Powering the next generation of financial apps — with Yodlee’s Joe Polverari

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Zack Miller: Zack Miller here at Tradestreaming Radio. We’re bringing you tools, tips, and technologies to help you make better, smarter investment decisions. Today’s guest on the program is Joe Polverari. He’s the GM and Chief Strategy Officer of Yodlee and he runs a division called Yodlee Interactive. I invited Joe on the show to talk about a press release that I saw last week that I thought was very interesting and worthwhile that you guys should know about. Yodlee, which is an account aggregator, they bring in data and information about user accounts from all over financial services industry.

They’re launching an Incubator/Accelerator program where they’re providing access, tools, technologies and resources to encourage the next generation of financial apps to build on top of Yodlee’s platform. They’re pretty much the only man left standing in this account aggregation field, which is a big issue, whether you decide to build that on your own or to partner with Yodlee, it’s a big issue going forward. Yodlee has, obviously, the most robust tool set out there. I invited Joe on the program to talk about some of the resources that Yodlee can provide and maybe where the market is headed.

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Joe: Yeah. My name is Joe Polverari. I am the Chief Strategy and Development Officer for a company called Yodlee and also the man and director of a new business unit of Yodlee, called Yodlee interactive. Yodlee’s been around for a long time.

Zack: Yeah.

Joe: It’s kind of an interesting story about Yodlee. When we actually started the company back in 1998, there was about 35 or 36 different companies trying to do what we do, which is basically really high quality data aggregation and payments processing and now there’s about one and a half, counting us. We’ve been around awhile and we’ve got the technology perfected at this point and are anxious to make some changes in the space based on that.

Zack: Why the consolidation in the space? If there were so many competitors along the way, why are we down to one and half?

Joe: Well, I think people found out that what we do is really tough to do, Zack. Maintaining a data infrastructure is almost like building a utility. It’s very expensive, it’s very complicated. It’s sort of fraught with difficulty, especially when you’re doing it around data. But once you get it done and you get it built, it scales nicely, as well. I think a lot of folks in the space when they started out thought it would be easier than it is to obtain clients and deliver financial data. It’s not that easy. We’ve built a lot of science around it and we’ve got a lot of art in the process being at this point, the most experienced practitioners in the space.

Zack: From my prospective and I’m sure you guys saw this way before I did, I’ve been talking about some of the leading edge companies in the space, some of the start-ups, for the past few years. It seems to me over the past, I don’t know, nine months to twelve months, there’s been like a resurgence of interest in financial start-ups. Are you guys seeing that on your end?

Joe: Yeah, we’re definitely seeing it. We look at it, if you take kind of a broad Internet or a broad digital spectrum view, if you think about what people do, they like to shop online and you can do that today very easily and very personally. They search online, clearly and you do that, obviously at this point, very quickly and in a very personalized manner. And then people communicate and that’s been made very easy and very personal.

What’s not been made easy and personal yet, at least not to our level of satisfaction, is how you interact with your money, which is one of the top three things you will do in any household, in any country, in any part of the world, is how do I manage my finances. For some reason, a lot of it having to do with legal and regulatory, a lot of it having to do with technology difficulty and data access quite frankly, that has lagged behind.

Our mission has been very much to make it easy for folks to innovate and do personalized things for consumers and small businesses in the financial arena. I think what’s happening now is people are recognizing that with the evolution of the digital channels, if you will, and various participants in the market including ourselves, making data access and payments access much more streamline and easy, and now it’s possible to innovate in this key area of all of our lives. So I think that has driven now what is this proliferation, if you will, of people who are interested in doing innovative things in finance, in payments and investment management.

Zack: So you’re positioning yourself as obviously a key player in this, you’re not positioning yourself, you are a key player in this entire ecosystem. I reached out to you guys when I saw an announcement about the Accelerator and incubator program that you guys are launching, can you tell us a little bit about your plans there?

Joe: Yeah, sure, I’d be happy to. If you think about Yodlee, historically, just for a moment, this is a company that has historically driven its solutions out in what I would call a B to B to C model. That means we sell to a business who ultimately delivers to an end-user consumer or and end-user small business. The other B between Yodlee and the consumer has tended to be the largest banks in the world. We’ve got now roughly 40 million users using our solutions through the largest banks, all branded to those banks, and basically delivering a platform that is data, payments, and security centric to power next generation financial services. And that had been kind of the mission of Yodlee from day one.
We have a very unique seat in the industry from the stand point of we have really good knowledge of financial institutions, we’ve got great networks in our entrepreneurs here who are used to selling into that space and innovating in that space. About a year or two ago we said, there’s no reason we should confine our thinking to making products for banks to give to their consumers.

