‘This is a tremendous community and it’s not getting services it needs’

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Transcription:
Penny Crosman: (00:03)
Welcome to the American Banker podcast. I'm Penny Crosman. Yasaman Hadjibashi and Keith Armstrong are a husband and wife who have done something unusual. They have created a financial technology company for people with a conviction history. They're here with us to share what they have built and why. Welcome Yassi and Keith.

Yasaman Hadjibashi: (00:21)
Thank you so much for having us.

Keith Armstrong: (00:23)
Great to be there with you.

Penny Crosman: (00:24)
Let's talk just for a minute about your background, because I think that's interesting. Yassi, where have you worked in the past?

Yasaman Hadjibashi: (00:32)
So I've spent the last 10 years of my career across two large financial institutions in the world, Barclays and Citigroup, but always in consumer banking. And I have worked in various realms of digital product innovation, data and analytics, predominantly focusing on the innovation part of how can we create more predictive, intelligent experiences to help our mass affluent customers? I would say one aspect that had always intrigued me was how can we better serve underserved communities? When I was at Barclays, that curiosity took me to South Africa, where I spent about three years of my career focusing on data and analytics, driving better experiences for underserved communities there. And Keith and I actually met there — he can talk a little bit about that — through a Techstars program. And I decided to bring that back here in the United States. I spent three years at Citigroup working across Mexico and consumer banking here in the U.S., but really decided that I wanted to do more with my talent.

Penny Crosman: (01:33)
So it's actually a fintech romance. I don't think we've ever had that on show before. So Keith, tell us a little bit about your background.

Keith Armstrong: (01:41)
Sure. So I started my career as a micro finance consultant. I was always very curious about small-dollar lending and different ways to build wealth and different cooperative economic models. And after that I spent some time at a company in Seattle called Startup Weekend where I helped foster entrepreneurial growth in communities around the world. And then most recently I co-founded a company called Abe.AI, which was a conversational AI platform for banks and credit unions. And that was acquired about three years ago by Envestnet Yodlee. So now I've teamed up with Yassi here to really help people coming home get access to better financial products, build wealth and reenter into society.

Penny Crosman: (02:32)
So what inspired both of you to do this specifically? I know you're both interested in the underbanked, but what specifically made you think about the people who have a conviction and trying to help them?

Yasaman Hadjibashi: (02:49)
I would say it was more of an accidental discovery. We read a Wall Street Journal article that talked about the financial challenges of this community upon their release and coming back into the economy, how a majority of them face challenges to open a bank account, finding work, rebuilding credit. And we can dig into that a little deeper in a bit, but when we read that, we were just quite surprised that this is such an overlooked community here in the United States. So we wanted to go and find out more and actually through a connection that Keith had managed to start meeting a few individuals who were recently released across different states here in the U.S. and were just so, so inspired by what we heard. These individuals are just so motivated. They come back with big dreams, big goals, they are hard workers. The struggles they've been through before incarceration and right out the gates, coming home from prison and still making it and trying to find work and create stability for themselves and their families. It just was just so inspiring to us. And we decided to essentially go and help them because it's just an injustice, I feel, here in society that this is a tremendous community and it's not getting the attention that it needs. It's not getting the services that it needs and deserves better.

Penny Crosman: (04:10)
What are some of those specific challenges? I mean, some you can sort of imagine, but what were some of the things you came across and, and can you think of any examples that kind of touched you?

Keith Armstrong: (04:23)
Sure. So the first thing people coming out need are housing and ID. This is a challenge for a lot of folks. Some people are fortunate to come back to a support network of family and friends. Others are staying at transitional housing. And there's a broad range of challenges there with respect to housing and ID. But after that, we view being able to find work as another critical part of re-entering society. And of course having access to that bank account. And we've spoken to numerous individuals who had challenges gaining access to their account. And then of course finding work, a lot of people will work at temporary agencies where the pay is quite low and there's not a lot of opportunity for growth. And so these are some of the first challenges that we've focused on solving, finding work and then having a safe place to keep that money. That's where we have have started our journey.

Penny Crosman: (05:35)
This is something I probably should know, but I don't: When somebody is incarcerated, does their bank typically suspend their account?

