Financial technology company Blend began building its platform by helping traditional institutions digitize mortgages, working with firms like Wells Fargo, US Bank and some regional banks and credit unions. Starting with digital mortgages was by design —it’s a super complex financial product that requires a lot of data. From there, it’s expanded into other offerings like HELOCs and home insurance. Blend recently launched a new digital deposit account product for its bank and credit union customers.
Blend founder Erin Collard joins me on the pod to discuss why a third of consumers begin their account opening journey online but nearly half of them are forced to complete the process offline. We talk about how consumer expectations have changed and what financial institutions are doing to meet them. We also chat about the pushback he received when he started working on digital mortgages and how things have played out since.
Post crisis, digital mortgages a huge opportunity
If you go back pre-crisis, I was working at Clarium Capital. I met Peter Thiel early on when he was working at PayPal. I worked for him at a global macro fund. Peter is also the founder of Palantir Technologies. In the time I worked with Peter, I met my other two founders, working with them closely to take the technology and apply it to the banking system.
Post crisis, the world changed. There was a seismic change in finance and with technology’s role. When you look at the housing market — a $10 trillion industry in the US — we were taken aback about how little money had been invested in technology and how much Silicon Valley ignored it. The initial idea was to partner with the banks to allow their consumers to access mortgages online.
Mortgages as holy grail of financial data
There was a reason we started with mortgages. They are the holy grail of financial data. It is the data superset of essentially every other financial product. We started with mortgages, always with the view to expand into the ecosystem, into a horizontal SaaS platform.
You have to go through everything from verification of your assets and income to providing tax statements. Mortgages take the full litany of consumer data. If you’re selling into banks — a very difficult prospect — once you’re in and handling complex financial products, expanding out into other products is much easier. If you’re handling the data superset, handling data subsets is much easier.
The evolving financial industry
We’ve seen a shift from financial institutions trying to build technology in-house. Banks are much more open to partnering with startups. There’s more of a rental view of how you see technology. Instead of spending $20 million to develop this in-house, why don’t we use some of the best companies out there solely focused on this to deliver a first class technology experience.
When we started the company, people thought we were crazy Californian kids, trying to digitize mortgages. They didn’t think anyone would get a mortgage on mobile. There was this thought that things would never change. There was a feeling that faxing in your social security number and bank statements was here forever.
Introducing account deposits
Deposit accounts are still quite painful to open in the U.S. It’s such a simple product. It was an easy fix for us and more importantly, they kind of go hand in hand with mortgages. People typically open up an account to deposit their paycheck to pay off their mortgages at the bank they took out their loan.
We want to support these consumers throughout their lifecycle. If they have children, student loans might be an option. So, too, an auto loan. Our goal is to eventually enable the banks to offer all these products in a very accessible way.
An unexpected response from customers
We were excited. We had a vision, spent a couple years building Blend. We thought we built the best thing since sliced bread. We thought it was a no brainer but there was a lot of resistance to it. People didn’t want to change. I was surprised — it just seemed so obvious that this was the way forward. When things started to change, there was kind of a defining moment when the world was moving to a digital path.