NerdWallet's Tim Chen on Banking, Bots, and Bitcoin

Technology PCmag

On today's episode of Fast Forward, we have Tim Chen, co-founder and CEO of NerdWallet, who I sat down with at the company's San Francisco headquarters earlier this month to talk about making better financial decisions, the prudence of financial literacy, and how the fintech sector is going to evolve over time. Read or watch our full conversation below.

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Dan Costa: Let's talk about the world of personal finance and financial technology today. In a lot of ways, it's never been a better time to be a consumer in this space. I've got my phone here. I can check my bank account, I can move money around, I can make stock purchases, all from the palm of my hand. It seems like it's the best time ever to be managing your personal finances but in a lot of ways, people still are coming up short.

Tim Chen: Absolutely. I see two huge consumer problems. One, it's really hard to shop for financial products. It's just hard to compare A, B, C, and D and know what's up. And two, you just don't know what you don't know about money. Unless you have a great financial advisor who's guiding you along, you just don't know what to do next. NerdWallet's really setting out to try to solve both of those problems.

Most people feel that before they get a financial advisor, you need to have a certain amount of money to protect. Most people who don't have large savings or stock accounts don't have a financial advisor at all, so they're left on their own, on the internet. NerdWallet actually answers a lot of those questions for them. In part, because they have questions and they go to search but you're doing something more than just answering questions via search, right?

Typically, a financial advisor, if you don't have 250K, 500K in assets, they'll say, "Come back in five years. We don't have time to manage your money." NerdWallet's really trying to bridge that gap. How do we get the up-and-coming millennial or any millennial to just get better financial advice, know what to do next, and just get the facts?

What makes NerdWallet different than all of the other financial how-to sites on the internet?

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NerdWallet's obsessively consumer-centric. I actually spend a ton of my time going around the country, going into people's living rooms, showing them NerdWallet, asking them questions about their financial lives, et cetera, just to understand what they need. That permeates throughout the whole company. My hope is, when you go to NerdWallet, it's very obvious that level of care and detail has gone into everything we write, every product we create. We develop our roadmaps based on consumer need, not based on a top-down view of the business.

People come to you for recommendations on everything from credit cards to mortgages. Can you talk a little bit about sort of the mix of financial products that you cover?

There are 10 or 12 major financial products. If I'm going to simplify the banking space, it's you either have too little money, too much money, or you need to insure something. When you have too little money, it's usually for a college education, a car, or a house. When you have too much money, you're thinking about investing, and you're insuring your life or your car or your house. That's kind of the universe of products, so we cover all that. I think one of the biggest issues that students face is they don't know how to fill out the federal application for financial aid. So we'll help people figure out how to fill out the FAFSA form for college and that kinda thing as well.

That seems like that gets to the crux of the matter, which is that people don't understand that there are such things as financial products. They just think that there are things they have to pay for and they don't necessarily know the best way to go about it.

Exactly. How you typically go about getting something like a student loan or a mortgage is you either talk to Uncle Bob, so we hear a lot of that, or you just do what the banker told you at your local branch, and that's not shopping. In fact, a lot of these financial institutions are able to make so much money because they leverage their direct relationships with you to give you products that are at prices that are worse than you can find on the internet. Pricing is interest rates or fees, in financial products. We try to surface all those things very transparently.

There are some core concepts that people miss, too. When you go shopping for mutual funds, for example, and you get managed funds, the fees associated with those funds seem very, very small when you buy into the fund. But then when you start calculating what those fees would cost over a 20-year period or a 30-year period, the difference is huge. Most people just have no innate understanding of that opportunity that they're losing.

Right. One of my painful moments of the last three years was when my parents called me and said, "Hey, we just put money into this fund. There's some 5 percent upfront fee and it locks rates and all this complicated stuff." I was just like, "Oh, man. Not you guys too." Right?

Did they not know what you did? Have they not visited your site?

They're very independent. They visit the site, they use our credit card products. But they didn't even think that there could be this kind of landmine when it came to buying managed funds.

My step-father does the same thing when he goes shopping for cameras. He's always sending me the camera that he just bought. I'm like, "Did you look at the reviews on PCMag? You know I do this full-time." So we have that in common.

Let's talk a little bit about that, the idea of financial literacy. It's not something that we teach in elementary school. It's not something we teach in high school. You can graduate college without ever having a basic understanding of how compound interest works. Where are we falling down and what do we need to close that gap?

The way I think about that problem is people who are about to become financially [independent] are typically high school to college, that transition. We need to teach them some basics but it's completely impractical to teach them everything. It's like asking them to memorize Wikipedia. First of all, what's the point? Second of all, we just want them to make good decisions, not to know everything. So to your point, I think there are some basics like compounding interest, how credit scores work, when you need to buy certain things, that we can do right around that age. The rest of it, I think there are resources like NerdWallet where, when you go ask a specific question, you're going to get back a really clear answer. So I think that's where technology should supplement.

