How FIs can ride the AI wave and build for a fragile customer with Suzy’s CEO Matt Britton

This conversation with Suzy’s Matt Britton really rose above the noise and allowed me to look at the financial services industry as an interconnected whole, as a mechanism that is alive and complex. It’s the kind of perspective you can lose when you report on niche developments day in and out. 

In this podcast, Britton takes us on a step by step inspection of a lot of the things we have come to take for granted: the rise of BNPL, Gen Z’s complicated relationship with money, and also how AI is going to impact sectors like wealth management and restructure how we recruit, train and strategize around talent.

Britton is an example of a professional that has his finger on the pulse and is also able to condense the many, and sometimes conflicting, signals the market and the industry gives, into a cogent outlook. 

It’s a conversation that will urge you to stop and take stock, and one that also spotlights how FIs can make the most of an industry and consumers that are in flux right now.

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The big ideas

Gen Z isn’t ready to take financial wellness pill: “A lot of young people just aren’t ready to take the medicine and take the advice that’s put out there, but if they want to seek out that advice, there’s no shortage of great influencers on social media, on platforms like TikTok, delivering that advice.”

Banks will move at their own pace when it comes to AI: “I think in the financial service industry, because it’s highly regulated, and they just move so slow, they are always sort of late to the game. Not because there’s not innovative people that work there, but just because they’re part of a bureaucratic complex that is built to slow down innovative decision making. So I think big financial service companies and the big banks are probably the one of the last segments to truly adopt AI.”

Wealth management is likely to change, thanks to AI: “Some of the biggest areas of disruption in the financial services space are going to be in the wealth management area. Any service function in the economy is largely at risk right now, especially accounting or legal services. They’re so expensive, especially for small businesses, and 99% of the things that they do are highly templatized.”

How financial institutions can reach young customers: “It’s incumbent on them to do so, because these are their future consumers and it is in their best interest to have consumers that are on sound financial footing. I think if they’re going to educate consumers, they need to do so in the form factor that they are easily and most likely to consume.”

The relationship between BNPL and young consumers isn’t healthy: “But a lot of younger consumers – disproportionately people who can’t afford it – are the ones making these decisions. Ultimately, throughout history, we’ve seen that debt is never a good thing for consumers. It just isn’t. And this is just putting more debt on the consumers. And I don’t know how that can ever be a good thing.”

Read the transcript

The financial markets in the last five years have been really topsy-turvy. Ever since COVID, it’s been a slingshot effect. You might remember when COVID first hit in March and April of 2020, there was talk about this being the next Great Depression, and everyone was hoarding cash and toilet paper and paper towels.

And then the government stepped in with unprecedented fiscal stimulus -– arguably too much for too long -– and then all of a sudden, consumers felt that they were flush with cash. That, combined with the fact that they weren’t traveling or spending money at restaurants, meant that they were sitting around looking for things to spend money on, which drove up the stock market, memestocks, cryptocurrency, and collectibles.

Wth too much cash in the system, it created a period of inflation, which we’re just arguably coming to the end of, where tremendous demand for supplies and services, combined with supply chain issues overseas, drove up the cost of goods. It wasn’t too much of an issue for a while, because unemployment was at a record low, so at least everybody was gainfully employed.

We’re at a point where we’re starting to see unemployment tick up, and we’re starting to see consumers really struggling. What we’re seeing now, especially with younger consumers, is credit card debt is at an all time high. Credit card debt just passed a trillion dollars for the first time ever, and savings as a portion of consumers income was at an all time low, and the government is seeing it in the Federal Reserve.

Now there’s talk in September about interest rates finally coming down. The question is, is it going to be a hard landing or not for the consumer? I believe it is. I think the consumer is hurting a lot more than the media would lead you to believe. And I think it’ll be a little bit of a rough patch. And I think the issue is, going back to the consumer, it’s very hard for consumers to change their spending habits.

So when consumers feel like they’re flush with cash, they’re buying all these things and they’re overspending and using Buy Now, Pay Later, tools like Klarna, and Affirm where they can buy things they really can’t afford, right? And then what ends up happening is it all comes to roost. I feel like we’re kind of in for a rude awakening in the short term with the consumer, with the economy, before we can get through to the other side of this.

The influence of social media

I would argue that social media has actually been a net negative for consumers relative to their financial health, because it actually pushes consumers to buy things that they can’t afford.

They are trying to keep up with the Joneses. I’m in Southampton right now and tragically, a father of two girls passed away – he took his own life because his wife was a very famous influencer and she was living a life they couldn’t afford. 