And so we spawned at that point what is now become Yodlee Interactive, which is how do we do two things. One is, how do we innovate outside the bank channel, so it’s distributed in channels that are not necessarily reliant on the bank to make them happen, although they could be beneficial to the bank channel as well. And how do we spur innovation to make finance and handling of finance effectively frictionless for consumers and small businesses across any device.

We sat back and said, “Well, the only way to do it is to consciously point our platform, this data, payments, and security infrastructure, outside of the bank channel.” As we did that we were pleasantly surprised to find that we have a lot of similarly minded people out there and companies out there who wanted to innovate in the space and we gathered a lot of customers really quickly. That took us to an initial wave of innovation that we thought was really interesting. Bordering almost on what I would say, the crowd sourcing of financial innovations. We’ve got all these great folks who are developing on the platform. We’ve got some good ideas of our own and we’re bringing them all together.

So what we did this year, we said, “Hey let’s take the next step. Let’s make it even easier.” Because we think about the best, most successful platforms out there in terms of innovation and really value creation for folks, in multiple dimensions are those that are open or at least semi-open and allow folks to come on and easily interact with what is the core capability of the platform. We said let’s launch two programs. The first being Yodlee Interactive Accelerator and the second being Yodlee Interactive Incubator. That will help continue this track record of success and innovation we’ve had over the past few years. That’s really what they’re all about.
What they do tactically is they allow folks who’ve got a good idea in the financial services space in the case of the Accelerator program. They get on the platform very quickly and cheaply and cheaply means zero. It doesn’t cost them anything. We give them a three-month term at a minimum, although we can extend that depending on the use case and at least 150 production users a month so they can go ahead and build a solution and begin testing it.

And then to the extent that becomes a business model they want to pursue, we’re certainly in a position to help them do that. They can build their own destinations out on top of the technology, but it’s really designed to remove any of the barriers from helping them deliver data, payments and security. We’ve had a very enthusiastic response so far to that and that’s kind of the base level program.

Then we said, “Well, lots of people like to about incubators.” We’re based in san Francisco and just about one of out of every two people you meet on the street these days has got some kind of incubator idea, some kind of venture back incubator idea. We said, “Well, we think that’s a good idea from an innovation standpoint and we’re all about innovation for consumers and small businesses, but what are the things we can do that are maybe different and better than a classic incubator? What are the assets we have as a company and the experience we have as a company that we can actually help innovation precede at a more rapid rate?” We sat back and said, “Well, for starters, we think it’s a great idea to have an incubator program because we have a platform and we want to encourage as much use of that platform as possible.” So that’s sort of the fundamental premise.
But we’ve got a different objective on the outcome. Unlike a lot of incubators where the outcome is to get equity or get a company to the next level and get in a position to get equity if you’re the sponsor of the incubator, our objective is really just to innovate financial services. We don’t have really a financial objective other than we like people to use the platform, which clearly is beneficial to Yodlee [inaudible 09:47] level. So we said, “We’re not going to be in this for, I guess, what you would consider a classic IRR. Right? We’re going to be in this for product and strategic innovation platform.

And the other assets that we have that we think are pretty unique to the space in particular, is we’ve got this great technology platform. We’ve got a lot of entrepreneurs actually in the company that know a lot about financial services. So we’ve got deep, deep domain expertise. We’ve got phenomenal distribution across over 300 banking customers and 200 nonbanking customers and we’ve got relationships within the industry where we know how to get financial products distributed and sold.

And then, finally, just given the folks who revolve around Yodlee and its infrastructure, we’ve got access to capital, whether it’s our own or access to capital with its folk outside of Yodlee who are similarly minded or maybe sponsors of Yodlee and investors in Yodlee themselves. So we said, we think we’ve got a lot of really unique assets beyond just, “I’m going to give you a couple of cubes in my office and maybe help introduce you to some people,” we can actually help you do things.
So the objective of the incubator program is to qualify companies, and our qualification criteria, we can certainly go over it at another time, but it’s made to be very flexible in terms of we want folks who are going to be innovative and do great things for consumers effectively on the digital channels or across the digital channels. So we want to get those folks in and then figure out what we can do for them.

Some of them, they may just need our access to distribution. Others may need our access to help them develop quickly. Some may need relationships. Some may need access to capital or a combination of all of them. But either way, we’re approaching it from a standpoint where our objective is not to get a piece of or value in their company. It’s to truly make a difference in the delivery of financial services, granted across our platform.

Let’s be honest our business is a for-profit entity so we want usage of the platform, but more than that we want innovation in the space and we figure if we’re successful cultivating innovation in the space and create that velocity or that crowd sourcing or the next great financial service, then ultimately our platform’s going to be successful. And I think so far we’ve been proven right. And as we’ve launched the incubator program, in fact, we’ve got, gosh, just in the last week or so we’ve had over two dozen applicants and I would put my own opinion of the quality of those applications as pretty extraordinarily high, in terms of folks with a combination of really bright ideas and good plans about how to effect those plans.

