PODCAST TRANSCRIPTION SESSION NO. 158 / CAMERON STEVENS & JOEL FRISCH

Welcome to the Lend Academy podcast, Episode No. 158. This is your host, Peter Renton, Founder of Lend Academy and Co-Founder of LendIt Fintech.

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Peter Renton: Today on the show, I’m delighted to welcome Cameron Stevens, the CEO and Founder of Prodigy Finance and Joel Frisch, the Head of Americas for Prodigy Finance. Prodigy is a fascinating company, they’ve been around for quite some time, over ten years in fact, but they are doing something that is quite challenging.

They are focusing on international students coming to various different countries including the US and really helping them fund their university education. It’s not a challenge that is easy to solve and we go into how they do that in some detail, we talk about how they fund their loans and the challenges they have obviously in scaling a business that is in over 100 countries around the world. It was a fascinating interview, hope you enjoy the show.

Welcome to the podcast, Cameron and Joel.

Joel Frisch: Thanks.

Cameron Stevens: Thanks, Peter.

Peter: Okay, well I like to get these things started by getting a bit of a background about who I’m interviewing so maybe, Cameron, you could start off and just give us a little bit of background about yourself and what you’ve done in your career to date.

Cameron: Sure, I’m South African, but a bit of a global mongrel.  I was born originally in New Zealand actually before my parents moved to South Africa. I also have lived in multiple countries and have visited about 95 countries…

Peter: Wow!

Cameron: … so I certainly see the world as my oyster. My undergraduate degree was at the University of Cape Town, I then started a company in Malaysia, I did my MBA at INSEAD and I then started Prodigy.

Peter: Okay, where was INSEAD, where did you do that?

Cameron: I did it in 2000, I joined the class in 2005 in both France and Singapore. I was originally not intending to go to Singapore because I’ve spent so much time in Malaysia and Singapore, but there was a bit of wildebeest migration, it’s like the Serengeti that goes on (Peter laughs) in which the whole class sort of decamped, I think it has something to do with the weather. You see the whole class decamping and it’s hard not to be a part and I graduated in 2006.

Peter: Okay, okay and Joel, what about you? Give us a little bit about your background.

Joel: Sure, so started on Wall Street and was there for a while both in sales and trading and a little bit of private banking, took a little bit of a pivot when things started getting really fun, in 2008/2009, and got into software with regards to employee management based software, based on some of the other investments that we had had and then along the way from hiring international students actually came across Prodigy and happy to share more about that, kind of how I melded both the finance and the appreciation for user experience.

Peter: Sure, sure, we’ll get into that in a little bit, but I actually want to go back to Cameron and talk about sort of the founding of Prodigy and what was the driving force behind the founding of the company and what problem were you trying to solve?

Cameron: I think it goes back to…I’ve always had an interest in two things. One, sort of large social problems and two, entrepreneurial models to solve them, but never particularly for me, in an NGO way. I’m really interested in how entrepreneurship could help solve big problems and that’s been my story through my life, the very first company I started was actually at university and trying to bring unemployed people in South Africa into the bank industry. I started a training academy and then a business to do that, but with the goal of really thinking about problems that existed that had an interesting social dimension.

Second to that as well, my undergrad was in finance and I tried to launch a business in South Africa in 1999 which was crowdfunding for early stage technology businesses at the time when it wasn’t called crowdfunding, certainly fintech wasn’t a term. But I thought it would be an amazing model to enable the flow of capital for early stage tech businesses. I was laughed out of most investor boardrooms at the time.

But it stuck with me as a model and I say that because really how Prodigy came about was going to INSEAD as a South African living in Malaysia having a surreal conversation with HSBC at the time about a loan and effectively being offered to lend to me in this case, but with a 100% of liquid assets required to get the loan. So basically take a sterling loan from HSBC, make sure there is liquid assets, not shares or any other assets, needs to be cash or something locked up and have it lent back to me. I thought that is just absolutely ridiculous.

It meant that I had to defer my year at INSEAD and found out that this was a really common problem. At that point the thought was really, hang on a second, how big of a problem is this really and who is it affecting and is there something that we could do to solve it and spoke to, in that process, a whole lot of universities. First of all, INSEAD was understanding to the extent of the problem at the time and was it really a problem, turns out, yes, absolutely, it was one of the biggest reasons of people not being able to attend. Disproportionately affecting people from emerging markets so basically meant where you were located in the world would determine your ability to get funding.

So it seemed very sort of intellectually interesting at the time and also sort of engaged in two of the things that have always interested me, that kind of social dimension and disruptive finance which came together. So it was a personal reaction to a journey that I had with then an overlay of wow this was actually a really big problem affecting, by the way, not just students trying to study which was sort of coal face of how I saw it, but 250 million people in the world live outside of their home country who experience similar friction points with finance and lending. So it seemed like a really, really interesting problem to try and solve.

Peter: Okay, then so Joel, I’ll switch to you and ask about your…you obviously weren’t around at the beginning of Prodigy, but you’ve been running the business here in the US for a while so why don’t you tell us about what attracted you to Prodigy?

Joel: Yeah, so I think similarly with regards to identifying a problem and then seeing if there’s a way to solve it. I had been hiring some engineering students for our software company and had hired two international students that had both come to study in Philadelphia, one at Penn’s engineering school and one at Drexel’s engineering school.

One day in the lunch room of our company overheard these two gentlemen just talking about life and bemoaning their loan payments and just kind of sat down and wanted to learn a little bit more about what they were experiencing and came to find out that one of the gentlemen who had come from a rural town in India, his family had been required to put up their mango farm as collateral and he was paying about 17% on his loan payments.

Peter: Wow.

Joel: And the other gentleman who had come from Nigeria had come actually with almost no funding and had come and begged his roommate’s father to cosign for him. I looked at these guys and I knew what I was paying them as first year engineers, I knew what their trajectory was, this is kind of silly, like I know the high quality of these students.

