.

And so, making exceptions and figuring out, “Okay, can we layer KYC so that you can have a very small balance account, with very little identification and then you can unlock layers of accounts with more identification or more official identification,” as one example that we see. So we really do need regulatory support in order to create a system that is inclusive, that does not by its nature keep people out. The second thing you need is infrastructure. We see in some places, and this can be done through private institutions, but some do it very successfully and others seem to really be struggling to do so. And so you need ways to get cash in and out of the system.

Government payments is a great one to get cash into a system. If there are no ways to get cash out of the system though, then that becomes a very difficult. And there are institutions that really struggle to create a good either Agent network or branch network or ATM network that consistently works so that people can access their money. And if people can’t access their money, then they’re much less likely to deposit money on the account in the first place. So if they’re not receiving a government payment but we’re relying on people putting money into their accounts, cash in and cash out becomes even more important.

And we find that in our user base, people often are very interested in finding out how to cash out and how to withdraw and they won’t deposit until after they feel very confident in their ability to cash out or withdraw.

Nicholas Borst:

Makes sense.

Katie Macc:

Which makes sense, right? If we weren’t sure if you could access your money, you would never put it in in the first place. But the third piece of it, you need a government that is inclusive in terms of their regulation and thinks really hard about regulation from a user-centric perspective. How do we make this work for our population? You need the infrastructure and then the last piece, I think we really need is relationships. And that’s why Juntos exists. And I think it’s a piece that right now is really getting forgotten by the financial industry at large, that as we shift towards digital financial services, so many people lack close relationships with their financial institutions.

But financial relationships, by their nature are relationships that require trust, and if you don’t know your institution, if you don’t know your customers, you can’t create trust. I really think that that third piece, figuring out how do we really make this work. So for folks who are receiving government payments over their new found account, and the government is encouraging them to continue using that account, that’s all really wonderful. But if the person doesn’t trust the institution where that account sits, they’re never going to use that account.

Nicholas Borst:

Makes sense. Having sort of done this work in a lot of emerging markets, obviously in the US, the financial inclusion problems can be very different. But do you think there’s any lessons that you can take from what you’ve done in emerging markets and possibly apply to the US?

Katie Macc:

One of the interesting things to me about financial inclusion in emerging markets is that the margins for the financial institutions are so slim for operating these accounts that the constraints they operate under are so tight that it really forces innovation. It forces innovation and delivery mechanisms, it forces innovation in service and servicing the account in relationships, and those innovations, I think, really could teach lessons to financial institutions in the States at really any demographic, institutions that are servicing maybe middle class Americans could learn from the constraints that exist in emerging market, and help them provide even better services, better relationships to their end customers.

So, I do think that there’s a lot to be learned on both sides. One of the things that is interesting to me about what’s happening in emerging markets right now is people adopt products, is that because usage rates are so low, it’s forcing institutions to be very, very user centric in their thoughts about product design, and thinking through very specific use cases of why would anyone adopt this product? What would they do with this product? How does that interface with their normal everyday life? How do we capture some of the like normal things that they do on a day to day basis?

I think institutions in the States have gotten maybe a little bit lazy about thinking about that, because banking is taken for granted and so, the products we use in the States I think, lag a little bit in their users-centric design and thoughts about, “How do I fit people’s natural everyday patterns?” And I think that’s where you see in fintech in the US also disrupting. But I think you could look abroad too and say, “Okay, what’s driving the innovation here, and how are we thinking about intersecting with people’s lives, and what are we learning about trust?” That seems so important when you look at a country where the economic system is maybe a little bit unstable, and maybe the banks have failed, and in the not too distant past, and you think cash trust is so important to be formed here. Let’s think about how people are solving that in that country.

And then you look at the US and you’re like, “Oh, we’re fine,” but trust is a major issue in the States too. And the trust in the banking system is at an all-time low, and I think banks could stand to listen to some of the lessons happening abroad.

Nicholas Borst:

Your comments about low margins are really interesting because that’s something that we hear here in the US, that you know, “Oh, it’s not necessarily worth it to make these really small micro business loans or accounts for people with really small amounts that they’re putting in.” So, working around those constraints of low margins, I think maybe there is a lot to learn.

Katie Macc:

Yeah. I think so too and I think one of the lessons too that perhaps, maybe it’s the US public that needs to learn it in order to accept it, I’m not sure if the US public or US institutions, but a lot of banks are managing to survive, our financial institutions manage to survive abroad because they charge for the services that they provide. And I think there’s a general perception in the US right now that my banking services should be free to me, and so, I should have free checking, and I should have free say, and they should pay me for my savings, and they should pay me for this and withdrawal should be free, and everything I do should be free

Sean Creehan:

And the internet is free, everything is free.

