Page 100 - Forbes - USA (November 2019)

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Bandwagon
Betterment cofounder Jon Stein at his New York City startup. It took a decade to get 420,000 clients for its robo-advisor business managing stocks and
bonds; as a neobank newcomer, Betterment already has 120,000 on a waiting list for a checking account.

change,” the 1% to 2% fees that retailers get charged when- Morris, a managing partner at QED Investors, an Alexandria,
ever a debit card gets swiped. These fees are split between Virginia-based VC firm specializing in fintech. “[Traditional
banks and debit-card issuers like Dave. Wilk optimistically banks] are really complicated businesses, with complex reg-
predicts Dave will bring in $100 million in revenue this year ulatory issues and consumers who are relatively inert.” But,
from its 4.5 million users—up from $19 million in 2018, the he adds, “If [neobanks] can get people to bundle, [they] can
year before it transformed itself into a neobank. Dave was get more of a share of a wallet of a consumer. [The] econom-
recently valued at $1 billion. ics can move dramatically. It changes the game.”
Established fintech companies that didn’t start out in
banking are getting into the game too. New York-based Bet- iwakar (Dee) Choubey was supposed to
terment, which manages $18 billion in customers’ stock D be an engineer, not an investment banker.
and bond investments using computer algorithms, recently Born in Ranchi, India, he came to the U.S.
rolled out a high-yield savings account. It pulled in $1 bil- at 4 when his father was finishing a gradu-
lion in deposits in two weeks. “The success has been unprec- ate degree in engineering at Syracuse Uni-
edented. In our history we’ve never grown this fast,” marvels versity. The family ended up in New Jersey. Choubey’s mom
Betterment CEO and cofounder Jon Stein. Now he’s launch- taught autistic children, while his dad worked as an engineer
ing a no-fee checking account with a debit card, and credit at Cisco—and plotted his son’s future.
cards and mortgages might be next, he says. When Choubey started at the University of Chicago in
Neobanks are swiftly emerging as a huge threat to tradi- 1999, he signed up for a bunch of computer science classes
tional banks. McKinsey estimates that by 2025 up to 40% of picked by his dad. But after earning a couple of B-minus-
banks’ collective revenue could be at risk from new digital es, “I cried uncle,” Choubey says. He became an economics FRANCO VOGT FOR FORBES
competition. “I don’t believe there’s going to be a Netflix mo- major, strengthening his grades and job prospects by taking
ment—where Netflix basically leapfrogs Blockbuster—where corporate finance and accounting courses at the business
fintechs basically put the banks out of business,” says Nigel school. After graduating with honors, he went into invest-

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