Slate Money – “The International Edition”

Date: April 9, 2016
Host: Felix Salmon (Fusion)
Guests: Cathy O’Neill (mathbabe.org), Josh Reich (CEO & co-founder of Simple), Jordan Weissmann

Episode Overview

This international-themed episode of Slate Money dives into fintech innovation, banking culture clashes, and the global drama of the Panama Papers. Felix, Cathy, and Jordan are joined by Josh Reich, CEO of Simple, to unpack the realities and hype behind fintech startups, banking regulation, and the implications of international shell companies.

Key Discussion Points

Simple: The “Non-Bank” Bank (01:32–19:03)

• What is Simple?
  Josh Reich introduces Simple as a technology company aiming to change how people bank by providing tools to increase financial confidence and ease (01:39).

  “We give our customers a Visa card... But what we're really known for is giving people a real sense of confidence with their money.” — Josh Reich [01:39]

• Origin Story & Acquisition
  Simple began in Brooklyn and eventually moved to Portland, Oregon. It was acquired by Spanish giant BBVA, which promised to keep it independent (08:23–09:28).

  • “They tend to kill their companies with their loving embrace... what they've done with Simple is they've made a very strong commitment to keeping us independent.” — Josh Reich [08:54]

• Product Distinction
  Clarifies that Simple is a fully-featured, interest-bearing checking account, not a prepaid debit card as often assumed (07:10).

  • “We are just a regular now account... an interest bearing checking account.” — Josh Reich [07:17]

• User Experience and Data Use
  Simple focuses on helping millennials manage money—safe spending, real-time notifications, saving goals (goals), and a prominent “Safe to Spend” feature (11:17–18:48).

  • “What we do with Simple is when you swipe your card, we do a lot of cool work. That means it appears on your phone in real time…” — Josh Reich [11:38]
  • “One of the features that we have is a thing called goals. Goals are basically named savings accounts... you can move money in and out of with no liquidity constraints.” — Josh Reich [13:35]
  • “One of the other things we have is a feature called Safe to Spend... By using Safe to Spend... people anchor to that number.” — Josh Reich [17:47]

• Customer Demographics and Behavior
  Average Simple user is 29 years old. Post-crisis, younger users favor debit over credit; saving behavior is a key focus (15:34).

  • “Young people have really shot... credit card debt down... It does seem like there would be a space for something that has a lot of the benefits of a credit card without necessarily tempting people to load it up with debt they can’t pay.” — Jordan Weissmann [12:46]

Fintech’s Grand Promises & Skepticism (20:06–39:23)

• Can Software Change Behavior?
  The group discusses whether fintech’s focus on “software that changes financial behavior” is profound or overhyped (20:39–22:54).

  • “There’s a very attractive pitch to be made around using data to inform alternative lending strategies. I think there’s a lot of reasons why these companies could succeed, but we haven’t seen... that data is actually driving outsized returns.” — Josh Reich [22:22]

• Fintech Lending – Risks & Arbitrage
  Fintech lenders like Lending Club and Prosper may succeed through distribution channel efficiencies, but their claimed credit underwriting advantages are unproven; major banks are quietly absorbing fintech-originated debt (23:28–25:48).

• Customer Acquisition “Dials” and Digital Branch-Killing
  Online banks like Simple scale efficiently and cheaply, drastically reducing the need for branches and traditional marketing (26:20–29:33).

  • “We were adding as many customers per month, whereby if we were a traditional bank, we would have needed 850 branches... We did all of that from our small office in Portland, Oregon, with less than 300 heads.” — Josh Reich [28:29]

• Branch Banking’s Future
  Growing digital banking may diminish the physical branch; some will always prefer in-person, but cost and convenience are driving change.

Bitcoin & Blockchain: Hype vs. Reality (29:33–39:06)

• Is Bitcoin on the Roadmap?
  Simple has no near-term plans to integrate Bitcoin. "We're about solving actual customer problems," says Reich (29:50).

  • "Bitcoin is super exciting... But... that's not the hard problem when it comes to doing international remittances or payments or other things. KYC, AML... that's hard. Bitcoin doesn't solve it." — Josh Reich [30:25]

• The ‘Blockchain Would Have Saved Lehman’ Claim
  The team is skeptical about claims that blockchain could have prevented the 2008 crash, suggesting transparency and pricing, not ledgers, were the real issues (31:15–33:58).

Banking/Tech Culture Clash (34:04–39:23)

• Core System Legacy & Mindsets
  Discussion of how banking’s legacy technology hinders innovation, and the distinct mindsets of banks vs. tech companies.

  • “We are dealing with systems that were designed and built in the 1950s for mainframe batch processing... The attitude that a bank takes about, you know, storing transactional data is let’s keep just what we need... versus... a technology company where everything’s in the cloud.” — Josh Reich [35:20]

• Anthropology of Technology Choices
  Referencing network design (packet vs. circuit switch), they illustrate how historical choices shape today's institutional cultures.