Katie Macc:

Everything is free, right? And so I often will speak at conferences where people will come up afterward and say things like that to me like, “I’m a millennial and I think this should be free.” Or something like that. I challenge the American public to think about what would your life be like if you didn’t have financial services at all? Then if you couldn’t have it, what would you pay to get it back? And so I do think that that’s a very interesting lesson where payments cost, when you’re talking about M-Pesa or mobile financial services in emerging markets. The poor are paying to access these financial services, and yet when I make a debit card purchase or transfer funds to a friend over PayPal or Venmo, I definitely expect that to be free.

I think that’s an interesting lesson learned as well and you can think about quality of service and maybe gratitude for service as being related to what you end up paying for it, whether or not you feel entitled to getting it for free.

Sean Creehan:

I guess one more question on the US, You mentioned that you had used your Apple Pay three times today, I think you’re probably a turbo user.

Katie Macc:

I’m the only one.

Sean Creehan:

I like tech and I’ve used Apple Pay maybe once.

Katie Macc:

I love it!

Sean Creehan:

Right. It was really convenient, and I was like, “Why didn’t I do this more often?” And if you have an Android Pay, whatever it may be. We focus a lot on China, I think Nick, what’s the number like 50X the volume of the mobile based payments in China versus the US.

Nicholas Borst:

It’s amazing.

Katie Macc:

I just read that only 11% of transactions take place in cash in China now.

Sean Creehan:

Is that just kind of necessity is the mother of all invention, that’s just something that’s a leapfrog effect, something that other countries are just filling a gap, it’s there and here we’re kind of an embarrassment of riches of ways to pay for things? Do you think there is anything to learn there as a way to increase that usage here or is it just a matter of time?

Katie Macc:

I think that’s a really great question to ask specifically about China. Right now, I think they’re an incredible case study to look at how mobile payments have really taken off, and how not very long ago, cash was 100% king. And I do think that’s a moment where you’re seeing just this leapfrog effect, where they skipped over the regular kinds of card payments that are so popular in the US. People are creatures of habit, and so cards are so prevalent in the US that to get people to adopt something new, I think is a really serious challenge.

One of the things that I think prevents adoption in the US of mobile payments is that, most people in the country, regardless of the demographic, ends their day kind of tapped out, like emotionally, mentally, I gave it all. I left it all on the table. Like they have stresses at home, they have stresses at work, they’re taking care of things, they’re being asked at work to adopt new technologies and new ways of doing things, and invent things and be creative. And you end the day, and you go to the store, and the last thing you want is to try something new when you have something that already works, and it has worked for you for years, and it’s never failed.

So, the first four or five times I used Apple Pay, I carried my wallet in my phone to the store, because I thought, “Gosh, what am I going to do if it fails?” Like if you’re at grocery store and there’s 40 things on the belt, they’ve just rung them all up, there’s six people in line behind you, and you have the phone and it’s going ”bah, bah” and there’s like all these people waiting, that’s terrible, right? I’m super afraid of that, and I think that prevents adoption, people are afraid.

Sean Creehan:

Maybe the lag on the chip cards will be what causes people to use the …

Katie Macc:

I think that might be true, that will also drive people crazy. I think that when people have an acceptable alternate that’s fitting their lives, that’s filling their needs, why adopt something new?

Nicholas Borst:

So, you have a unique background, previously you did some on-the-ground work with micro-finance. How did that sort of influence your thinking when you moved into sort of the tech world and working on these fintech applications?

Katie Macc:

Yeah. I think it’s a really unique perspective to bring, particularly to Silicon Valley. I think sometimes in Silicon Valley and in the tech space in particular, you can gloss over what it takes to get technology the last mile to delivery to people. And when you’ve lived in … Because of my experience, I don’t know about other people, because of my experience living in Africa, I’ve lived in Congo for three years. It was very clear to me the constraints that would prevent technology from being adopted or banking from being adopted in a place like Congo.

And so I think having a very real life experience of the challenges of building a business in that place, and of last mile delivery, and so the lack of regular power supply, for example, drives a lot of things. You can’t have internet if you can’t have power. And so then, once you have power, who reliably provides Internet services? And how reliable are those internet services? And what happens when they go out? and what happens when you don’t have a lot of competition in a provider of Internet services?

So, Mobile payments and Mobile technology doesn’t thrive in a place where there’s no regular power, there’s no regular internet. You have to provide ways for things to happen off line, for alternate ways for things to happen, and so I think I bring an experience that says, “Everything can and will go wrong, how is this going to work anyway?” where I think if you live and work in Silicon Valley, you can start to believe that like, everything always works, the internet always works.

Nicholas Borst:

Everyone has ubiquitous high speed internet.