I think that’s obviously the worst case of it. But the lighter examples you have are of kids that are looking at sneakers and watches and things that they can’t afford on Instagram and trying to keep up. I think that’s obviously [negative] for young, impressionable teens and Gen Z. 

I think it’s hard to answer your question in terms of finfluencers. I think it takes somebody that needs to want to take the advice for them, to get value from it. I think there’s a tremendous amount of positive advice that you can find on social media. Back in the day, you could only get financial advice from somebody like Suze Orman, right?

I had somebody on my podcast named Nicole Lapin, who’s a great financial influencer for young people, and she’s fantastic. People like her are fantastic in terms of helping people understand all the jargon and understand the power of compound interest and all those things. 

I think the reality is, though, a lot of young people just aren’t ready to take the medicine and take the advice that’s put out there, but if they want to seek out that advice, there’s no shortage of great influencers on social media platforms like TikTok delivering that advice.

AI’s impact on the economy

I think in America, there’s a lot of factors that are kind of coming together at the same time. Obviously, it’s an election year, and we don’t know what’s going to come out of that, and what the policies are going to come out of that. 

We talked about what I believe are pending economic headwinds that are happening with the consumer. You have a more existential risk with commercial real estate that’s going to impact bonds and a lot of the markets that trade in that. And then you have AI, which I think is probably going to be the biggest long term driver of financial and economic change in this country, because there will be a period where it’s going to replace a lot of jobs. 

I run a startup of 300 people, and every day I’m encountering new technologies that I think can make us more efficient. Does that mean that AI is going to replace people at my company? No, but it means that I’m going to need my people at the company to level up and stop doing things that maybe they did three or four years ago, because those things can all be automated. 

I think for young people, in the short term, it’s going to be harder for junior and entry level people to get jobs. I think there’s a huge opportunity to reinvent yourself, but not everyone’s going to know how to do it right away, and I think that’s going to have a major impact on the economy. There’s going to be some people that are gonna drive enough income that it used to take 100 people to deliver that, and they’re going to do it by themselves, because they figured out how to work with AI. 

Then there’s going to be the other 99% people that are going to figure out, what do I do next? Where are those job applications? So I think it’s going to be really topsy-turvy, and as you put it, a fragile time, in the next three to five years before it all shakes out. On the flip side of this, we’re going to end up with a way more efficient economy, and likely a booming economy coming out of this. But I think it’s going to get worse before it gets better.

I think in the financial service industry, because it’s highly regulated, and they just move so slow, they are always sort of late to the game. Not because there’s not innovative people that work there, but just because they’re part of a bureaucratic complex that is built to slow down innovative decision making. So I think big financial service companies and the big banks are probably the one of the last segments to truly adopt AI.

If you think about it, it took 10 years into the digital era to even allow you to bank online, right? But at the same time, there’s this wide range of fintech startups, for example, the whole crypto space as well as the payment space that is going to very quickly adopt AI. 

I think some of the biggest areas of disruption in the financial services space are going to be in the wealth management area. Any service function in the economy is largely at risk right now, especially accounting or legal services. They’re so expensive, especially for small businesses, and 99% of the things that they do are highly templatized. Sure, there’s going to be that 1% where, if someone’s selling their company, they’re not going to want an AI lawyer, right? Or if they make millions of dollars, they are not going to want an AI accountant. But for 99% of small business owners and even mid sized business owners, they’re going to seek AI driven services because it’s just cheaper and faster, and more efficient.

Especially, going back to young people, I think wealth management is an area where most wealth managers are saying the same things like buy low cost ETF funds and budget and plan, here AI is going to do a lot of those things. 

I used to use a tool called Mint. It was shut down by Intuit , and now I use a tool called Monarch. I have absolutely tracked every expense I’ve ever made and categorized it since I was 21 years old, because I just have found it really impactful to basically track the way I spend money. That’s an example of a software, where If I were a bank, I would build an AI version of that, which knows how to categorize your finances, knows how to pull insights from it, give it away for free as a loss leader, to get people to bank with you. That’s one thing that’s such a no-brainer and it doesn’t exist yet. So those are areas where maybe it’s not as regulated, because it’s not actual banking. It’s reporting on how you spend your money, which could add value in the AI realm.

Gen Z under the microscope

Gen Z was different because they were the first generation that grew up with the iPhone, and Gen Alpha is going to be the first generation to grow up with AI, which is really going to be fascinating. In terms of Gen Z, it’s also the first generation that is growing up in a financially worse place than their parents, and that,  because their parents are Gen Xers, who grew up in a different time, who came out into the economy during the Clinton era, when the .com boom was happening. So these kids have an expectation and even an entitlement in a lot of young people that they’re going to get promoted fast, that they should be able to have Mercedes, that they should be able to have a nice house. 