Zack: Wow. So, Joe, it makes sense, total sense from a platform point of view. It’s great for you guys. It’s great for the applicants to these programs. Do you envision getting to a point where there’s almost like an economy of scale between the companies themselves? Not only helping each other, but do you imagine that somehow this is going to create just like a larger ecosystem with Yodlee at the center?

Joe: I do think it’s going to help create a larger ecosystem and I guess it would be nice if Yodlee was at the center at some level, but I don’t think that’s a mandatory. Our objective is primarily to change the way that people interact with their money in a way that makes their lives ultimately happier, if not easier because let’s face it, dealing with your money can be complicated and not all together satisfying. So that’s really what it’s about. I think we’ve got enough scale in the platform now.
We’ve got actually over 300 developers on the platform today, irrespective of the Accelerator and Incubator platforms. We’ve got combined 500 customers that are big institutions driving 40 million users and growing at a pretty rapid rate already. So I think that. We’ve got a nice ecosystem of users and what we’re building now on top of that is the ability to continue to innovate quickly from the solutions side. And where I think it starts to pay off for members of the ecosystem is if you look at what’s coming in and I know our time is brief so I won’t talk to you about all 300 of the developers and their ideas . . .

Zack: Well, give us an example of a couple that you think are innovative.

Joe: We’ve got a couple… we’ve got a few that have interesting stuff in the payment space. I’ll give you a couple of examples.

Zack: Okay.

Joe: Here’s one. There’s a company called, and this is a quasi financial service, I guess I would call it. There’s one called My Rewards Tree, which is a Yodlee incubated company that focuses on ‘how do you make sure you realize full value from your rewards points?’ There’s a lot of us out there around the world who are very focused on what is the value I can get from my rewards. And what they’ve got is a collection of points and cards and systems that have real economic value to them, that goes, a lot of times, unrecognized and even worse, on an annual basis, lost. And by that I mean, somewhere in the neighborhood of one third of the value of your rewards as a consumer, this is on a sort of an aggregate basis and speaking generally, expire or go unused or are somehow lost.
So that’s value, depending on how big of a rewards user you are that you should be capturing, that you made some investment to receive and yet are unable to value. So what My Rewards Tree does is put all those points and systems together for you, leveraging Yodlee platforms on the back end, and then run analytics that basically tell you how you can optimize that. So that’s really interesting from a couple of perspectives.

One, it’s a great companion product to wherever it is that you’re managing your financial life, because that is something that has real economic value to you. Alternatively, it can sit completely outside of your finances and be something that you interact with across a major social platform or some other medium beside your bank. So it kind of goes both directions, but yet it’s an area that’s core to enough of us that there’s a real demand for how do I get my arms around what it is that are my rewards points and how do I most efficiently spend them so that I’m not losing them? So that’s one example.

Another example is also an incubated company called MyCard. This is a really, I’m not going to call it infrastructure, but it’s one with a, probably a longer lead time, but a lot more upside. And this is this whole concept of what I’ll call a federated digital identity and with our incubated company at MyCard, our partners at MyCard, what we’ve done, and what they have done primarily, is take our assets, which is the platform and the ability to deliver data basically anywhere you want it, when you want it and build analytics on top of it that are both historical and forward-looking based on your transaction history across multiple accounts that basically prove you are who you say you are online.
The one thing that we spent a long time actually working on this with them and one thing that we figured out is that your transaction history, overtime, doesn’t lie. You might lie once or twice in specific instances and time and be able to pull that off, but long term over the history of your accounts, we’ve got a pretty good idea based on what’s going in and out of those accounts and how they’re being handled that they either are yours truly or they are not. And so what we have done is build on top of that, this MyCard, digital federated identity which enables a number of things and I’ll give you one easy example where it’s going to take a lot of pain out of consumers lives and the lives of financial products providers.

A lot of places around the world today, still in a majority of the places around the world, you cannot open a financial services account, a credit card, a DDA account, something like that, without actually showing up in someone’s branch or someone’s office and proving you are who you say you are. And that’s a direct result, rightly so, of a pretty heavy legal and regulatory overlay, but it’s cumbersome. It’s cumbersome for people who want products and it’s cumbersome for people who want to sell products. So what MyCard does is actually find a way that satisfies most of the national monetary authorities in terms of knowing your customer or authenticating your customer in a way that allows now truly, end to end online account opening.

Previously, online account opening had basically been a screen capture. I would type in my information, someone at your firm would get it, and then I would show up later with my passport or some other ID to finish opening my account and then I would begin to use it. And the abandonment there and the frustration on the consumer side and the provider side is effectively on an all-time high, because it’s so foreign now to the way we manage the rest of our lives. We’re used to being able to do things quickly and easily.