And so I just went…kind of to help out my employees and said hey, is anybody doing this and how do I help them, I said I’ll take your loan, I’ll take it right out of your paycheck and hope we can find some savings. I reached out to all the domestic players in the US, even some of the upstarts at the time and this was the early days of SoFi and some others and nobody was really interested in the international students. They were hyper focused on looking for high quality borrowers in the US.

One night, I literally just came upon the website for Prodigy and reached out to Cameron because I wanted to understand a little bit more about what they were doing and the experience that they were finding and just found it to be fascinating. I appreciated how many international students there were in the US and I saw the way that they were placing….particularly coming out of some these business and engineering schools. I was fascinated and when the opportunity arose, maybe a year or two later, serendipitously kind of where I was in my path I literally jumped at the chance and got on a plane to meet the team. So it’s been a fascinating journey for me and it’s been great to finally have a solution to help these high quality borrowers.

Peter: So then maybe we could just backtrack a little bit and talk about what Prodigy does exactly. Obviously you’re helping international students, but maybe talk about what that looks like and what direction you’re going. Obviously, it’s a many to many problem as in there’s obviously many students from all over the world going to many different countries to study so tell us a little bit about where you operate and what sort of students you’re attracting.

Cameron: Sure I think, Peter, one of the things that we realize or certainly I realized when I started because the thesis that really started was, hang on a second, you’ve got plenty of banks around and many of them have a global presence. What does that actually mean? And unpacking the problem initially and then trying to solve it because…like Joel was saying earlier, part of the thinking was how do we solve this problem efficiently and maybe a partnership with a bank not even myself at that time being involved. What’s the possible way to do that?

But I quickly realized that how the banks think about risk is incredibly localized so everything from the initial assessment, from how do you use credit bureau data, how do you get credit bureau data from around the world, how do you think about, in this case, the students particularly assessing their future earnings potential because you’re trying to understand what are they going to be earning after graduating rather than before through to collections and repayment channels globally, enforcement globally.

All of those things fall completely outside the way a bank thinks about risk which has always been in an inherently localized way from the time…you know, not long ago when really it’s about knowing your local branch manager and forming a relationship and that branch manager calling up when there’s an issue to what we have now in which you can move countries…you can move from Ghana to Singapore or the UK to study at Oxford and that’s easy to do, but finance doesn’t follow you.

Essentially, everything else in the world is being offered increasingly globally, but finance really is not, in the sense of consumer finance obviously and some of the wholesale piece… and it’s effectively across the whole system of that is fairly broken. So when we started, the problem we were trying to solve was to say hey, we want to be able to look at anyone, wherever they are in the world. It’s essentially those national boundaries are irrelevant, you want to be able to assess their potential and fund against it, assuming that they made their first step in being able to get into one of these top universities globally.

So basically, the challenge with that obviously is easy to say, but the challenge of that is you’re dealing just with people from a vast array of countries. So currently, we’ve supported students from 127 different countries going to universities in multiple countries across the US, Europe, Asia, Africa, one or two in Latin America and that brings significant challenges if you think about lending models because really we were the pioneers in thinking about how to be able to do this on a global scale without worrying about, or not worry about, without needing to be restricted by locally fragmented markets.

So the journey in getting that right is not simple, and it took a long time and still continues to be a challenge, but we felt that it was a worthwhile journey to go on to be able to get to the point one day when…not just on education finance, but down the line we’ll be able to recognize potential wherever it is in the world and fund against it. We think that’s the way the industry is going to go despite what you might see as some national sentiment more prominently in the US and in the UK. We think that’s where the world will end up over the next…you know, pick your time frame, depending on how optimistic you are, a decade, two decades and we’re really sort of pioneering this space in that.

Peter: Right, right. Okay, so then if you go to your website and right there on the home page you’ve got two different options; I’m looking at it right now. You’ve got a get your post grad student loan or refinance your student loan so obviously the refinancing space…we’ve already mentioned SoFi, you’ve got CommonBond and others really making a big effort, including some of the banks in that space. So a couple of questions here, are you focusing on post grad students for an actual student loan? Is this like not an undergraduate program? And then secondly, tell us about the refinancing program. Maybe Joel, do you want to give us some information about that?

Joel: Yeah, I think it’s important to kind of think about the journey that we’ve been on. When Cameron first started, we were just starting MBA students, supporting MBA students at INSEAD. I think it was a very tangible kind of piece to go after and also if you think about it from a business school perspective, there is a lot of data readily available to understand how these students are ultimately doing because in the absence of credit history and if you really want to be forward looking, you really need to understand how these folks are going to end up. I think that was a very logical place to start.

Over the subsequent ten years, you’ve seen us expand, not just in the MBA space, but in other postgraduate spaces across business schools, engineering, law schools, policy schools and even most recently in the medical space starting with some advanced dental programs.

And postgraduate has really been where we focused because of a combination of understanding how these students ultimately do. There is typically…on average 2-year programs. Also they typically are some of the most expensive programs so finance really is a barrier for many of these students being able to advance their education and better themselves in their communities and so it was really a good place for us to start.

I think the second piece of that journey, as you mentioned, is not only offering to the incoming students who has a blocker as far as how they are going to fund school, but then with us refinance has really been looking at those students who maybe we missed because we only entered into the marketplaces within the last few years. So for example, our first loan in the United States was in 2014 so any student that has recently graduated or as we were scaling up the business in the last few years maybe didn’t have access to a solution like Prodigy Finance.

So they were probably looking at some type of, you know, encumbered loan like some of the examples we gave or they had cosigners who it made sense when they needed that cosigner to get to school, but now maybe they’re even out earning their cosigners and their cosigners are saying hey, I’d like to go buy a home, you know, is there any way that you can release me from your 20-year education loan.

So for us refinance has really been focused on those students who are now working in some of these established markets and maybe looking to release the cosigner or release some of those encumbered terms that they’ve had and that’s really taken off in the last year. We started the pilot of that back at the end of 2017 and that’s really started expanding quite quickly.

Peter: Is that international students inside the US, is that what you’re talking about there for the refinance product or is this in multiple countries as well?