I think the hard reality has already set in, but I think it’s going to set in even more. There’s a lot of talk about mental health issues with Gen Z and for good reason. They went through COVID, when they were separated from their friends, and obviously all the impacts of social media, some of which we’ve talked about, create mental health issues. I do think that as they get older and they get into the workforce, there’s going to be a lot of reality hitting, based upon the time they’re entering the workforce and given all the factors we just talked about. 

So I think one of the implications in the long term is that people adjust, but I do think there’s a reckoning that needs to happen. Again, I think COVID was such a massive event, it reshifted the earth on its axis in so many different ways. Look at us right now, we’re doing a podcast in a Zoom-like interface, and it’s sort of like a normal thing, but it wasn’t a normal thing before covid. 

For consumers, it really reframed – for a while – the way they thought that they could live, and how everything was easier and because there was so much money in the system, and now it’s the opposite. Hopefully that answered your question, but I do think there’s going to be some type of reckoning. We’ll be better for it on the other side, but I think it is a process that needs to happen. 

An era of deep consumerism

I think many of those people are buying because they think everyone else has it, and some people are buying it because they want everyone else to know that they have it. It’s the social media effect. What we saw pre-COVID was sort of this experience economy started emerging.

Where people weren’t as interested in stuff and they were more interested in experiences. Then during COVID, we really ricocheted back to an era of deep consumerism, where everybody had a TV in every room, including the bathroom in their house, right? 

People were buying everything and that again, there was low cost financing, and we’re still facing the impacts of it. Then obviously, post-COVID, we had this revenge travel trend, where everyone was traveling, all of which goes to what you’re talking about, which is like YOLO, spend now, live for the moment. That is what’s happening. The expectations that many young kids have to be able to go to Europe before they’ve graduated from college is completely different than it is now. I’m sure that my parents, baby boomers, were talking about how crazy it was that I had a car when I was 17. So with every generation, I think that changes. 

The difference is, though, that this young generation is in a worse financial position than their parents, and that wasn’t the case with Gen X vs. Baby Boomers. That is the biggest distinction. 

Financial literacy and financial institutions

So I think that it’s incumbent on them to do so, because these are their future consumers, and it is in their best interest to have consumers that are on sound financial footing. I think if they’re going to educate consumers, they need to do so in the form factor that they are easily and most likely to consume. 

Meaning they have to partner with influencers who know how to create content for platforms like TikTok like short form videos, fast cuts, and get one point across. Don’t use too much jargon, speak in their language, educate them in the way that they like to be entertained. Edutainment, as they call it, is  what banks need to do, use gamification. 

That’s where the idea I had earlier comes in. Create an app that makes it easy and fun for people to be able to track where they’re spending leveraging AI, so they don’t have to put too much input, but they can get all the output insights like:  Do you know if instead of buying Starbucks for the last three months you bought bought Starbucks stock, you’d have this much money? That will really help them understand how their lifestyle and choices impact their financial future. And that’s what I would be investing in if I was running a bank. 

Evolution of the incumbents

I think banks need to evolve, but the problem is that a lot of big banks, it’s hard for them to evolve. They’re large companies and they have a lot of regulatory hurdles. So then you have companies like Chime and Ally Financial, which are built for young people and the underbanked. There are a lot of companies, for example, Current and a lot of new upstart banks that also aren’t saddled by legacy systems and legacy real estate. 

So if you think about a lot of the big banks, they have banking service centers in major cities everywhere, and that was built for an era where you would be walking down Main Street and say, “Oh, let me stop in and talk to my banker to get a mortgage.” That’s not how people bank anymore.

Will there be physical banking locations in five to ten years? I don’t see why there would be, I question if they’ll even be ATMs or cash in five to ten years. Why does cash even exist? It’s such a legacy system. 

I do think that we’re going to look back in probably ten to fifteen years and then say, remember, we actually had cash? It may still exist but it’ll be a very unique, exotic thing for people to need cash, because everything will just be tapped in electronics and can be used on your phone, and the government doesn’t like cash. What people think is that the government likes cash. They don’t. The government likes things that they can track, to make sure that people pay taxes. So cash is not a good thing for the government, despite what people believe. 

I think when you talk about the financial services, and particularly the services aspect, anything that’s consultative, that’s the first place AI is going to go. So if you have a mortgage broker, if you have a wealth manager, if you have an accountant, those are areas I think AI is just built to be able to disrupt. 

