"Millennials and Gen-Z are Managing Credit with Technology" - Leo Goriev

Ishan Pandey: Hi Leo, welcome to our series “Behind the Startup.” Please tell us about yourself and the story behind Card Blanch?

Leo Goriev: I’ve been an IT entrepreneur for ten years, and I’ve been in the general entrepreneurship world for a total of 15 years now.

I started in IT when I joined a service design and development company - Alty (former Alterplay).

In 2011, our team got our first bank client, and since then, we have been narrowing our expertise in banking and fintech, signed a partnership with VISA, won several prestigious awards like RedDot, 20+ different banks in a portfolio, and more.

We gained a lot of experience by working with different banks all around the world. We held many deep interviews with users and got insights into how they interact with banks, cards, and money.

This brought us to the idea that we do not need to invent a new bank; there are many of them out there. We need to bring a new way of using those banks’ services, particularly a new way to use their cards. This is how we came up with CardBlanch.

Ishan Pandey: Please tell us about the state of the card industry in the USA and why it needs to be disrupted as move towards a more digital economy?

Leo Goriev: The card business in the United States is very old. Basically, the card business began in the States back in the 1950s.

Since that time, this market has been evolving a lot. Furthermore, on average, every American has up to 4 bank cards that they use daily.

This is because different banks give different rewards for spendings with their cards. This creates a lot of inconvenience for the user, for example:

1. They need to remember all the different rewards they can have.

2. They need to carry all of their cards all of the time.

3. They need to settle the liabilities every month for each card.

Artificial Intelligence and Crypto&Blockchain will have a major effect on the credit card and banking sectors in the long run.

As a consequence of these technologies, risk management, financial planning, marketing, and payment systems will all change.

The next changes will profoundly alter how we manage the influx, accumulation, and outflow of value in our lives, paving the path for legacy institutions, financial products, currencies, and intermediaries to be phased out in the future.

Artificial intelligence will permanently alter risk management.

Issuers will no longer depend on scoring models from credit reporting bureaus that are only available in a few geographies; instead, they will be able to use thousands of attributes such as a person’s phone battery level to extend credit and their geolocation data to determine whether a transaction is fraudulent or legitimate.

Loan securitization will be facilitated by blockchain services like Provenance, which will decrease risks, cut transaction costs, and improve liquidity.

Ishan Pandey: According to a new report by PYMNTS and Lending Club, around 70% of millennials are living paycheck to paycheck.

How are millennials and Gen-Z using credit and debit cards after the coronavirus pandemic and what things need to be overhauled?

Leo Goriev: Yes, that is correct. However, millennials have more experience with managing financials with technology.

According to Experian’s 11th annual report, actually; Gen-Z users had fewer missed payments than all generations, and the average credit score rose by 13 points to 654 in 2020.

They are more likely to use credit cards to make purchases, making this the most common way to pay. Although recovery from pandemic effects would be gradual and unclear, credit card payment volume will skyrocket when travel-related expenditure resumes.

The influence of the improving economy can already be seen in the $100 billion rises in credit card payment volume between the second and third quarters of 2020, compared to $80 billion for debit cards.

Consumers in 2020 have grown increasingly debt-averse, similar to how they became debt-averse during the 2008 economic collapse. Like the post-financial crisis period, the recovery from the pandemic crisis witnessed a rise in credit card ownership and spending.

According to recent research by Cornerstone Advisors, two-thirds of Millennials seem to have at minimum one credit card, with 40% having two or more.

As for stigmatisation, fifty-seven percent of the nearly 22 million Gen Zers between the ages of 21 and 25 have at minimum one credit card, with 25% having two or more. Therefore, there is so much space for credit card expansion here.

Ishan Pandey: According to you, how many credit cards should a person have in order to build their credit score?

Leo Goriev: I believe building a credit score has nothing to do with the number of credit cards that one has. It is all about creating the habit of using a credit card more frequently than other payment methods and paying the liabilities on time.

Ishan Pandey: What are the best practices that users should keep in mind to avoid credit and debit card frauds?

Leo Goriev: There are many recommendations out there, but I personally suggest using a digital version of a card (for example, Apple Pay/Google wallets/etc). If you split your transactions across cards, you may reduce the amount of “spillover” if fraud happens.

This recommendation isn’t for everyone. Some customers like accumulating points on a single card. Others are concerned that they will miss a payment if they have more than one credit card bill each month. Separating transactions, on the other hand, may help prevent fraud.

Consider having a card that you only use for higher-risk transactions, such as those from less popular websites that may not have the same security safeguards as a more prominent site. As a result, if the tiny site is hacked, the effect on your life will be limited.

According to the National Customer Law Center, if a consumer’s debit card hasn’t really been lost or stolen but there are illegal transactions on the account, the consumer is protected if the charges are reported within 60 days of the statement being issued.

When a physical card is lost or stolen, customers only have two business days to inform the card issuer after discovering the loss. Those who do so will be limited to a $50 loss. They may lose up to $500 if they don’t. They may not be able to recover any money if it takes months to inform the bank.

Many banks have strengthened their debit card safeguards for clients, going above and above the above regulations to exclude customers from liability for any fraudulent transactions. This is particularly true if the illegal transactions are reported as soon as feasible by the customers.

Phishing emails have been there for a long time — so long, in fact, that you may have forgotten about the danger they represent. That was a huge blunder.

Phishers “thrive” on customers’ overconfidence, according to research published last year by the University of Texas. In 2016, the number of personalized, social-media-based phishes increased by 500 percent.

A notice stating your credit card on file with iTunes has been denied and is requesting an urgent update is typical credit-card theft spam.

You’re mistaken if you believe you can’t be phished. Never put your credit card number into a website unless you have visited it by entering the URL into the address bar of your web browser.

Never enter payment credentials after clicking on a link in an email, even if you are certain it is legitimate.

Ishan Pandey: If a user is shopping online, is it better to pay by credit card or debit card? What are the significant differences between shopping with a credit card or a debit card?

Leo Goriev: It is better to shop with a credit card. When you shop with a debit card, the main difference is that the money is withdrawn immediately from your checking account. This info will never go to credit bureaus, so it will not help you build your credit score.

Ishan Pandey: What are your views on the regulations around debit cards and the credit cards industry? According to you, is there any scope of improvement and if yes, then in what areas?

Leo Goriev: The regulations have to change.

There is a big need for digital onboarding to receive credit/debit cards without visiting a branch, especially since COVID.

When this is resolved, it will change the market. Banks will no longer need to maintain thousands of branches to become 'nationwide.' And users will no longer wait for their 'plastic' and will be able to add their cards to their devices and use them immediately.

Ishan Pandey: According to you, what next trends will we see in the credit card industry?

Leo Goriev: Complete digitalization. Banks will become digital-only and super convenient.

This will bring cards to the digital world (tap to phone technologies) and help us pull away from plastic, saving the production of tens of millions of cards every year (compare it to several Everest mountains), which is a big change for our world’s ecology, too.

Disclaimer: The purpose of this article is to remove informational asymmetry existing today in our digital markets by performing due diligence by asking the right questions and equipping readers with better opinions to make informed decisions. The material does not constitute any investment, financial, or legal advice. Please do your research before investing in any digital assets or tokens, etc. The writer does not have any vested interest in the company. Ishan Pandey.