Quo, a Stanford consumer fintech startup, leverages AI for financial security


Payment for the car is due in seven days. The electricity bill is overdue. Cable service has been cut. You have to go to the doctor, but you are not insured.

You have also discovered that your home is in need of major repairs. You’ve reached your credit card limit, and your next paycheck won’t arrive for a week and a half.

These challenges are all too familiar in the United States of America. In the middle of a unprecedented stock market rally and record unemployment ratet, many Americans still struggle to meet their financial needs. CNBC reports that about 40% of Americans can’t handle a $ 400 emergency. Anyone can fall behind on these recurring bills, and unforeseen expenses can add to financial constraints. Payday loans are used to bridge the gap between paychecks, but end up compounding a cash flow problem due to their usurious interest rates. Financial disaster can happen to anyone in the United States.

“My family, like other families across the country, has suffered our fair share of economic hardship,” said Tucker Haas. “In 2002, my younger sister was born with Kernicterus, a rare form of preventable brain injury caused by jaundice in the newborn. Her condition involved a lot of expensive medical care, which resulted in my family being in great medical debt. From this my father’s business got slightly worse. The two unexpected financial emergencies caused my parents to file for bankruptcy. Eventually my parents were able to recover, but they found themselves haunted by the impact of this period. One of the worst It had the effect of hurting their credit. These financial emergencies made it almost impossible for them to get credit even after their income and debt repayment were back on track. Even today ‘hui, almost 15 years later, they are still having trouble getting a loan. “

Haas tells me that these painful and precarious family financial experiences made him “passionate about personal finances.” “Personal finance needs to be more active and provide real financial tools to help in these times of crisis. People don’t need another budgeting app that tells you to save a little more,” he points out. -he. Haas partnered with Neel Yerneni to create Quo. What is an artificial intelligence (AI) fintech application that provides users with secure financial backup plans. The San Francisco-based startup recently raised a $ 2.5 million funding round from major investors Global Founders Capital, with participation from Soma Capital and a few angel investors.

Kendrick Kho, the investor who led Global Founders Capital’s investment in the consumer fintech company, said: “I was impressed by Neel and Tucker’s passion for space. From a society’s point of view, our considerations for investing in them were not a question of capacity. , but if they would stay the course. Considering their talent and numerous job opportunities, that says a lot about their drive to create a positive outcome in the personal finance field. “

For most Americans, personal finance is a sensitive and troubling topic. The fact that a majority of the United States is struggling to manage an emergency has already been established. Recent employment statistics show that a the plurality of jobs created in the United States are low-wage. In other words, most Americans don’t even earn enough to meet their regular bills and surprise financial emergencies. The lack of wage growth in the United States naturally pushes people in low-paying jobs to depend on credit cards and payday loans. However, these financial products end up doing more harm than good. Payday loans carry exorbitant (but legal) interest rates for borrowing amounts in the hundreds or thousands of dollars.

In some cases, payday loan borrowers ultimately owe more interest than the principal amount they agreed to in their loan agreement. Credit card users aren’t much better off either. Interest rates on credit cards are lower than payday loans, but they are still 20-30% APR.

“Products like payday loans and high interest credit cards are designed to exploit people when they are most desperate or in need,” says Yerneni. “Personal finance is one of the less disrupted spaces with one of the greatest potential to improve people’s financial lives. Some of the solutions / products that people are building in fintech are only scratching the surface. These solutions take existing infrastructure / business models and digitize them for the modern age. Instead, we asked how technology can change the underlying logic itself. This is mainly reflected in the backgrounds of the founders, who previously worked in finance and consulting.

In these desperate times of financial need, market opportunities for short-term financial products continue to grow. Consumer credit card debt continues to grow at a rate of 4-5% per year, with Total U.S. credit card debt was $ 1,088 trillion in 2019. The founders say they are targeting risk-averse millennials, who represent an initial market of $ 10 billion. Adding in low-income people looking to change their financial habits, Haas and Yerneni estimate their initial market to be $ 50 billion. The lack of a business product aligned with the interests of borrowers leaves a huge opportunity to take market share from payday lenders.

“Throughout this experience, my parents hammered home to my sisters and me the importance of personal finances. They have constantly encouraged us to save, pay attention to budgets, invest and live below our means. But more than that, they illustrated why traditional personal finance still fails many Americans. Even if you do everything like they did and build towards the American Dream, emergencies like my sister’s condition can bring that to a halt. At this point, saving more or cutting costs is not. Instead, having access to affordable and flexible capital is what can keep households afloat, ”says Haas.

Quo relies on AI to sort out a user’s financial transactions to understand their spending habits. After a user’s economic history is compiled and interpreted, the startup sends a debit card to the user for financial purposes. The debit card provides access to two types of loans via a monthly subscription: $ 5.99 / month for $ 400 at 5% APR or $ 9.99 / month for $ 700 at 2% APR. These interest rates are significantly lower than those for credit cards and payday loans. The startup providing these loans from a small monthly amount with APRs tailored to borrowers reflects their mission to not want their users to go into debt. Unlike conventional credit business models, profit is not made by keeping users perpetually spending and in debt to pay interest, but by deleveraging them to build up savings. These loans come with user-specified constraints, such as money being used only at traders that are relevant to the purpose of the loan. If someone takes out the loan to make payment for a car, the user can only spend that money to pay off the vehicle for that month. More importantly, if a user falls behind in their loan repayment, Quo is able to restructure the loan in real time to accommodate a person’s immediate financial constraints. Quo’s financial innovation is the result of a stellar and passionate founding team.

“I saw a lot of potential with Tucker and I having a highly technical background to build something really revolutionary. The founders of Robinhood had a background in math and physics, and they alone changed the landscape of personal investment. They didn’t just build a nicer trading platform – they rewrote the trading model. There were enough people in my class going on Facebook and Google, so I thought why not try to have a more direct social impact, ”Yerneni tells me.

The two Stanford graduates met in the spring of 2018 in Berlin, Germany. Yerneni was doing an internship at N26, one of the largest mobile banks in the European Union, while Haas was studying abroad at a university in Berlin. After their friendship began, the two were interned together on Facebook. Haas and Yerneni discussed the shortcomings of traditional American personal financial services. Both were convinced of their ability to bring about positive change in the field of personal finance. They left their return offers to the social media giant on the table and launched Quo.

The personal finance status quo in the United States is changing for the better with Haas and Yerneni offering financial security, one transaction at a time.

If you liked this article, feel free to check out my other work on LinkedIn and my personal website, frederickdaso.com. Follow me on twitter @fredsoda, on Medium @fredsoda, and on Instagram @fred_soda.

Correction: Kendrick Kho’s last name was misspelled. This has been corrected.

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