Joel: Correct, so currently that offering is for international students who have come from one of those 127 countries that Cameron mentioned and they’re currently living in the US or actually the UK. This is very much kind of early innings for this product so we’ll see where that continues to grow, but for right now, it’s for folks who are working in the US today.

Peter: Okay, got it, got it.

Cameron:  And, by the way, many of them are still internationally mobile so they could move. You know, they don’t have generally permanent residency in the US, they could move back or to another country and often do and also don’t have a deep credit history in the US so they can’t get a loan from anyone else even at that point, even when working.

Peter: Yeah, yeah, I get that. So then I know when I was doing some research on you guys and Cameron, I saw that you’ve already talked about INSEAD, but you sort of started off as an alumni-funded platform which is what a lot of the other student loan lenders have also done. I wanted to see if that’s…you’ve obviously evolved since then, but I wanted to know firstly, who are the investors today and can you tell us a little bit, I was reading about your bond program, you have, I think I was reading about it in Ireland, but tell us a little bit about the investor side of the platform.

Cameron: Sure, so the difference for us compared to some of the domestic platforms that launched post us, so SoFi is a good example, but even some of the other platforms like a Prosper or a LendingClub, the slight difference for us is that we were going after a market that no one had gone after before compared to the domestic platforms who were going after effectively a market that was well served by the banks, but were doing it with great efficiency.

And the difference with that is that you can build your business, you can scale your funding on your platform on the basis of proxy data. So basically, if you are, for example, funding US domestic people with a FICO score of X and higher, what you can do to get funding on your platform is you can go to a large wholesale institution and you’re not reinventing anything because you, in many cases, have someone else servicing your loans who does it for the major banks as well.

You’re building a credit model…as much as you want to talk about alternative data, you’re building a credit model based on effectively FICO score which the bureau has or some version of it and so you can go to a funding institution and say, hey, can you give me 100 million to lend through my platform; by the way, there’s no real risk here because I’m just a marketing acquisition engine. You can look at the student pool, you can get five decades of data on how that bureau score performed and you can make a very clear assessment of the risk upfront which is not actually anything to do with you as a platform.

And that’s very nice for scaling capital, but it’s also very difficult to defend because someone else can do exactly the same thing pretty simply as you’ve seen in many of the sort of very competitive markets. Compared to us where when we started we had the same insight which was institutional funding still today and we can argue about or, you know, discuss whether this is going to change and how quickly it’s going to change, but institutional investors are still where the significant deep pools of capital are at.

So for us the challenge was saying…hey, we’re going after this really new segment which no one has addressed before and therefore there’s no proxy data. We can’t point you to a portfolio to say, here is decades of data on it and the response with that from investors obviously is well that’s great, let’s see how this is going to work out, we’ll see how the track record goes and so we were faced with the point and this was why we sort of innovated on that model in being the first to think about and to execute on an alumni-funded model which we said, well, who understands its risk.

My early thoughts about crowdfunding from 1999 came to me as well in saying, hey alumni should get this, they were in this journey. It feels to me at least a bit at the time and still does that the connection that you get from that compared to a random peer-to-peer platform where you’re just investing into anyone based on something…this is genuinely a community in which it’s someone that has been through that experience, the same experience as you coming after them. They have an amount of funds to be able to invest and really intuitively get the point.

So all of our funding initially was crowdfunded to alumni, but we always knew that we would need to scale it up because we were facing massive demand that we couldn’t meet and so…but it took time and that’s a little bit frustrating when you’re scaling in the early stages of the business. The first five years was 100% alumni funded. Then once we had a decent track record to be able to show that people actually repay, still slightly early days, but you’re seeing repayment performance and you’re seeing the model work. We then started a partnership with the impact investing team at Credit Suisse which still today has been a fantastic partnership for us.

They would distribute to their private client base so very much sort of similar to our alumni base of funders just done through Credit Suisse’s distribution, same type of investor but through Credit Suisse. And subsequent to that, we got additional data, additional proof points which has meant that we’ve been able to bring on additional sources of funding on to the platform as well so additional banks have been joining.

But for us, we had to really prove out that journey from the early days and what’s nice about that now is as we’re scaling up the funding significantly. I think this year we’ll get to the point where we will scale up the funding which still has been our biggest bottleneck to date to the point at which it will change to be a demand piece for us for the first time.

But how we did that in a long response to your question is we also wanted to target alumni investors from multiple countries so we started the bond program which in its simplest form is we issue a listed bond which means you can hold it in your portfolio which funds a class of students in its smallest unit. So the bond…there’s nothing fancy going on in the bond structure, we’re not putting tranching in or anything complicated in it. It is the same as if you were funding let’s say the 100 students that made up that bond or let’s say the Oxford class of 2017, you fund that bond and you get repaid as the students are repaying and it’s as simple as that, it would be the same as if you funded those 100 students directly, but in a much more official mechanism for you as an investor with a lot of security around it because you get bankruptcy remoteness and lots of other bells and whistles.

Peter: Right, right. Okay, so I’m really curious about how you’re actually underwriting these students because you’ve got…they’re coming from, you said, 100 odd countries that have various levels of financial sophistication. Particularly if they’re in a small town in rural Africa, there’s probably going to have very little in the way of data so tell us a little bit about your approach there. Is it a country by country thing where you’ve really got to go and find sources of data or have you been able to get this into sort of a model that is somewhat independent of country?

Cameron: Sure, so what we were trying to solve in who to lend to and how much to lend to them and how we think about that, is no different to anyone who’s making a lending decision in terms of being, you know, your two basics of trying to understand what someone can afford to repay and if they can afford, are they willing to repay you. And we approached that in a slightly different way because of the uniqueness of this pool which was firstly, we had to work out a model to work out what someone could afford to repay and the reality is, as you say, you’re coming from 127 currently countries with a huge variety of current earnings, current income and current assets.

It means the question is not what are you earning right now, because it’s almost irrelevant, but what are you going to be earning when you graduate and how do we think about that. So how we did that initially, when we first started was getting thousands of data points from the  university. This was stuff we had to work with the universities on to really get line by line data so we could build a scorecard to assess someone’s future earning potential in a quantitative way so we could really understand with certain factors in your profile you’re going to end up in a certain earnings bracket based from the course and university that you’re going to.