Katie Macc:

The ubiquitous high speed internet exactly, everyone has a smartphone, not true. But we start to believe that, and so we create technology that works great when you have high speed internet, and regular power, and a smart phone, and a backup phone in case your smartphone dies, like all of these things. And the technology works perfectly and yet there so many places in the world that technology won’t work, and so I think that perspective really did prepare me to come here and say, “Okay, great. So, what about when that doesn’t work? What about when that fails? What about when our connection fails?”

We have data connections to the institutions we partner with around the world and those fail all the time. And many systems that are set up by fintech companies in the U.S. would not survive the failure rates that we experience with our partners in terms of connections both for sending and receiving messages, but also for sending and receiving data. And yet because Juntos was born out of this desire to work in places where life is so hard and where these things aren’t ubiquitous, we built into our systems kind of the redundancy, maybe it’s elasticity or something that allows the system to fail but not the product to fail then in the end.

Nicholas Borst:

Do you feel like awareness of those issues is becoming more prevalent? As a lot of these Silicon Valley technologies go global, are people starting to understand these challenges or is it still sort of an uphill battle?

Katie Macc:

I think some people are. I was in the Facebook office maybe a year ago when somebody told me that they have a room with dumb phones in it, not smartphones.

Sean Creehan:

Yeah. 2G.

Katie Macc:

Yeah. On 2G networks with very slow internet, where the Facebook employees themselves can try using the Facebook app on like not super smart phones with very slow internet speeds, so that they can experience the challenge of their product and therefore, begin to design a product that works in that context. And so I think as these global players are seeking to become truly global, not just global in the sense of like, Western Europe, the U.K., the U.S., maybe Australia, but truly global and capture the African market, and the Asian market.

They’re starting to knit us all for the same kinds of challenges, and so I believe that that’s true for some institutions. I think it’s true for Facebook, they’re putting a lot more energy into capturing emerging markets than the U.S. market at this point, for example.

Sean Creehan:

Maybe we can end by asking you to make your best forecasts. What do you think are the most interesting trends in fintech that you think will evolve over the next five to 10 years?

Katie Macc:

If I had a crystal ball.

Nicholas Borst:

It’s a big question.

Katie Macc:

It is a big question. At Juntos, we tend to be a little bit pragmatic, and so I think more about the trends in terms of what will make it into the marketplace and make an impact on people, rather than the trends that like will get developed in a room and then released someday. But the two things that come to mind for me are, we’re in the midst of a trend towards digitizing payments and digitizing products right now.

That trend obviously, the tables have turned, we’ve kind of crossed the river in China, right? Like it’s 65% or something of payments are digital, are mobile. That’s fantastic, the rest of the world is very far behind that, cash is still king in most places in the world. And so I think in the next five to 10 years, we’re still going to see that trend at play, and we’re going to see more and more efforts put into getting rid of cash, the cashless society, more mobile payments, more digital payments.

Alongside that, I believe and I hope for the sake of the financial industry, we’re going to see a trend towards digital relationships as well. And I think we’re already starting to see some of that. Most U.S. banks now have some kind of chat bot they’re working with. Some kind of way of communicating with users that isn’t just person to person and isn’t just an outsourced call center. And I think we’re seeing that globally and I think institutions are beginning to see the need for that. So I think that’ll be another trend.

The second thing that I think will happen and I think this will happen as … I think it’s a necessary outcome of digitizing banking services, is that there will be a moment where banking services start to feel a little bit more commoditized, “I’m a little less loyal. It’s a little less sticky, I don’t need the branch to be super close to me. Most of my interaction with the bank is digital,” that we’ll see a transition from banks creating products under the philosophy, “Well, if we build it, they’ll come, they’ll use whatever product I give them,” to much more customer-centered design. And they’ll need to because they’re going to start to lose the loyalty of their current customers.

Nicholas Borst:

So that ease of use is really what’s going to keep people around in a world where you can open up your phone and you have a choice of a hundred different banks to deposit money with.

Katie Macc:

I think ease of use, but I also think relationships. I think that’s the other thing that’s going to come out of customer centric design. I think banking is going to need to restore close relationships, and so we’re at a greater distance than we’ve ever been in terms of relationships with our financial institutions, and I think those are going to need to be drawn closer and that will drive loyalty.

Nicholas Borst:

Oh great. Thank you so much for joining us today.

Katie Macc:

Thank you guys.

Sean Creehan:

Thanks Katie.

Nicholas Borst:

We hope you enjoyed today’s conversation with Katie. For more episodes like this, you can find us on iTunes, Google Play and Stitcher. If you like what you hear, please leave a review. Feedback from listeners like you will help more people find us. And for even more content, look up our Pacific Exchange blog, available at frbsf.org. Thanks for joining us.