I think that one of the cool things about NerdWallet is that it makes managing your money kind of fun, as opposed to something you dread. You can see it in the way the stories are written and the way the advice is given. How much of that is designed to appeal to the millennial market and how much appeals to everyone across any age group?

We have a bullseye of what we're going for and it's certainly people who are starting out and settling in in their financial lives, so maybe recent college grads, maybe people who are getting married and buying a home for the first time. It's not that we don't want to help everyone else. We do see that there's a lot more resistance to new things, new methods of finance, when you're talking to someone who's already bought a home, who's already set up a retirement plan. That group is often more hesitant to link their bank accounts or to get their credit score for free. There's this huge rift. Often, we can see people who think our name is ridiculous and before that, there's all these people that are like, "That's the best thing ever," so that's right around when the rift happens.

The name is the test. If you think the name is cool, then this is a site for you.

Right, exactly.

I think that there's also something to be said for reaching that audience at that pivot point. I've got the same brokerage firm that I've had for 20 years because I'm just not going to move that money to a different place for no real reason. Locking people in, being that first brokerage account is really valuable.

Absolutely, especially if we've guided you through two or three or four decisions. We've shown you, transparently, that we're doing what's in your best interest. I think that's how we build the trust.

You've described NerdWallet as more of a book of maps as opposed to a GPS. There are lots of places that'll tell you what to do, but NerdWallet is really trying to do something a little bit different. Can you talk about that book of maps concept?

For those of you who remember maps, there used to be road atlases. You would find out where your friend lives, you would look it up in the index, and then you would go to the map. Then, you would have to orient yourself around, well, where's that relative to the highway system, et cetera. There's so much compiling and processing that has to go on for you to get there that ... The amazing thing about a GPS is you just where you're trying to go and they're like, "Go this way and turn left." That's so simple, right?

It's like you don't have plan ahead 15 steps, we'll just make sure you do the right thing right now to get there quickly. I think that's what hasn't really been built in terms of a financial product, and that's really where a roadmap is orienting.

For the users on the site, because it's a research tool and people are trying to answer questions a lot of times, is your audience still mostly desktop? Have they moved to mobile? Do you see a future for NerdWallet in social media platforms, where people are getting most of their news information these days?

We became more than 50% mobile at some point in the last year. If you had asked me five years ago, I would've said, "That's ridiculous. Who's going to apply for a mortgage on their phone? Or who's going to apply even a credit product on the phone? Who's going to try to learn about the FAFSA on their phone?" But as phones have gotten bigger and internet's gotten faster and we've gotten better with user interfaces, that's become super popular.

Social is such an interesting thing when it comes to money. It's something we've been thinking about more. Things that work on social are a little bit different in terms of orientation. For example, if we were to talk about tiny houses and how they could let you retire 10 years earlier, that's something millennials love. They're like, "Man, that's visual. There are design elements. Hey, I could actually work a lot less if I lived in a tiny house." That stuff works really well on social, so we're definitely investing and engaging people that way as well.

How active is the community? I mean, you guys create a ton of great content. It tends to be very specific, very useful. Is the community helping itself out? Do people feel like they're part of the NerdWallet clan?

Absolutely. If you look at our analytics, we definitely have our power users that are coming back all the time. People who use us for one thing often come back and use us for something else. I think, yeah, that's one of the things I'm the proudest of.

We're entering this age of automation where so many processes are being replaced by artificial intelligence engines and that's taking off a lot of our decision-making. Financial firms have tremendous resources to target, to optimize, and to price their products. Do you see consumers being able to take advantage of these AIs to help lead people through their financial lives and maybe calculate some of these costs for them in real time?

Absolutely. We talked earlier about financial advisors and how it really only makes sense as ... Say one of the big money management firms, "If they have 500,000 in assets and I'm charging them 1% a year and then, yeah, maybe I can give them some level of service with a human." But what technology enables is really creating these heuristics around how you should make decisions. We can apply those heuristics to the data we know about the user and deliver it through an app, for example. And maybe we can save the human interactions for those times that are really critical. Maybe we can call in, right?

So I think that's really the way the world is going. We really wanna provide financial advisory for the 99% and make that scalable, so I predict that's where the world's going.

Do you think that bot technology will be sophisticated enough that it'll be able to at least cover the basics of financial research or the calculations?

I think it's going to take a really long time. The challenge is the complexity of personalization. A lot of times, I need to ask ... If you ask me a question, I need to ask you five to seven more questions to really be able to provide an appropriate answer. I may need to know your tax status or what state you live in or if your goal is to send your kid to college or things like that. Those all factor in. That set of five to seven questions is different for every single question you may ask me, right?

So this is a very complex thing. The way we're attacking it is really trying to take it one chunk at a time. I think, eventually, we will be able to standardize huge trees of the decision-making.