And we can size the loan based on that future earnings potential while making both a sort of conservative decision on that, but also enabling you not to be able to…so we don’t need to look at the fact that you might be earning $5,000 a year currently. We can look at your future potential in a smart way and of course that data gets better and better as you continue.

The second thing was using more traditional background information from people and using credit bureau information, for example. The interesting thing about that is that while it’s not homogenizing over the world so the credit bureaus are not linked up and the data is completely diverse, more and more countries do have these decent sets of data available. So currently about ninety five odd percent of our borrowers do have credit bureau data, but the quality of that data varies quite significantly so you might have in some emerging markets really good positive repayment performance data, i.e. am I repaying on this account, with what degree of regularity, what are the balances outstanding, etc. and in others you’re only going to get negative data in which it’s have you actually to various levels of severity defaults on a loan etc. so making sense of all of that data with our future earnings potential model.

And then we’re at the point now where we’re able to be playing back our own performance data from what we’ve been seeing into the model to make it more predictive and so the model gets better and better over time, but it does take time to be able to do that.

Joel: That model has actually resulted in us being able to extend automated offers to over 90% of our applicants which you and I may take for granted in the US or the UK to get a mortgage from a click of a button on our mobile phone, but to think that now for students all over the world sitting in bedrooms, libraries, their workplaces can actually secure financing for education within seconds is pretty amazing.

Peter: Right, right, that is fantastic. I mean, it’s taken for granted like domestically, but going cross border that’s quite an achievement. So I’m curious about…like a lot of the student lenders you’ve sort of isolated here a population that is…you know, these are future high earners and the one thing they have in common is that they’re also very much an internationally focused group.

So I’m curious and, Joel, maybe you can comment on this since I’m really familiar with the US side of things here, but I imagine the US is one of your larger countries here. Firstly, how do you engage with these students? Obviously they’re paying back a loan, but what more are you doing to engage and are you looking at adding other products to try and serve these people, particularly for the ones that are here in the US?

Joel: Yeah, that’s a great question. I think it helps to start when thinking about the relationship that we have with our customers. Typical financial services, it’s very much a transactional relationship. If you or I walk into Wells Fargo, we open up an account and then we walk out the door and it’s done. Whereas with our customers, if you think about…for most of these folks this is not their first financial transaction, it’s definitely their largest so some of these school costs these days are extremely expensive.

So it becomes really a relationship about opportunity and so it’s a very intimate relationship that we have with our customers. If you think about us understanding this particular customer and where they’re going to end up, it’s not crazy to think how we could continue to build that kind of family of products that we offer them. So currently we have the in school loan, the refinance loan, we’re offering community benefits such as help with career placement if needed, both short and long term, we’ve started testing introducing some other ancillary pieces.

For example, we all take for granted how much credit really is the backbone of our society so even something like securing a mobile phone…it’s quite challenging if I show up in a new country today and so securing special deals for our borrowers for things like that, that’s what borrowers want. We’ve had many conversations and speak to our customers about what are some of the other pieces that they need and so we’ve heard requests for card products, we’ve heard requests for bridge loans once they’ve graduated from school, request for personal loans. You can even extrapolate how business loans…these are some of the most successful bright minds out there and they’re looking for a business loan to unlock future opportunities, well that would fit right in line with kind of what we’re thinking about.

If you start continuing down that path then you can see how this could become a full suite of products, very similar to how other folks have done it. I always use the good example of…I am  a big fan of USAA and how they have built a beautiful platform that’s connecting people based on the commonality of service men and women in the United States and the relationship that those customers have with USAA is really one of membership and belonging. It’s not really your typical transactional bank so I think those types of models could very much be one that we follow and we’re just going to continue to listen to what the customers are looking for.

Peter: Okay.

Cameron: Just to add to that, I think aside from the relationship, the friction points are real and you’ll see them in multiple examples when you’re crossing a border. So the fact that there are 250 million people in the world who live outside of their home country, 60 million of them are tertiary educated or higher and who experience similar friction points.

When you move to London, good luck in trying to get a credit card, let alone a mortgage or anything else even though you might be very much like one of our existing borrowers who is highly educated at an amazing university, working for a great company, those friction points are still real. So I think just sort of longer term the thought that you are catering to this basis of people who are globally mobile experiencing friction points that make it much harder for them to access even basic financial services across multiple countries. It’s interesting to see how that sort of develops and where we go with that longer term.

Peter: Yeah, and speaking of that we’re almost out of time, unfortunately, but I’d like to get a sense from both of you of sort of the future ambitions for the firm and personally what are the things that you’re working on that you find most exciting. Maybe, Joel, we’ll start with you.

Joel: Sure, so I think, in general, where we’re going as an industry and as a company as part of that journey. I think you’re seeing a continued renewed interest in this alternative space. It’s funny you’re seeing kind of a little bit of a pushback into some of these ISAs or income-shared agreements which we can argue whether they’re appropriate or not, but I think what it brings into light is a dynamic relationship which I do think is something that you could see with regard to alternative lenders.

If you’re continuing to de-risk or add risk to my relationship with you as a borrower why should we have a static rate the whole time, a static relationship so I think that’s kind of interesting and then you can layer on some of the additional access to information in data, utilizing things like blockchain. I mean, recently we saw Equifax and TransUnion start to run a small pilot, with about $20 million in alternative lending with the identification of the borrowers on the blockchain which is a little interestingly ironic because if you think about it over time if that would work then you really wouldn’t need credit agencies because you’d have access to individuals to see what they’re doing so for me those are really interesting. On a more local level, it’s most exciting as we continue to kind of blaze into new areas so, as I mentioned, we just started launching medical programs. That’s really, really fascinating to understand all about a whole new area students that are encountering the same type of friction that we hadn’t supported before.