If you think about accounting, for example, you know who’s going to be a better accountant? An AI agent that knows every single line of code of every single tax law in every state, instantly, or human being who’s relying on happenstance and what they know, right? Who’s gonna optimize your tax returns better? Obviously, the AI agent, right? 

And arguably, they can already do it today, but if it can do it today 9/10 then  it’ll be able to do it 15/10 in a year from now. So, that’s the case for most financial oriented services, and that’s where it’s going to be at the beginning. I think there’s going to be edge use cases, just like I often use the analogy of photography, like there are still areas where you’re going to hire a professional photographer, but 99.99% of all photos are taken on phones right now, right? 

I think that’s probably going to be the case in financial services based upon what AI can do. So then over time, as AI gets more and more powerful, it begs the question, what do you really need a bank for? How do they actually provide value, besides storing your money? And now with decentralization and the blockchain, I think banks over time – and this is going to happen very slowly because of regulation – definitely have an existential risk long term ahead of them, because just in terms of the value, if you don’t need an ATM, if you don’t need consultative services (and I never really thought about this until you asked it) if you don’t need a physical banking location that you can step into right, then actually, why do you need a bank except to store the money that you have, right? 

Then there’s all these other emerging kinds of blockchain based technologies that have new currencies. I’m not a Bitcoin maximalist at alI, I’m kind of lukewarm on crypto, but I certainly see the long term value and I think I just made the case for it just now in terms of why Bitcoin could be something that more and more consumers gravitate towards.

Frankly, I don’t know if the job of a financial institution is to address the stress of a consumer. If I were a bank, I would want to make sure that consumers can pay their interest payments, you want to educate them, and you want to put them in a position where they’re not overspending. 

I think the best way for banks to address stress is not extend too much credit and be more stringent on issuing credit, because, you show me the person that’s in financial hardship, and I’ll show you that they’re in debt. They basically are spending money and it’s not theirs. In a higher interest rate environment, banks are spread on the yield. When interest rates are high and they’re 7% if they have a 10% spread, that’s 0.7% that they’re making on a dollar. If it’s a 10% interest rate it’s only 0.1% so banks make more money in higher interest rate environments. So it’s kind of counterintuitive, because that’s when they kind of most want to lend, and there’s usually lower demand, because consumers know the interest rates are higher, we see that in the mortgage space, right now. 

The pitfalls of day trading

I mean, it’s just another form of gambling. I mean, you look at FanDuel and DraftKings. People who want to save long term are not trading meme stocks, and they’re not day trading. They’re buying a low cost ETF and forgetting about it. They say the best investor is one that’s dead, because they’re not trading. I think that the people who are on it every day, you look at Robinhood which is an incredible tool, but it looks like a video game. People who are on it every day are not making money. 

They might make money one day and they are losing it the next day. Just like somebody who has been betting on sports. As a long time, losing sports better with very minimal bets. I can tell you that everybody loses, right? You’ll have good days and bad days, but it’s consumption. You do it for fun, and I know I’m doing it for fun. 

I know I’m never going to make money from it. It’s just fun. I think if you are treating trading and retail investing the same way, fine, but  if you’re doing it as a way to make money, you aren’t going to do that. You do not have an advantage as a retail investor. You are on the outside looking in, and the opposite of everything you think is going to happen is going to happen. Think about what happened while we’re taping this. Yesterday, the stock market crashed, the business day before it was announced that the interest rates were finally going to come down. 

Conventional wisdom would think that when interest rates come down, the market’s going to go up. But what happened was that the rates went down, the market went down. Because the people figured out, oh, that actually signals we might go into a recession. 

But the retail investor wouldn’t think of it that way, right? And so what happened? If they put money in on Friday, on Monday, they would have lost 15% of their money, and it’s a perfect example. So I don’t think retail investing is a good thing unless you’re doing it for consumption, or with a tiny amount, just to get educated. Otherwise, just put it in a low cost ETF and forget about it and it’s the best way. Or just buy a bond or something where you’re not playing around with it. 

The impact of BNPL

There’s definitely going to be defaults in that space, for sure. I think it’s just so tempting for consumers to say, oh, instead of buying one pair of jeans for $100 I can buy five. I’m shopping at Urban Outfitters and I’m gonna buy five pairs for the same outlay today than if I bought one. And I’ll worry about that monthly bill that’s gonna come for the next 24 months, next month.

