Q&A with Hutsy Founder, Tefari

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After a “life-changing” experience in “Dragon’s Den,” Tefari Bailey is eager to fulfill her mission and disrupt the Canadian banking industry.

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Hutsy, a digital banking platform, comes with a fee-free account and an app that helps users save, earn money, and track their finances. With 15,000 users on its waiting list and a $500,000 investment from one of the Dragonsthis neobank plans to launch later this year.

Bailey sat down with MoneyWise to talk about neobanking, the problems with Canada’s current options, and the role Hutsy has to play.

Many people may not be familiar with the term “neobank”. What is that?

Simply put, a neobank is an online digital bank. The advantage of doing business with a neobank over a traditional financial institution is that we don’t have the thousands of employees of a large financial institution or the thousands of corporate trading offices across Canada and the rest of the world that these other big companies have. This is how we are able to reward our customers by doing everything online, offering them zero fees on their banking services and giving them cash back on all purchases.

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You started your career working for one of Canada’s major banks. What have you seen in this company that made you want to disrupt it?

I’ve done everything from entry-level cashier to financial and investment advisor. People were trying to see me on a daily, weekly, monthly basis in order to get a loan just to pay for something small, like replacing a car tire, an emergency medical bill and things of that nature. .

Unfortunately, I worked in a low income area and had no authority to approve or deny loans. As an advisor, I would just put the information in the system, it would go to our back office decision team, and they would approve or deny. For the people who were turned down, I saw them going to the payday loan store in our same place to get that $300 payday loan just to fix their car.

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If you’re unfamiliar with this industry, payday lenders charge interest rates well over 300%, which could end up leaving individuals trapped in a cycle of debt. As a counselor, I have seen the financial quality of their health deteriorate over time, to the point that they were getting a payday loan from one institution just to pay off the loan from another institution. They got sucked into this debt cycle, unfortunately, and there was nothing I could do about it.

Was this what inspired your original plans for Hutsy?

It was definitely one of Hutsy’s main inspirations. Digging deeper into this, I saw that 45% of Canadians were living paycheck to paycheque, according to a 2017 report. About two million Canadians used payday loan services each year and more than 125,000 Canadians applied for insolvency services every year. And by insolvency, I mean consumer proposals and bankruptcies.

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And no big players were really doing anything to help these people. From what I understand, working for the banks, they really only cared about people putting money into their mutual fund or GIC portfolios, or taking out mortgage real estate loans for them. Ultimately, this is one of the main reasons we decided to launch Hutsy.

Many Canadians don’t realize they have options outside of the big banks. What is your advice for them?

We recommend that you explore your options. Just because five banks control 95% of the assets under management here in Canada doesn’t mean you have to choose one. There are always alternative options. Look at our neighbors in the United States: there are over 4,000 different banks and neobanks in the United States. We really want to expand that market in Canada as well. And that’s why we offer differentiated services such as free chequing accounts. That’s why we offer debit cards that also offer credit and insolvency services.

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As I mentioned earlier, 125,000 Canadians go through bankruptcy or a consumer proposal every year. But what a lot of people don’t understand is that if you fall into this category, yes, you will clear your debts…but you won’t be able to get any kind of credit for the next five to six years of your life. . With our debt management program…let’s say we have a person who has $10,000 in unsecured debt, they have three different creditors, their total interest rate is well over 200%, they have about seven months to refund. And that $10,000 turns into about $20,000.

Where Hutsy comes into play with our debt management product is that we are a licensed collection agency; we negotiate a rate with your creditors. Creditors will still be repaid, but at a zero percent interest rate. And we would spread the payment over a period of time. It’s a win-win situation for all parties.

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Why isn’t the Canadian market already crowded with thousands of options like there are in the US?

It’s a question I ask myself every day. So of course in the banking space, there are a ton of different players in the space. When it comes to loans, there are a ton of different people offering loans. But in the insolvency space, there are a ton of micro players, but no one has a strong foothold in the market. We being a neobank, being able to serve thousands, if not millions of people…being able to provide those services, we believe that is where our bread and butter will be. And that’s what’s really going to set us apart from all the other banks and the Canadian ecosystem.

What are Hutsy’s next steps?

Our next step for the company is launch…we are hoping for a launch between July and August of this year. We received more registrations, more inquiries, more people contacting us than expected. We have a small team right now and we don’t have the human capital to really serve everyone, so the next steps are to hire some great, talented people. And also to raise another round of VC funding in the meantime to further develop what we are doing to expand our engineering team, further develop our technology and build brand awareness and brand equity for Hutsy Financial .

This interview has been edited for length and clarity.

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