And I think, lastly, just with regards to kind of where we’ve taken the growth in the last few years, we’re just seeing deepening of relationships within many of the schools that we support.  You know, it’s one thing when you’re the new kid on the block and then you start seeing that, oh wow, Prodigy has helped all of these students come to our school and after a few years Prodigy has actually helped hundreds, if not thousands of students come to our school. So we’re engaging on a whole other level, we’re engaging [inaudible] schools, councils of deans. For me, that’s really interesting because the prominence of the brand continues to grow which in turn allows us to help more and more students.

Peter: Okay, Cameron, last word.

Cameron: I think for me just remembering what we have set out to do which is really to say, hey, we want to be able to look at these amazing high potential people from around the world and assess them and be able to fund them from a community of investors really simply and in doing that break down the national barriers that have come to define finance.

That’s the mission that keeps me engaged and focused. More specifically I think this year we’re going to roll out a pilot in something about access to education through funding in Africa which I think is going to be interesting, but more broadly, it’s about really making that mission come to bear at scale which is both challenging and very engaging and rewarding.

Peter: Okay, we’ll have to leave it there. I wish you all the best, it’s a noble mission, that’s for sure and thanks for coming on the show today, guys.

Cameron: Thanks, Peter.

Cameron: Brilliant, thanks Peter.

Peter: Okay, see you.

Peter: You know, I sometimes wonder if in ten years time we’ll live in a world where information crosses borders, financial products cross borders in a seamless way. We certainly are a long from that and companies like Prodigy are really leading the way when it comes to breaking down the barriers between borders. Whether or not we get to a completely seamless system I think depends upon the innovation that is happening in fintech with companies like Prodigy and others that are doing things where it can really help people take their identity around the world and take their financial data around the world with them.

As an immigrant to this country, I’ve had this problem first hand and I feel like it’s one that desperately needs to be solved and one that I think will certainly make people’s lives easier and I think it will make the world a better place.

Anyway on that note, I will sign off. I very much appreciate you listening and I’ll catch you next time. Bye.

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PODCAST TRANSCRIPTION SESSION NO. 157 / ADAPIA D’ERRICO

Welcome to the Lend Academy podcast, Episode No. 157. This is your host, Peter Renton, Founder of Lend Academy and Co-Founder of LendIt Fintech.

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Today’s show is sponsored by LendIt Fintech Europe 2018, Europe’s leading event for innovation in financial services. It’s coming up on the 19th and 20th of November in London at the Business Design Centre. We have recently opened registration as well as speaker applications. You can find out more by going to lendit.com/europe.

Peter Renton: Today on the show, we are doing something a little bit different. We are talking about empowering women with AdaPia d’Errico. She has been around fintech for some time, she’s worked for a couple of different startups and she is someone that I’ve got to know personally over the years and someone I truly respect.

She was impacted with the MeToo Movement last year to really go out and start helping women, helping organizations to empower women and she’s really very passionate about this as you will find out in the interview. We talk a lot about women’s issues, we talk about gender bias, we talk about the unconscious bias that happens, we talk about what women can do to really overcome some of these things and what organizations need to do to really encourage female leadership. It was a fascinating interview, hope you enjoy the show.

Welcome to the podcast, AdaPia!

AdaPia d’Errico:  Thanks, Peter, it’s great to be here.

Peter: Okay, so I like to get these things started by giving the listeners a little bit of background about yourself so why don’t you tell us what you’ve done, so far, in your career.

AdaPia: Sure, I will start by saying that I’ve been in the fintech industry for about five years, I got started in late 2013 when real estate crowdfunding was also getting started and I joined very early at Patch of Land when there were about three founders and I was employee number one. I still remember going to LendIt in San Francisco in 2014 and the buzz there was incredible. So that’s been me for the past five years at Patch of Land, as the Chief Marketing Officer, really advocating nationally and largely around the awareness with the opportunity with real estate crowdfunding and hard money lending.

My overall career background really started when I was 19, I started in a bank so I’ve always been in finance actually. I started in personal financial planning so I had my CFP by the time I was 21, my securities license up in Canada where I’m from, and I started my career there. I went abroad for a while, I lived in Europe and was in hedge funds when I was in Europe so amongst other things, I’ve remained in finance to one degree or another and when I came to LA, when I moved to LA in 2012, I was in the middle of a few entrepreneurial ventures and got into the VC space in Silicon Beach and that’s how I came into real estate crowdfunding and Patch of Land.

So somehow everything went in this very roundabout direction, but it brought me back into finance on the tech side and on this new regulatory side and I’ve really been learning so much for the past five years as it pertains to the use of technology in finance and how that’s really changing the game.

Peter: And then I know you were at AlphaFlow and you left there. It seems to sort of do something that you felt like was more aligned with your core purpose so why don’t you tell us about that kind of transition and what you’ve been doing for the last year or so.

AdaPia: Sure yeah, I was at AlphaFlow last year and was doing great there and loved it, loved the team, but in September when the Me Too and the Time’s Up Movement really started like they went on fire, it shifted something within me. It really galvanized me, like I wasn’t expecting it and I felt very called as quite an experienced woman in business. As an executive, as an entrepreneur, I really felt called to do something more with everything that I know and everything that I’ve done, all of the lessons that I’ve learned and that translated for me into giving back essentially.

I thought I need to give back to other women who are not able to speak up or stand up for themselves the way that I’ve learned how to or the lessons I’ve learned in leadership as a woman and so I left to pursue some work where I could give back more. So what happened was Me Too made me realize that with my experience, everything that I’ve been through, various countries, various industries, I needed to impart some of this to others.

So I took a few months to do research, get educated and get trained on everything ranging from leadership training techniques, really diving into women’s issues as well as taking some training on behavioral psychology and neuroscience so that I could bring some of that forward into the speaking and the presentations I was already doing, but shifting those away from finance and technology and real estate and really shifting them into what it means to be a woman today and what can be done today because there’s this opportunity with these movements that they’ve given us to make change…like now is the time to step up and companies want to.

That’s what I’ve been finding with the companies I’ve been working with and speaking to, they want change and so I’m thrilled to be able to help with that.

Peter: Right, right. And so then I see you’ve recently actually taken on a new position. Why don’t you tell us what was behind that decision and just a little bit about the company that you took on the position with.