I have to ask you about Bitcoin. Bitcoin is trading near an all-time high. A lot of people are talking about it. Even everyday people on the street ask me, should they invest in Bitcoin. What do you think about Bitcoin as an investment product?

As a former investor, this really pains me to see. It has all the characteristics of any bubble that we've seen since the tulip bubble in the 1700s. I would say if Chinese grandmas are borrowing money to invest in something, it's probably a good idea to stay as far away as humanly possible from this thing.

That's the last money in. But the curve of what Bitcoin itself has been worth since the beginning of the year, it's extraordinarily tempting to feel like you're missing out on something.

Absolutely. It's speculation. It may still go up 2, 3, 20x. You just have to realize it's gambling.

That's what I've been telling people. I'm glad you're confirming that for me, as a financial expert.


Beause I've steered my friends away from it, just because I think if you don't understand something, you probably shouldn't be buying it.

Yeah, I agree.

The same goes for stocks and other financial products. Let me ask you about another hot topic in Silicon Valley, the idea of universal basic income. It seems like it's taking hold in The Valley faster than in the rest of the country. I think part of that's because people in the technology space really understand how powerful these automation movements are and just how many jobs are going to be eliminated. But do you think universal basic income is sort of a valid concept, and how long would it take for us to transition to something like that?

Well, this is a bit of a politically loaded question. I'm going to try to argue the other side a little bit, but I stand a little bit neutral here. If you take an example and look at Saudi Arabia, they effectively have UVI but they are having a lot of trouble in motivating the workforce to take even highly skilled jobs. This airplane parts manufacturer tried to create a factory in Saudi Arabia, they couldn't get people to come and work. There's definitely that element to consider. I've been reading a lot of history lately as well, and I think a lot of these notions that jobs are going to be destroyed by technology are recurring themes that have popped up in history over and over again. I really do believe that we're going to see an explosion in service jobs created by a lot of these technology trends. We will find a productive work for a lot of people out there.

It's an interesting approach too because, I mean, I think it's hard to say ... You'd have to imagine that people would be disincentivized to work if the universal basic income was high enough that they didn't have to work. At the same time, when I've been doing interviews and I've been talking to people like, "Do you think there are going to be as many radiologists in 10 years as there are now? Do you think they'll be as many truck drivers?" It seems like we can go industry after industry and say, "These are the industries that are going to take hits." I just don't know where that line gets drawn, between ... I'm not sure what those new jobs will be, that people will be able to transition to.

If you look at human history, almost everyone used to work in an agrarian capacity. Human ingenuity have created all sorts of new jobs and technologies since then, so I do believe the same things will happen.

Let's get to the questions I ask everybody on the show.


In terms of technology trends, what is it that concerns you the most? Is there anything that keeps you up at night and just makes you feel like we're going in the wrong direction on this?

I think social media is extremely insidious. I think it's a very reactive medium. I'm going to consume whatever content that an algorithm or other people put in front of me. I'm the happiest when I seek out new knowledge, reading books, just like these considered, deeply-researched pieces, and I think that there's something really lost there when we start to surface so much stuff on social media. That really worries me.

The problem with social media is that it's not accidental. It's designed to distract and entertain you--as opposed to inform you. There's no advantage to informing you. There's lots of advantage to distracting you and sucking up your time.

Ad impressions, right?

And data and establishing a profile of your likes so that it creates this self-fulfilling circle where the more you click and the more you like, the more your experience can be catered to. And then it continues to occupy more and more of your time.

Right, and it narrows your mind into like-minded individuals. I find that very challenging.

It's almost like having a playlist that's all of your favorite songs and then you don't discover any new songs--and for every category of content.

Right, exactly. Yeah, I enjoy the books most. I changed the way I think about things. You don't find that as much on social media.

Is there a technology trend that you're very excited about, that you wake up and it inspires wonder in you? You're like, "I can't believe we've done this."

This is very basic but I find delight in things like Instacart. I am so busy, it's so hard to eat in a healthy way. I find the process of cooking meditative, creative, et cetera. I think it's just something very fundamental that all people should do to have a balanced life, right?

Instacart makes cooking possible for me, so I absolutely love that. It's kind of offsetting the social media thing a little bit for me.

And saving you time and actually giving you more time in the average day, as opposed to social media, which consumes time voraciously. Is there a device or service that you use everyday that you couldn't live without?

That would be Instacart, really. It's funny, I've actually tried to unplug in a lot of areas and try to actively focus on being more analog.

In terms of finding you online, following what you're doing, obviously is a good place to go. Is there any other places people can follow you on social media?

Well, I try to stay off social media but I'll log into Twitter once a quarter. So I'm @timchen82.

Once every three months?


Okay, that's not going to overwhelm you.

Right. So I might take a little bit to get back to you but timchen82 on Twitter.

Very cool. Tim, thanks so much for doing this interview. I appreciate it.

Absolutely. Thanks for having me.

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