Tally CEO Jason Brown built a startup for people struggling with the kind of financial stress he and his family endured.
The debt-management company offers software tools to help people steady their finances, a mission largely inspired by the tough times Brown, his mother and younger brother went through in Colorado.
"Growing up, there's just a lot of financial stress in my home," he told Protocol. It was a home where "everything was managed down to the last penny" by his mom who used envelopes to try to keep their finances organized.
"There was an envelope for rent, an envelope for electricity and an envelope for groceries," he said. "When the money was gone, it was gone. There was no extra. I remember multiple times where there was no more grocery money."
Changing shoes with the customer
That brush with poverty led Brown to build tools that automate the process of paying down and reining in credit card debt. It also has shaped the way Tally's culture has evolved, rooted in empathy for those with financial struggles.
That culture has a key tenet, Brown said: "Change shoes," or imagine yourself in someone else's place.
Brown rejected an applicant for a top executive position because he got a sense that the person viewed wealth as a way to achieve status. "Somebody who has that as their motivation is going to have a very difficult time" being able to relate to the customers Tally is trying to reach, he said.
"Change shoes" is also why the startup shares a video with employees each month of Brown having a conversation with a Tally customer, probing for that person's financial struggles.
Tally shared excerpts from the conversations with Protocol while keeping the names of clients private. In one exchange, a customer tells Brown, "I'm part of the country that could not cover a $400 cost out of pocket. But I have $60,000-$70,000 worth of credit card lines open, so if shit hits the fan, I have that backup."
Another talked about the financial stress of an upcoming wedding: "My dad, in the last 10 years, he has been in and out of work and my mom is disabled. … They definitely don't have the ability to contribute anything, and so there's a lot of financial pressure on my fiancee and I to basically do everything ourselves. … Just coming out of school, there was a fair amount of debt. So financially, it's been really challenging."
The stories echo some of Brown's recollection of his mother, for whom "going to the dentist was like a luxury because she didn't have insurance and didn't have money."
Jason Brown with his mom, Christina.Photo: Tally
"I want everybody in the company to be able to see our members not as numbers. It's really important to make it not about numbers, but about individual human stories," Brown said.
Steven Kaplan, one of Brown's professors at the University of Chicago Booth School of Business, said Brown stood out among his students in tackling the problems of poverty he experienced firsthand.
"He grew up with it. He's solving the problems that he either dealt with himself, or more likely he saw," Kaplan said.
Lowering rates — and consumer stress
Tally's business model is based on Brown's highly critical view of credit cards, which he describes as "socially-engineered financial vampires."
"They are appealing for their convenience and rewards, but many people just get screwed over by the sky-high interest rates and fees," he said. "What we're doing is building software for the masses, something that can make them less stressed financially."
To help manage credit card debt, Tally gives members access to a line of credit for transferring credit card balances, similar to the system used by credit card companies. To qualify, a member needs a FICO score of 660 or higher. The credit line APR ranges from 7.9% to 25.9%. The high end of that range is for members who, based on their FICO score, "represent a very high risk," but are paying higher rates on their credit cards, Brown said. (The highest rate on record is a 79.9% APR on a First Premier Bank card; WalletHub reports the current highest as 36%, also on a First Premier card.)
Tally does not charge members fees for transferring a balance or late payments, Brown said. The company makes a small profit from the line of credit.
In a hypothetical example, he cited a member with a card charging 20% APR; they could get a Tally line of credit with a 12% APR, which would represent a small markup on financing it may have secured from an intermediary bank.
"We can only make money if we're actually saving your money by getting you a lower interest rate," Brown said.
One customer, Samantha Rodriguez of San Francisco, was able to move a balance on a credit card with 19% APR to a Tally line of credit with 11% APR. She said Tally's tools subsequently helped pay down what she owed faster. "I really liked the ease of it," she told Protocol.
Brown compared Tally's business model to Kaiser Permanente, the health care organization known for its emphasis on prevention. "A normal doctor is incentivized to prescribe you medicine and procedures because that's how they make money," he said. "The Kaiser doctor is incentivized to keep you healthy because if they keep you healthy you're better off. Also, it's in Kaiser's best financial interest to keep you healthy."
Tally will also work with members who are struggling to make payments on a line of credit. An in-house collections team will work with a member to "make sure you don't charge off and get this black mark on your credit report," including offering to waive interest fees temporarily or restructuring payments to make it more manageable, Brown said.
"The only time when we will charge off your account is if you don't pick up the phone and you don't talk to us," he said. "You can't use Tally anymore. And we write that off as a loss."
Jay Shah, president of Personal Capital, a digital wealth management company, described Tally's business model as "disruptive," based on "this orientation that says 'I want to help people that are circling the drain come back from the morass of credit card debt.'"
But Tally faces major challenges in a crowded market, Kaplan, Brown's University of Chicago professor, said. Building a consumer-focused startup, especially in fintech, is tough. "B2C is very hard," he said. "It's hard to know whether you're going to get customers."
Launched in 2015, Tally now manages about $1 billion in credit card debt. That's a small fraction of the $820 billion in credit card balances across the U.S. as of December.
The San Francisco startup has raised $92 million in funding from investors including Andreessen Horowitz, whose general partner, Angela Strange, compared Tally to a "Google Maps for money." "Jason is solving such a large and pervasive problem that anyone experiencing credit card debt falls in love with the product," she told Protocol.
Tally is already exploring ways to expand the service to users with a sub-660 FICO score, including launching a subscription service for some users. It is also expanding into other forms of debt, including mortgages, auto and student loans.
Still, rapid expansion will be its biggest challenge, Shah said: "It tends to be merciless when you're in a growth business: You have to keep on growing, growing, growing faster, faster, faster."
Brown's bet is that Tally can stand out and thrive by embracing its culture of empathy, which is not always accepted in fintech.
"There's a lot of interesting things going on in fintech," he said. "But one thing that worries me is that a big chunk of these companies are building products for people like themselves. There's honestly just a huge lack of empathy for the lived experience of the majority of people."