AdaPia: Sure, so I was happily on my merry way doing my leadership work and my workshops and my group coaching, all of these things I was doing, really like you were saying, my purpose and my calling, and part of this work I was advising and mentoring and coaching in this company. It’s actually called Alpha Investing which is ironic with AlphaFlow, but it’s a small private equity firm and in real estate. I love real estate, and love real estate investing and I was advising them and they approached me after a few months and asked me if I’d be willing to join and I really had to think about it because I thought well, I wasn’t really looking for a job. I was really into this work that I was doing, but they’re such an incredible team, so much integrity and also quite diverse.

We talked a lot about this work that I’m doing, the leadership work and the speaking and the presentations and I said, you know, I’d be happy to help with the company and help grow it, as long as there’s this really big understanding that this is a big piece of me and I really need to be focused on giving back and they agreed wholeheartedly. So I took the opportunity because I have the opportunity to walk my talk because it is a leadership position, it is a diverse team, both racially and in gender terms, and the way that we’re working together, the way we’re building the company, the way we’re doing business to me is the way that I would like all businesses to be grown and to do business with others, especially in a space that can be a little thorny like real estate investing and development.

So it’s a really interesting opportunity, I’m excited to be able to apply also so much that I’m learning and teaching and apply it directly to Alpha Investing.

Peter: Sure, so I want to step back a bit. As you look back on your career to date, you’ve been in fintech for a while and when you combine finance and technology there’s certainly a shortage, shall we say, of female executives. We’ve struggled at LendIt to try and work towards more gender parity, but the reality is there physically isn’t gender parity inside the industry at any level.

So I’m curious, when you’ve gone through your career and you’ve had a variety of different experiences, did you have any female role models? Was this something you thought about a lot before the MeToo Movement?

AdaPia: I didn’t really think about it a lot. I think that as I got to know everyone in the industry and when I got started there were far fewer people and it was more specifically fintech. Nowadays, the fintech industry, as you know so well, is full of finance people. So you have a lot because of all of the partnerships and the integrations with the traditional finance industry so there’s a lot of finance that’s come into it.

In the early days, it was a much smaller group of people and so naturally I gravitated to the other women, you just find each other (laughs) and so I was able in that way, to meet a few women, Luan Cox being one of them and Candace, I think her last name is Sjogren now, I hope I said that right Candace, (Peter laughs) and just a few women. We bonded in a way because we were in the same boat, we were doing the same kind of work. I really found most people to be honest in the fintech industry, men and women alike, to be so open and so welcoming and so generous with their time and their knowledge that it was really quite easy to get my feet into the industry and to grow these relationships with these women.

But in terms of role models per se, honestly, I was so focused on growing the companies that I was really head down in how to do that and just, by and large, building relationships as I went along.

Peter: Right, that makes sense. So then when you look at fintech today and as I said, there is a vast majority of men still at all levels, what do you think needs to happen for us to get more gender parity?

AdaPia: Yeah, it’s really tough. I think that basically, it’s been the norm in so many industries, this has been a norm for decades that it’s been largely men in business at work and it’s been changing though it’s much slower to change at top levels. The research does show that there isn’t necessarily a pipeline problem at entry level; where the problem starts to bottleneck is as you get closer to the top.

Usually the first thing is to bring awareness to anything, right? We can’t fix a problem if we don’t know what it is. If anything the MeToo Movement and Time’s Up and all of the awareness that has been brought to the issues by media is bringing awareness back into companies, and that’s the first step. So we know there’s an imbalance and a lot of companies and a lot of leadership teams which are predominantly made of men that I’ve been speaking to have said, you know, we know this is a problem and we want to change it, how do we do that?

You know, it takes time, dedication and just a persistent, constant effort. What I’ve seen is it starts with that personal responsibility of like what are my own internal biases and beliefs that are basically running unconsciously because while you can have a management team that says, okay, here’s an issue, we want to change it, you have to start up there, at the top, in their heads saying how is my behavior, how are our policies, either promoting or holding people back, in general.

So being really honest with ourselves about is my current workplace imbalanced, is a certain behavior being condoned and being very conscientious and aware of how that behavior is occurring and stepping in, courageously stepping in, to say hey, we don’t do this, like this might be the old way because it wasn’t talked about before, but today, this is not appropriate and here is how it is changing. It needs to be role modeled from the top.

Peter: That makes sense. So I remember at your presentation at LendIt this year, which I enjoyed very much, you gave this exercise about unconscious bias that was really…it was really interesting to me because I used to run a manufacturing company and we literally had a wall between the front office and the back office. The back office was predominantly men, I think there was one woman back there and the front office was predominantly women, it was like one man up there.

It made me realize that when I would hire like a machine operator, I was looking for a man. I didn’t realize it really, but that’s what I was looking for. When I was hiring for a customer service representative I was looking more for a woman. I think it was really interesting to me to see that those…we do have those biases. Is that something that in the training you’ve been doing and the work you’ve been doing, is that something you’re addressing directly?

AdaPia: Yes, absolutely. I really find it all starts with those biases and beliefs and thought patterns generally that run in our brain unconsciously…I mean, we are basically wired, we’re like hardwired in our brain like this neural net to have automatic responses to people and situations and that’s kind of this reptilian brain, as they call, which is even responsible for fight or flight. But you take that one level further and it comes into when you grow up you experience through your environment and the people you’re around, what is good, what is bad, who is good, who is bad and that keeps just building, building on top of it and each other, it just builds and builds and builds and after a while, you’re not thinking anymore.

When you walk into a room, you’re scanning, you’re scanning for friends and foes and danger and safety and you don’t know this is going on. And then you have these stereotypes and these biases that you don’t know are going on, that they’re literally running your brain and if you’re not aware of it, they’re going to run your words, your thoughts, your actions and essentially, like that’s when you say you shape your reality, that’s where that comes from.

Peter: Right, right, that’s understandable. So what is your advice to women who are…you know, they’re in their career and they are experiencing gender bias in the workplace, whether it’s overt or covert it could be often they’re passed over for promotion, they’re not given the recognition that someone…you know, a man might have done the exact same work, whatever it is, what’s your advice to women who experience this kind of bias?