Then you make those decisions over and over again, and one day you wake up and you find out that you’re working for the bank, because you wanted to feel good that day – going back to that  YOLO trend. I think that BNPL pounces on the YOLO mentality for younger consumers. 

That’s why you saw a company like Peloton, doing so well. Nobody’s outlaid $3,000 for a Peloton in 2020 and at one point, I think for Affirm, 70% of their revenue was Peloton, because they just financed everyone to get a Peloton. Everyone else had it, so they bought it, and a lot of people are still paying that off today, right? 

I think it’s going to be a net negative for consumers, and in a lot of ways it’s even more predatory than credit cards are, because at least credit card are connected with a purchase at that time, and there are more steps involved. For example, you have to sign up for a credit card and then go buy something. 

It’s closer to a store branded card than a credit card, but even in that, you have to kind of stop and fill something out. This is just you check a box and all of a sudden, there you go, you’re in this debt. So I don’t know how long these companies are gonna last. And listen, ultimately, it’s up to the consumer to make the decision or not. But a lot of younger consumers – disproportionately people who can’t afford it – are the ones making these decisions. Ultimately, throughout history, we’ve seen that debt is never a good thing for consumers. It just isn’t. And this is just putting more debt on the consumers. And I don’t know how that can ever be a good thing. 

You saw a lot of companies grow, Peloton included, and we all know what happened with that company, right? A lot of companies built their business model on the fact that consumers were spending money they couldn’t afford on their products, and they booked the revenue when they reported the quarterly earnings. It’s not like they reported, oh, the consumers that bought these products actually didn’t pay cash at that time. It’s being financed by something else. That would be an important data point to evaluate. 

What is the real demand for that product, right? And that’s why you see gross slowing down for a lot of consumer retail and consumer products companies. In a zero interest rate environment, people are buying things they can’t afford, and now not so much. Also the BNPL companies are starting to tighten up their credit restrictions as well, because they’ve had a lot of write down. So not everybody can get credit, and if you do, it’s much less of a credit basket when you make those purchases.

Pathways for FIs that lead to growth 

It’s balancing the now and the long term. It’s balancing consumers, especially younger consumers. They say, when you’re young, you don’t have money and you have a lot of time. And when you’re older, you have money, but you don’t have a lot of time, right? And I get that. I think younger consumers, when you’re young, when you’re healthy, you want to explore and you want to travel, and you want to enjoy the finer things in life. I think balancing that for younger consumers, especially with all the temptations like the ones we’ve talked about with BNPL and easy access to credit 

Especially these younger consumers, Gen Z, they’re going to live much longer than their parents have, with all the advancements in healthcare. So I think they need to be looking at a horizon where they’re gonna be working – unless they want to be working until they’re 80 – they need to figure out how they can save more and how they can enjoy the benefits of compound interest and those things. It’s harder and harder to do in an Instagram-fueled world where credit is readily accessible. 

I think not just for younger consumers: you see consumers of all ages kind of fall into that trap. It’s just the consumers that have mortgages and tuition to pay – things of that nature probably are less likely to do it because they have more responsibility. But I think that’s ultimately the biggest challenge. I think it’s more of a challenge now than it’s ever been for the consumer. It’s basically just making sure that you’re not getting in your own way. 

The genesis of Suzy

Suzy is a market research software platform which serves many of the largest companies in the world in financial services. We work with companies like Citibank, and these big banks use Suzy to test everything from new products they’re going to be rolling out to identifying new consumer segments, testing advertising, testing messaging. 

We also work with tech companies like Google and Microsoft and consumer packaged goods companies like Procter and Gamble and Kimberly Clark. Essentially, we are disrupting the world of market research. Market research for years has been very slow and ineffective, and now more than ever, especially given all the changes we spoke about today, it’s incumbent on brands to have their finger on the pulse of where the consumer is headed and what they’re thinking and feeling. And Suzy unlocks that for brands and it allows them to put the consumer at the center of every business decision that they make.

I’d started an ad agency over 20 years ago called MRY, which helped large brands target teens and college students. One of the service offerings we had was this nationwide student rep platform where companies could tap into college student ambassadors. We had built a software to manage and measure those student reps, and that software got a lot of interest from third parties so I spun it out as its own company, and then I went on to sell my agency. 

After that I left the company that bought my agency, the board asked me to rejoin this software company. And after a lot of twists and turns and identifying opportunities, I decided to pivot into the market research space, and that’s where Suzy was born. So nothing is ever like up and to the right. Everything in the entrepreneur world is always a long and windy road, and it’s just about having perseverance and and one day understanding you’re going to find an opportunity that makes sense, and that’s exactly what we did.