  • “[It’s] a weird loop between the choices that people made... the impact it has on how they think about technology, and then the future choices they make.” — Josh Reich [35:49]

• Legacy Banks Still Dominate Payments
  Even with fintech, old networks (like SWIFT) remain robust and secure for high-value transactions (38:34).

The Panama Papers: Money Laundering & Shell Companies (40:14–50:13)

• Mossack Fonseca and the Mechanics of Shell Companies
  The panel outlines how offshore law firms like Mossack Fonseca aid wealth concealment, tax avoidance, and secrecy for the global elite (43:08, 44:35).

  • “It is just about secrecy and opacity, even when it’s not tax evasion. There are other reasons why certain people, like politicians... might not want the world to know just how rich they are.” — Felix Salmon [45:26]
  • “The money quote... is... 95% of our business is creating vehicles for people who want to deal with taxes.” — Jordan Weissmann [45:41]

• The Regulatory Response & KYC Weaknesses
  U.S. authorities are moving to tighten Know Your Customer (KYC) rules to cover the real beneficiaries of shell companies (46:33–49:07).

  • “A lot of banks have been taking the standard... that all they need to know to meet... KYC requirements is they just need to know who set up the shell company. Now, it’s often designed so that the person who set up the shell company is not the beneficiary.” — Josh Reich [46:33]

• Money Laundering Loopholes
  Banks, lawyers, and fintechs sometimes point fingers to avoid responsibility for vetting clients, a loophole regulators are trying to close (49:07).

  • “They both had this plausible deniability of finger pointing–‘I thought you were doing that’...” — Josh Reich, on Payoneer case [48:53]

• Simple’s Own KYC Process
  Josh Reich, when pressed for details on anti-money-laundering:

  • “I don’t think I’m allowed to talk about that.” — Josh Reich [49:24]

Notable Quotes & Memorable Moments

• On User Experience over Price:
  “If we build a great user experience for 1,000 customers, it doesn’t cost us 10 times more to scale up to 10,000...” — Josh Reich [16:45]

• Fintech vs. Old-School Banks:
  “The IT budgets at Morgan Stanley or wherever, just stratospheric... And they employ more engineers. Not a technology company.” — Felix Salmon [37:49]

• Felix’s Deep Skepticism about Bitcoin:
  “Frankly, the bitcoin industry doesn’t seem to have fulfilled any of its promise. But that hasn’t prevented a bunch of people from still... throwing a bunch of money at it.” — Felix Salmon [29:54]

• On Customer Data & Privacy:
  “If you can’t find a really good use of your data to make your customers’ lives better, it’s very unlikely you’ll be able to make that data valuable to a third party.” — Josh Reich [13:35]

Numbers Round (51:31–END)

1. $160 billion – Value of the failed Pfizer-Allergan deal, blocked by new U.S. Treasury rules curbing corporate inversions [51:41].

   “Pfizer can no longer become an Irish company because the Treasury managed to find a way of preventing inversions. This is like politicians up in arms about something and actually doing something about it.” — Felix Salmon [52:15]

2. 6.6 million – Number of Americans at least one month delinquent on their student loans; the total with paused or delinquent loans is ~40% of graduates [53:31].

3. $203 million – Amount Wells Fargo must pay for ‘cascading overdrafts’ and misleading customers [55:16].

   “Our disclosures were totally deceptive... but none of our customers actually ever read our disclosures, therefore [they could not have been deceived].” — Josh Reich [55:16]

4. 11.4 billion – (Jordan) The net worth of David Tepper, a hedge fund manager leaving New Jersey for Florida, thereby impacting NJ’s state budget projections [56:59].

   “One dude has actually managed to affect an entire state’s budget...” — Jordan Weissmann [57:28]

Important Timestamps

• Introduction & Guests: 00:59–03:00
• Simple’s Mission & BBVA Acquisition: 03:00–09:28
• Millennials & Debit Card Use: 10:43–12:46
• Customer Data, Gamification & UX: 13:32–18:48
• Fintech Skepticism & Lending: 20:39–25:48
• Digital Banking & Branch Decline: 26:20–29:33
• Bitcoin & Blockchain Discussion: 29:33–33:58
• Tech-Bank Culture Clash: 34:04–39:23
• Panama Papers, Offshore Shells & KYC: 40:14–50:13
• Numbers Round: 51:31–end

Tone & Style

Conversational yet analytical, featuring good-natured debate, inside references, and a mix of skepticism and curiosity—especially about fintech’s promises, the realities of banking culture, and global finance machinations. The panelists keep the conversation lively, personalizing complex topics with accessible anecdotes and a few pointed jokes.

For New Listeners:

This episode is a deep dive into how technology is reshaping banking behind the scenes—sometimes for the better, sometimes possibly oversold. It pairs this with timely, international news about financial secrecy and regulation—the Panama Papers—while connecting the dots for listeners curious about “how the money really moves” in a digital, global age.