AdaPia: Yeah, that is such a tough one because the experience of a bias and knowing the objective reality of the situation can be two different things.

Peter: Yeah, for sure.

AdaPia: So in a way to just back up for a minute, women have really been asked to adapt to men in general in the workplace, like the responsibility of fitting in has been placed on the women or women take it upon themselves to do so in order to enter the workplace. The past few decades have really been women kind of having to show up and prove themselves to men and that puts them on the back foot when trying to be at parity. So they’re already going into it with an experience of probably unequal treatment so they’re already coming at it with a different perspective.

So if something happens where they feel that they’ve been treated unequally, especially when it comes to promotion, there has to be a really open conversation. That can be hard if your counterpart isn’t open minded and isn’t willing to listen. So there’s a few things that come into play like is there psychological safety in the organization, in general. Is there really someone, a system, whether it’s HR or a management team or a person that I can speak to without risk of backlash because that happens a lot. So that’s a conversation that needs to happen and it also needs to happen in a non-aggressive way because the last thing you want to do is show up screaming and yelling and blaming because you don’t know what the real story is.

The important thing is to get to a place of objectivity from both sides and if it’s hey, I feel I was passed up because of this, then the conversation needs to be, okay, here are the facts from our side and here are the facts from my side and you have to talk it out and you have to understand. Now the counterparty should be open to hearing and seeing whether there are really these unconscious biases and processes happening in the promotion, like in the review and promotion process.

So it’s this whole system really where it has to begin with a calm, open and objective conversation where all the facts are laid out, where the company potentially explains here’s what we’re looking for and then if you’re on the receiving end and you got passed up because maybe you didn’t have access to mentorship or training because that’s the next step.

And if we want to empower female leadership at work, it’s what development programs exist for men and women period, like we need a lot more development programs, especially in startups where the people aspect is so important, we need to be developing leadership traits for everyone and that’s a HR and an executive function, in my opinion.

Peter: So you’re saying that to encourage female leadership, because I think there’s certainly a lot of male leadership in fintech, you’re saying there should be leadership period, but should there be leadership training specifically for women? I’m not sure I am clear about what you’re saying there.

AdaPia: Yeah, sure. I don’t think that there should be leadership training specifically for women at the exclusion of men. I think there should be leadership training and for example, the work that I do like I can come in and I can do training like mixed training because I’m really looking at the biases and the personal responsibility that we each need to take to be our own leader because leadership training is more organizational and systemic and that should exist period.

We just need to be mindful in the organization as to whether there is even informal forms of leadership training like mentorship that is being given by executives or management to men but not to women because if there’s more men then that whole model gets built off of relationships; going out for drinks and having dinners and doing things. So it naturally builds a relationship where there’s trust, you get to know a person better and you think, oh no, that’s a good person, I think that’s a better leader.

You haven’t spent the same equal amount of time with a woman that is at the same position because on a personal level you don’t know her. So there’s little elements like that that come into it, but certainly, there are issues that women have which I’ve really discovered in my research and my training that there are these mental models that hold us back from playing bigger and a lot of those have to do with systemic biases in our culture and in our organizations.

Peter: Right, right. You know, I was reading the Wall Street Journal this morning and I saw a photograph of Harvey Weinstein who has now been charged with a crime, or with multiple crimes, I guess. I’m just curious, because obviously that sort of seems to be the real start of the MeToo Movement, I’m curious to get your perspective.

Do you think…what impact has the MeToo Movement had because now we’re more than eight or nine months since that story came about Harvey Weinstein and it’s been really a powerful movement. What impact has that had do you think in business that you’ve seen over the last nine months?

AdaPia: I think it’s had a really big impact, some positive and some negative.

On the positive side, it’s just bringing to light what has always existed and we’re all being asked to look at it and do something about it. I think within the context of when something really bad happens, usually it’s an opportunity to examine and change things that are really no longer working. So on the positive, I think it’s allowing also women to have a voice and to be heard because women who have been speaking up in the past have been silenced a lot of times. So that isn’t happening anymore or not as much anymore and so we really need to listen and we need to suck it up because it doesn’t feel good and you don’t want to think that this exists.

You want to pretend this doesn’t exist and ignore it, but it does. So it’s giving us all the opportunity to do something about it and so you’re seeing a lot of companies saying, okay, I’m changing things at work now like noticing that their culture is not conducive to really full participation for women and so they’re making changes. Or, they’re implementing programs or mentorship or whatever it is, but there’s a lot of people taking action within companies and it’s fantastic to see and this is really all in the last nine months.

On the negative side, one of the negatives is that there’s some apprehension with some men who don’t…they’ve talked to me like I don’t know if I can even talk to my co-worker anymore, I’m kind of afraid that what if she goes and says something that isn’t even true because we’ve had a few of those cases which is really, really unfortunate because it’s not helping us when things get taken out of hand and approached in a way that doesn’t really help improve anything.

There’s a negative there where you have some apprehension and some segregation which is the opposite of what we want. We want to achieve more parity and unity and inclusion and you might have men…I’m just saying hypothetically, well now I really don’t want to talk to women. So I don’t want you around because what if you decide to go to HR, what if you decide to sue me and it’s not even true, whatever it is, because that can happen.

So that is potentially the negative and it just needs to be addressed on a case by case basis. I think, again, in an organization and a company, the management team or the leadership team needs to making these statements and these initiatives and being really clear about the kind of culture and the kind of behavior that they promote or condone or condemn.

Peter: Right.

AdaPia: So there have been a lot of changes, I mean, so many programs and so much attention being brought to it. As long as it gets implemented and it starts to manifest this change then it will have been worth a lot of the pain and the trouble and the turmoil that it’s caused.

Peter: Right, yeah, I get that and as a white male who has…I’ve been an entrepreneur now coming up on 30 years, to me it hasn’t changed my behavior whatsoever. In fact, I feel like it’s been a great thing, the MeToo Movement has been great. For all those men out there who are scared to talk to women, I feel like if you’re not a jerk, just be yourself, there’s nothing really to worry about.