So what MyCard does, and you’ll start to see this piloting with a few banks shortly and it can also be a consumer manage service at MyCard.com, is build again now to now replace part of that functionality if you will, with this completely digital passport that will say, you know what, we have got a high enough level of assurance that Zack is who he says he is because we understand his account history. And that MyCard solution will be provided to you by your bank. It could be provided by some other financial prox provider. It could be provided by you as a self- managed service, but it’s a way to obviate the need to have a lot of time cycles in the account opening process and have a lot people in the account opening process and make it much more automated and much more frictionless from a consumer perspective. And, again, across any device.
It really, think about the power of being able actually to open a brand new credit card and use it on your Smartphone within about a single five minute session instead of a two- or three- week approval and show up at the bank account and prove your ownership process. It’s really, like I said a few minutes ago, it’s making your finances and your ability to interact with them and create them on par with the rest of the Internet.

Zack: Wow. Sounds like a huge potential in that product.

Joe: We’re excited about it.

Zack: So I just want to spend the last few minutes and, again, I appreciate all the time you’re spending with us telling us about Yodlee, if you can, you sort of talked about it already, but if we could talk a little bit about what would make a successful applicant to the incubator program, in broad strokes, the types of people you’re looking for. Just so my audience knows if they’re a good fit for you guys, as well.

Joe: Yeah, that’s a great question. We’ve got a panel of folks who actually work in Yodlee Interactive that have different disciplines. Some of them are very technology focused. Some of them very back office focused. And a majority of them are very consumer/small business user focused. And everybody looks at every application that comes in. It’s a short application process. We actually prefer a little bit of a presentation and basically what I would call a very truncated version of what would be your business plan. Sort of the who, what, when, why, what problem am I solving. But the sorts of solutions . . .

Zack: With financials included or just big idea?

Joe: Nope, just the big idea. We figure if the idea is big enough the financials will come. So we’re really interested in’ is this an innovation that makes sense within the financial services landscape or the landscape of how does the consumer or small business interact with his or her money? And a lot of them are really good feature ideas, but we don’t ask for anything very particular or very systematic. We say what is your big idea, why is it good, and how would you carry it out and then how can we help you? That’s effectively the four buckets we ask for.
We get all that information and then the group here inside of Yodlee Interactive sits down and reviews it and we have typically one of two follow-ups with the entrepreneur or the company. It’s real interesting, we’re focused on entrepreneurs here, which are the majority of folks in the program today, but we also got really large companies that want to participate, as well. Not so much to be incubated because they got plenty of resource, but just from an idea and a creation perspective.

So we get all that information together, we review it, we interact with the entrepreneur and then we say, we actually go back in a very unconventional incubator’s way. We don’t call back and say or email back and say. We call back one last time and say, “What is it that you think that we can do for you? Where is the value that we can add for you?” And when there’s a good fit because we think it’s a big idea either because we’ve heard the demand for this in the market from our banks or our non banks, or because we think the ideas just big enough or revolutionary enough, kind of like the MyCard idea where it’s simple enough of a daily problem like My Rewards Tree.
When there’s a match in terms of what we can do, other than just charge you to be on a technology platform some day, and what they can do in terms of innovating in the space, then we invite them into the incubator program. Then the real elegance of the program, I’m calling it elegance now, we’ll see in six months time ask me again, but the real elegance of the program is it’s not limited by capital. It’s not limited by the number of participants. It’s not limited by anything other than your imagination as an entrepreneur and your ability to innovate in the space.

So far we’ve found it to be… I think people are a little surprised because when they’ve applied to incubators they need to be part of a class system or a class structure that gets accepted as a, especially if a program, and we’re almost the un- incubator, but we’re doing it in a way that we think that we can add real value, because we’ve got deep domain expertise, we’ve got great entrepreneurship, we’ve got awesome banking relationships where we can get distribution for these folk, and we’ve got just a different set of assets to your classic incubator/investor.

We’re keeping it intentionally as casual as that and as friendly as that at this point. Now as we go forward and we’re going to see what works and what sort of benefit the community is getting out the back end. Are the assets we’re bringing to bear truly helping their companies materially advance what it is they want to do? Are those innovations truly useful in the market or not? We’ll make changes as we go. But right now the system is, let’s just get a bunch of really driven, dedicated people who share the same problem and that problem is how do I make it easier to deal with my money?

Zack: Wow, it sounds like a great program. Joe Polverari, Chief Strategy Officer at Yodlee. Thank you so much for coming on and talking to us about the company and some of the new developments there.

Joe: Great. Thank you, Zack. We were just encouraged. I know you got a lot of listeners out there and love to hear from folks who want to be part of the Yodlee Interactive Accelerator or Incubator program.