‘Financial service providers haven’t caught up with the different ways people are making money’: Argyle’s Billy Marsden

The following was produced by Tearsheet Studios. We worked with employment data platform Argyle to create a podcast series about the rising importance of employment data and how lenders, banks and fintechs are using this data to make financial products available to more people, solving some of the challenges with today’s financial services. You can access the previous interviews with Argyle’s CEO Shmulik Fishman here, CTO Audrius Zujus here, and vp of business development Hannah Arnold here.

Thanks to rapid technological advancements, everything we know about work is constantly changing. The pandemic also brought about massive job losses and many career paths changed as a result. With the rise of the gig economy, this new reality means more and more people are joining the non-traditional, multi-income workforce. 

Financial systems, like credit scoring, weren't built for this new worker -- they were built for the W2 worker, with a single full-time job and monthly pay stubs. This leaves non-traditional workers underserved by traditional financial services, and puts major hurdles in the way of deserving folks toward their financial wellbeing. Fintechs like Argyle look to technology to create transparency and empower everyday people.

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The following excerpts were edited for clarity.

Billy Marsden: I am one of the co-founders and the chief operating officer of Argyle. At Argyle, I manage all of our customer facing operations -- anything from sales to customer success to marketing -- my job is to make sure that our product provides the most value for our customers.

I spoke with Marsden about his entry into fintech. Like many entrepreneurs tackling today’s big issues, he didn’t grow up in the system. His background as a consultant gives him a birds-eye view of the industry while his experience in enterprise software exposed him to software’s power to address specific large problems. And I think his stint as an early stage fintech investor honed his insight into identifying big opportunities.

Billy Marsden: I'm heavier on the tech than on the fin, as far as my background goes. I spent the early parts of my career consulting at Bain, mostly in the tech industry for large clients. From there, I jumped to an early stage startup, Stratim, in which we spent time in fleet management providing enterprise software for companies that manage large fleets of vehicles. In that capacity, I spent a lot of time working with independent contractors who provided services for fleet vehicles. From there on I spent time as an early stage venture investor in fintech and enterprise software at F-Prime Capital. And then Shmulik, Audrius and I started the journey with Argyle. So I’d say that I've seen tech from many different angles; from a consulting angle; from an operating angle; from an investing angle; and now from a founding angle.

Marsden comes from a broad background in various tech industries, which lends itself well to his current role heading operations at Argyle. The fintech industry, however, easily stands out as it continues changing to expand its reach globally to touch every imaginable sector.

Billy Marsden: I think fintech is certainly one of the industries that I've lived and operated in and that feels like it's undergoing the most radical change the most quickly. We're in a story in fintech where it's slow at first and then all at once, and we're really starting on that hockey curve. I think one of the really interesting elements of fintech is that it touches everybody. No consumer or no business can escape the disruption that's happening as a result of financial innovation. Some of the other industries that have existed live in their niche parts of the world, but fintech certainly feels ubiquitous.

With the rise of the gig economy, and against the backdrop of a global pandemic, work is undeniably changing. As traditional workers lose jobs and change career paths, the non-traditional workforce is expanding quickly -- too quickly for financial services to catch up. 

Billy Marsden: When it comes to non-traditional thin file workers, the biggest challenge that we see is a lack of access -- a lack of access to financial services and products. And I think this leads to bad outcomes for all parties. I think this leads to bad outcomes for businesses, because businesses, frankly, want to serve those customers. It's a large market in the US, and I think everybody is in agreement that everybody should have access to the right kinds of financial products and services. But that remains an unaddressable market for many financial businesses. 

And then from a worker’s perspective, it means an inability to access affordable financial products and services. And I think our diagnosis on this, or at least our solution to the cause, is making it easier for those consumers to provide information about themselves. I'll give an example: let's just talk about the lending industry specifically -- an Uber driver who wants to get a loan; how does an Uber driver today verify the things that that lender needs to see in order to provide that person with access to credit? It's virtually impossible for them to do that in this day and age and so their only alternative is a payday loan. And so fair, transparent lenders who exist can't do their appropriate diligence or risk modeling on that driver because they don't have verified information, and that Uber driver is locked out from affordable financial products.

Financial products and services were built around the traditional single-income worker. As a result, non-traditional workers with their changing portfolio of employers and income streams are frequently left behind. 