The reality is male or female, if someone’s got a vendetta against you, they can do things. It’s just one of those things, you’re going to meet people who dislike you from time to time and you just hope they don’t take any drastic action. I feel like those men who refuse to talk to women, I think they need to get a grip and really just be themselves.

You know, I grew up in a country that is probably more male chauvinistic than America is (AdaPia laughs), you know, some of my college days were spent…I’m not proud of some of the things that I got up to in college, but my point is that we’re not in college anymore and if you can sort of get away from the Animal House type behavior that still does exist around the country…if you’re just professional and friendly at work, you’ve got nothing to worry about. That’s my view on it.

AdaPia:  Yeah, I agree. You know, when people ask me about my experience and I’ve had my fair share of inappropriate remarks and jokes and things like that and sometimes I’ve laughed it off, I’ve left well enough alone, I pick my battles, most of the time I don’t pick a battle at all if it’s not worth it, but when people ask me if I’ve ever had really big issues around being a woman at work, I will say, when I lived in Italy, definitely, what you were saying male chauvinist crazy, like crazy, crazy and I was also a lot younger so I had sort of these two things going against me.

But in my more recent professional life, I have not because I was raised with the thought in my head that you’re just as good as anyone else period. So I never thought of myself as like a female specifically or a woman specifically when it came to anything. It’s like, I’m me, I’m here to work, you’re here to work and I never allowed any limiting thought from that perspective to even enter my mind.

It’s interesting when I think about it when I do this kind of work and I think, I just never…it never even crossed my mind like I knew it existed, but it just wasn’t something that I believed applied to me. So I just did my best because I thought, you know, you work hard, you do your best and you get rewarded, so to speak, so I haven’t had that problem and I think it really comes from mindset and these beliefs and thought patterns and biases in a different way. I’m like no, I’m not a woman, you’re not a man, we’re co-workers, period.

Peter: So then are you optimistic that the changes that have really begun over the last nine months will continue and there will be real lasting change that…not just leading to more gender parity, but leading to a more sort of I don’t know, open and friendly workplace that really is one that is productive and not subject to negative kind of incidents that you just talked about. So are you optimistic about what’s going to happen?

AdaPia: Yeah, I am, I’m optimistic. I think that the initiatives today are part of what I call a transition initiative. We’re all part of a transition team, we can’t go backwards, we can’t go back in time and sweep everything under the rug. We’re bringing awareness and change to really much needed outdated behavior that just doesn’t serve anyone, especially younger generations like when we talk about even like the 20-somethings that are coming into the workplace now, this is just not how they are, that is not how they think.

Peter: Right.

AdaPia: So the momentum that’s happening now is also being pushed forward by this younger generation who…they just don’t stand for it, they don’t understand it which is great because they don’t even come into it with a mindset that this is even a possibility for them. To me, when you shine this light of awareness and knowledge on certain behaviors, they disappear, they disappear like shadows under like the sun at high noon.

This is what we’re doing so we are not going to go backwards and I think what you end up seeing is that everyone benefits when people are generally more professional, nicer, like you said, collaborative, open, inclusive. Everybody benefits and you’re not going to want to go back to when it wasn’t like this because it doesn’t feel good.

Peter: Right.

AdaPia: And so much of our lives are intertwined with work, you know, and with purpose. A lot of people, especially in entrepreneurial ventures, startups, young companies, what have you, they are expressing their purpose and their drive and their ambition through work so they’re not separating personal and professional.

So they don’t want to work in a workplace that doesn’t feel good to them, where they’re spending most of their day. So yeah, I’m super optimistic that this is going to change for the better and it’s going to continue to change.

Peter: Okay, we are almost out of time. Just one last question, what’s next for you, where are you taking all the work you’ve done over the last year or so, what are you doing?

AdaPia: Yeah, thank you. So I’m doing a few different things like we talked about. I’ve really combined my passion for personal development and business with coaching and this leadership work so I’m still working with companies or organizations or groups and you know what’s funny, a lot of people don’t know this about me, but my dissertation was on the role of emotional intelligence and intercultural management.

So I’ve always had this passion for people development and the development of company cultures and so that, and on my own personal development, because I believe that we are responsible for that more than anyone else. So I’m taking this and I’m able with having Alpha Investing, having my role there, growing that business and a lot of it is relationship management and relationship based work which is great, it is totally in my wheelhouse and I still get to do this passionate work of going and working with women.

I’m going to be doing a more formal like group, women’s coaching program probably in Q3 where I can virtually coach a group of women like a mastermind where they can also help each other because….and not just within a company, but women from everywhere because that is so useful to have women coming together and creating a support system.

I’m really passionate about that, I’m really passionate about women helping each other. For sure, this is my calling, it is where my heart is and I always say that when I present like I have my work work, but then this is where my heart shines and I love to give back so I’m excited to do more of this, wherever and whenever somebody would like my presence and my presentations.

Peter: Okay, well on that note, we will have to leave it there. I wish you the best of luck, AdaPia, and thanks a lot for coming on the show.

AdaPia: Thanks so much for having me, Peter.

Peter: Okay, see you.

So we were just chatting after we turned off the recording and the reality is, and I agree completely with AdaPia on this, is that companies shouldn’t do this because they think it might help them avoid a lawsuit or what have you. They should do this because this is how high performing teams will operate in the future, it needs to be diverse thinking and really diverse perspectives make for a stronger company with more creative ideas and better execution.

I think we live in an age that that is going to become more and more demanded from the workers, both male and female. If you’re a female executive in fintech listening to this show and you want to know what now, what can I do, go check out the show notes at lendacademy.com. This is Episode 157 and we’ll have a list of different organizations that you can be a part of, you can join, you can network with other women.

Anyway on that note, I will sign off. I very much appreciate your listening and I’ll catch you next time. Bye.

Today’s show was sponsored by LendIt Fintech Europe 2018, Europe’s leading event for innovation in financial services. It’s happening November 19th and 20th at the Business Design Centre in London. Registration is now open as well as speaker applications. Find out more by going to lendit.com/europe.