Keith Armstrong: (05:44)
That's a great question. And so it really is an institution by institution decision. A lot of the people that we've spoken to had their account closed during their incarceration. This is for a variety of reasons, either because of a lack of activity or in some cases you may have had an overdrawn account that has...now you're in a check system and have continued problems opening up future accounts. And we've also spoken with people who prior to their incarceration would write letters to Bank of America and Wells Fargo asking to have an account. So it's certainly something people are aware of as they prepare their plan to re-enter society. But to answer your question, several people have had their bank account closed and it really just depends on the policies of that particular institution.

Penny Crosman: (06:42)
Interesting. And what about people who have just been released? Is it hard to get an account? Are there banks that just won't open an account because somebody has a conviction?

Yasaman Hadjibashi: (06:53)
The answer is it depends case by case. So there are some that don't open an account for these individuals, unless you deposit first a hundred dollars, $20 to get the account activated and started. And as you can imagine upon release very likely you may not have any cash at all. Some people walk out with a cashier's check in certain states. In other states, there may just literally be no gate money released to them at all. So that is a barrier. The other one is many exit without a state ID yet, and they need to gather the documentation to go and apply for their state ID, which takes anywhere between a few days to a few months in certain cases, once they have their documentation ready. Then again, it depends from institution to institution and the branch manager sometimes, if they go into an actual branch, if they're in the check system and the institution does that background check by seeing what the record is in the check system, they may reject them. In certain cases, a branch manager may still make an exception, but there are no consistent results in targeting different institutions and wanting to get a bank account. Sometimes it works, sometimes it doesn't.

Penny Crosman: (08:03)
So is there anything special that you need to do to open a bank account for people who've recently been released or is it simply being willing to do so?

Keith Armstrong: (08:16)
So there's nothing that says you can't bank people who have committed a crime in the past. It all depends again on compliance policies. And so for us, it's really just a matter of doing it. A lot of people do have challenges opening up accounts at more traditional institutions that look at past banking history where an individual may be in the check system, again, due to an overdrafted account or something of that nature. But with us, we are able to open up the accounts for individuals through a standard process that currently does not require proof of an identification unless extended due diligence is triggered by our bank partner. We really do try to make it as simple as possible. And right now people can open up an account in three minutes or less on the website.

Penny Crosman: (09:12)
And your bank partner is Evolve Bank and Trust, I think.

Keith Armstrong: (09:17)
That is correct.

Penny Crosman: (09:17)
So, okay. Are there any special risks to banking this niche or is it just a perception that there's risk?

Yasaman Hadjibashi: (09:27)
Yes. So there is not a particular risk. We still do KYC compliance, making sure sanctions screening, anti-money laundering, background check, all of that gets conducted in the background. What is very important is that we do not offer overdraft. And sometimes there may be concerns by institutions around, do these individuals start making income? How much income are they going to have? Is it truly going to be an account that is going to be transacted on frequently? And the answer is the reason we don't care about that is we want to really make sure the individuals are equipped before they even walk into that first job and start making money that they can share their routing number and account number and from day one, they can get deposited and avoid any sort of prepaid debit cards that come with predatory charges or check cashing practices. And we do not provide overdraft, which from day one might be a bit of a concern because what if you don't make enough money, but you have outstanding debt obligations from prior to your incarceration, the fact that you only allow people to spend what they earn and have available balance in their account is I think very powerful to how we've started our product to market.

Penny Crosman: (10:40)
Now you also help people get jobs, right?

Yasaman Hadjibashi: (10:44)
That's the key unique differentiator. And it's not just about a free checking account, which there are many, many providers out there. Obviously there are many challenger banks whose core proposition as the basics are just a free checking account, no minimum balance, no transaction fees, et cetera. But that's where the community aspect comes in, is solving for a problem that is not solving a banking solution, but will have a financial impact on the individual. We care about solving problems for individuals upon the re-entry. And the first one is, you need to start making money. You need to start being a productive, stable citizen back in society. So we saw it as our biggest mission to help people earn money. In addition to having the place ready where they can store and manage their money.

Penny Crosman: (11:37)
And how do you reach people who have just been released from incarceration? Is there a mailing list or how do you get there?