Billy Marsden: We've built a financial system that is meant to serve a very specific type of IRS classification. It’s meant to serve salaried workers, or it's meant to serve specifically W2 workers. But what we see are people who are now making money in very different ways: 1099 workers, people who make money through rental income, or who are running their own fleets. I see all sorts of entrepreneurs who are coming up with new and innovative ways to make money, but the financial system is very much structured on the worker who has a job, gets paid that money, and that's documented very clearly in a document known as a W2. Financial service providers have not necessarily caught up with the disparate and varied ways that folks are now making money; they are caught in a structure that was set up many, many years ago that has since evolved.

So what are the alternatives? For the non-traditional 1099 worker, very few options are available for important financial products, like loans. Those options, too, are not easily accessible, or in any way seamless.

Billy Marsden: Let's just talk about lending, specifically -- they can go to a payday lender, or they can go to very specific niche lenders who will ask for robust, extensive documentation, which is difficult to procure. So none of these are really great solutions, which when we refer to these thin file workers means that lenders are operating in the dark. So they can’t provide them with appropriately quantified risk, and therefore, the right types of financial products and services. That means those workers don't have access to easily accessible, affordable loans.

How come non-traditional workers remain underserved by financial services? Could lenders do more to better serve these customers and capture this significantly growing market sector? Or is it the overarching financial system that’s preventing a seamless interaction between lenders and borrowers?

Billy Marsden: Well, let's talk about an Uber driver. A lender wants access to an Uber driver’s income -- how would they do that today? It's very difficult. Do they want an Uber driver to go and screenshot all of the trips that that individual has done within their app and send them over? That's overly burdensome for both sides of that equation and a business can't really digest that type of information. And that's the part where Argyle comes in: creating this intermediary technology layer that makes it easy for workers who aren't necessarily making money in a traditional way to transfer their employment or income record seamlessly, and for businesses to be able to digest that in a seamless automated fashion.

Work has been changing rapidly in recent decades. These changes are brought about by ever evolving technologies changing workflows and workspaces. In the past year and a half, however, we’ve experienced an unexpected, huge impact that hit first and hard at workers and businesses worldwide. It forced us to reassess much we knew about work. 

Billy Marsden: Lost income, lost jobs. Specifically, what we've seen in the pandemic is a desire, or a shift actually, to independent contractor-like work, not necessarily Uber specifically, but folks going to more varied income streams. We've seen an acceleration of that as a result of the pandemic in so many salaried hourly workers being laid off. One of the trends that I see coming out of this pandemic is a shift, or an acceleration, towards more freelance, gig type work -- not just for people who work for Uber, but all sorts of workers who want to work remotely or internationally. 

Argyle is a remote-first company, and I think at this point that's what a lot of talent in the world wants. A lot of businesses are proving that they can function remotely, and they can function seamlessly with contractor-based work. It's created a new paradigm and that's what workers are going to start to demand, and so business will need to adapt as a result.

The pandemic impacted not only workers and businesses, but financial services at large. With new ways of earning income, the need to effectively access, manage, and analyze employment data in real-time is urgent like never before.

Billy Marsden: For a mortgage lender, there's never been a larger need to verify somebody's income and employment status. For example, there’s a lot of buzz around cash flow underwriting, because cash flow underwriting has served a lot of purposes in this industry. But one of the downfalls in cash flow underwriting is that you're seeing a deposit hit a bank account from an income perspective, and that at times can be two to four weeks old from when that money was made to the time when you might see it. You’re now operating as a business sometimes two to four weeks in the past of reality -- that's the latency of information that you have. We are seeing millions of workers who are changing jobs during the pandemic, or who lost jobs during the pandemic. And so what we're seeing from businesses is that that latency requirement is getting lower and lower -- there's a real need for real-time information. And so one of the things that Argyle does is provide real-time access, up to the hour relevant, whether somebody is employed or not, or whether somebody is making money or not. And that's something that I think lenders are really starting to demand and need in order to run their business efficiently.

Argyle looks to employment data as the master key to unlock the growing non-traditional workforce’s financial lives. By using tech to put alternative, real-time data in the hands of its owners, Argyle seeks to shift the narrative around financial credibility.

Billy Marsden: Employment data is the bedrock of somebody's financial picture. It is one of, if not the most important indicator of somebody's financial health. Because of an inability for consumers to access this information, it makes it very hard for them to get loans or access to insurance products. And so what gets me excited to get up in the morning is putting control of an individual's data into their hands. I think that's incredibly liberating and powerful for somebody to be able to go and prove that they work somewhere and prove that they make money. It's nearly impossible for somebody to do that today. 

The other thing that really gets me excited is what the possibilities are for them once a borrower is able to harness that information. I think it changes the game for a lot of folks, especially folks who are thin file or no file type of borrowers --  those folks are stuck between a rock and a hard place. We've got a lot of lenders who are sitting on a lot of research that says that especially in the subprime segment, a credit score is actually a very poor indicator of ability to pay. If you look at the ability to pay, what you're actually looking for is its behavioral characteristics. And you can see those behavioral characteristics in employment data. 

I'll give a very specific example: for a lot of the progressive lenders, underwriting is based on tenure -- how long someone has worked somewhere. As somebody who hires a lot of team members to Argyle, one of the indicators I look for is how long somebody had stayed in their previous jobs, because somebody who bounces around between jobs for nine months at a time is probably less reliable than somebody who stays at a job for many years at a time. And it's the same thing in lending -- if you see that somebody has worked in a place for a long amount of time, or consistently shows up to their shifts, that is a very powerful indicator of ability to pay. I think a credit score is very light on income and very heavy on debt and liabilities. And I'm excited to shift that balance.

The underlying mechanisms of the credit system are difficult to understand -- even for people with good scores. As Marsden says, a credit score does not actually tell us much about a person’s present income and ability to pay. Shifting the narrative around financial credibility will require rewriting a new financial story.

Billy Marsden: It'll be a world with well publicized criticisms of how credit scores affect disproportionately poorly and who they help. And that creates an imbalanced playing field -- it disproportionately hurts subprime borrowers. I see [opening up employment data] as a much more transparent system. Who knows what goes into a credit score? I don't know what goes into mine. And when I get a notification that it increases by 20, or decreases by 50, I don't know why that's happening. And so I see this creating a much more transparent world, where people know what goes into their employment data and why those things are there, and a much more meritocratic system, based on the factors consumers can influence and understand why and how they're influencing it.

Creating APIs with the power to effectively aggregate and digest exponentially growing employment data points is not easy. But making a good, working product is only the first step.

Billy Marsden: I think our biggest challenge is putting this product into the hands of businesses. The way we see it, every time that Argyle is used, it benefits the business and it benefits the consumer. Our objective as a business, and this might sound overly simplistic, is to increase the usage of our product, because we think it benefits both sides of this marketplace. The biggest challenge that we're working through is how we can get this into the hands of as many individuals and businesses as possible. And that requires a lot of education. It requires thinking about employment data in a different way -- in a consumer-owned way. One of the biggest challenges we face is educating the market on how they should think about employment differently, on consumers owning data and consumers being able to pass it from their own employment systems to businesses.

Though employment data is entirely created by working people, ownership of that fact is another story. Wielding the power of that data in one’s hands, though smart systems that provide access to it, relies on an understanding that comes naturally to younger workers and businesses.

Billy Marsden: I definitely think we're early in this. The banking aggregators have made this more normal; younger generations are probably much more comfortable with this. I even see that with some of the clients that we sell to, the younger businesses are more comfortable with this. But much like fintech, I see this as the early wave, at the beginning and then all at once. We're at the snowball phase, and in ten years, we’ll look back and not really remember the days when individuals didn't have complete ownership, access, and portability of their financial data and their employment data.

We are looking to a future, not so far from now, when seamless ownership and access to employment data will be an obvious aspect to lending and other financial products. Financial service providers that already utilize employment data will naturally lead the way, but will products like Argyle’s be helpful for others as well?

Billy Marsden: I'll break that out into two categories. One, which are businesses that are used to digesting employment data in some way. Typically, this comes in terms of either self-reported data or a pay stub upload. Those are the two primary ways that businesses digest employment information today. And I think we're seeing people use this data to fit it into the rows and columns that they’re used to -- they’re used to take the unemployment status or hire date, and piping in that information, largely used for verifications and a lending product. 

But the next frontier is businesses thinking, ‘wow, I have access to much more granular information. I don't just have a single pay stub -- I have every pay stub. So how can I then use that? How can I perform analytics on that to create a different risk model, or make a different credit decision?’ So the next frontier is about how to take this plethora of information that was previously unused and get smarter with that. I put that in the bucket of businesses who are used to employment data. 

The other side of the pie is businesses who currently don't really digest employment data in any way. And now that Argyle is making it easy to transfer that information, as well as easy to digest it, that means that more businesses get to use this data in one way or another. We see this in some insurance products -- people who never really thought about using income data or shift level data being able to incorporate that into their own products. Another example is leasing companies that are now incorporating income information into their own application flow, as opposed to previously they may have received a pay stub via email. So there I think there are all sorts of new businesses that are starting to touch this information in a way that they previously couldn't.