Keith Armstrong: (11:49)
So in fact, we've had some very strong engagement through direct mail. When we were first beginning to evaluate the, the space we're in, I think we emailed over a thousand people in Texas prisons and had an incredible response. But in terms of reaching people, trust and relatability are critical to this community. And so we have to reach our customers through trusted messengers. And right now that takes shape in three ways. One is with a community organization called the Anti-Recidivism Coalition based in Los Angeles that communicates with over 10,000 currently incarcerated and formerly incarcerated individuals. We've won a grant with them through the Financial Solutions Lab to expand services. So they've been a great partner. We've also established our ambassador program, which is made up of formally incarcerated people with ties to the community who can go evangelize the benefits of Stretch to their network and other organizations that they have a relationship with. And thirdly is focusing on media partnerships, other individuals who have come out and bounced back from prison and are doing great things. One of them is Aaron Smith of the Escaping the Odds podcast. In his podcast, in his reach, he's able to connect the benefits of Stretch while telling the stories of people who have come back and are really doing great things post their release

Penny Crosman: (13:28)
And how will Stretch make money?

Yasaman Hadjibashi: (13:31)
So in the early days, I don't think there will be any surprise about what we say. We offer a checking account. So the only way we can make money is to through card interchange. Having said that, we have plans to diversify away from that. Number one, we want to offer a premium account experience in addition to the basic account experience that comes with discounted services that are important for the reentry back into the economy. We found out that transportation is a big challenge for individuals, many come out and either rely on public transportation, be it bus or subway, or they rely on the kindness of family members, which creates many hours in transit rather than either getting rest or working and earning money. So giving access to discounted month-to-month car subscription models, which gives the flexibility for individuals to stop that if they have a cash constraint month or to continue, that's number one, as part of our premium account experience.

Yasaman Hadjibashi: (14:34)
And number two is credit bill features, and that's not necessarily starting taking out a credit product, but more importantly, as I make payments every single month to my cell phone bill or utilities, I can start repairing my credit. So these are just a few areas that we are thinking about as a premium account service. Want to introduce that again, solves for challenges specific to the experience of those individuals. We also think about partner referrals in the longer term, as we integrate with more service providers for non-banking services that have a financial impact for our community, we will also rely on partner referral.

Penny Crosman: (15:11)
That makes sense. So I was going to ask you what's next, but I think you just answered that. So I don't think we've ever had a husband and wife on the podcast before. What has it been like working together, living together 24/7 during the pandemic?

Yasaman Hadjibashi: (15:27)
So I remember I was still at Citibank when the pandemic hit and all of a sudden we had to work from home and it may be a little bit of a too much sharing from our personal life, but we had a construction situation going on in our home. So we had to go and reside in a hotel for the first month of the lockdowns, literally in one hotel room, both of us trying to make calls, work, coordinating schedules that you're not on calls at the same time. And it worked really well. We came back into our house, the remote working for both of us continued. And we decided last year, when we wanted to start Stretch, we had no hesitation whatsoever. Having said that, we have been also inspired by Kevin and Julia Hartz, the husband and wife co-founders of Eventbright. Now they were engaged and not married yet when they co-founded Eventbright. But I feel like that gave us even more inspiration to want to go ahead on this journey, having survived the pandemic and build a thriving business together.

Penny Crosman: (16:29)
All right. Anything to add to that, Keith?

Keith Armstrong: (16:33)
I would just say, I've co-founded companies before and it truly is a marriage and that's exactly what I have with Yassi. So we're looking forward to building this together,

Yasaman Hadjibashi: (16:44)
We get funny comments sometimes when in our close circle we share this with friends and acquaintances. They're like, oh my gosh, I would never do something with my wife or I would never with my husband. We're like, well, you decided to have a child together. So it requires similar amount of emotional commitment and time commitment to make that a success. And we believe the same is true for starting a venture together.

Penny Crosman: (17:09)
So Stretch is your baby.

Keith Armstrong: (17:11)
Stretch is our baby. And I would also say our ambition and life circumstances for pursuing that ambition are 100% aligned, which isn't always the case with a co-founding team. So we're excited to build this and we're really just getting started.

Penny Crosman: (17:31)
Great. Well, thank you both for coming and sharing your story with us.

Keith Armstrong: (17:35)
Thank you so much.

Yasaman Hadjibashi: (17:36)
Thank you for having us.

Penny Crosman: (17:38)
Thank you for listening to the American Banker podcast. I produced this episode with audio production by Kellie Malone. Special thanks this week to Yassi Hadjibashi and Keith Armstrong. Rate us, review us and subscribe to our content at www.americanbanker.com/subscribe. From American Banker I'm Penny Crosman and thanks for listening.