Hey guys welcome to the Fintech Coffee Break I’m your host, Isabelle Castro. Back in May, I sat down and shared my coffee with Ben Borodach, co-founder and CEO of April.
April focuses on the challenging task that faces all US adults every year- tax returns. Turning away from previous approaches that only digitize tax forms, April looks to make taxes a part of everyday life. Incorporating regular advice and tips, users of April’s app can keep track of their taxes and make informed decisions about their finances.
I spoke to Ben about this approach, why it hasn’t been done before, and what the knock-on effects of this tool could be.
Isabelle Castro: 0:01
Hi, Ben, nice to have you here. Thank you for coming down.
Ben Borodach: 0:47
Thanks for having me, Isabelle. Good.
Isabelle Castro: 0:49
Good. Good to have you here. So, to begin with, what gets you up in the morning?
Ben Borodach: 0:53
Yeah, well, here at April, we’re focused on helping Americans Achieve Financial greatness, which for us means embedding tax experiences anywhere that Americans make financial decisions. And so as an entrepreneur, I think what gets me really motivated is to be able to build something from nothing and also solve a really difficult challenge facing millions of people something that they have to deal with tax is sort of a core part of financial life here in the United States. And something that has become both a big challenge in terms of the number of hours that Americans spend on filing their taxes, and also the lack of, or the asymmetry and information because people here don’t really know what taxes they owe all year long. And so the ability to bring information and visibility so people can have greater control over their everyday finances is just something that motivates me to wake up in the morning and go to work.
Isabelle Castro: 1:42
Yeah, I would agree. It’s a huge, good motivator. I bet. Taxes is something that everyone has to deal with. Right. So what was your journey to founding April?
Ben Borodach: 1:52
Yeah, you know,I’ve spent my career at the intersection of financial services and technology, I actually started my first company here. When I was at NYU,it was in the marketing automation space, and was kind of dual tracking University and,and, and running a startup venture back startup, which my parents had questions about,given what they were paying in university tuition. And then went on to Deloitte and ended up running a good chunk of the fintech group working with the largest financial services companies like AIG, and Citi, at the board and CIO level. And that really gave me a purview into sort of what financial services in the United States were all about, what were the strengths? Why did we build practices, and risk management and so on the way that we did and where were the opportunity spaces and the struggles and from there, I went on to a company called teammate, which was building very early stage technology primarily in cybersecurity. And I always thought that when I was at the banks and insurance companies,every time we ran into a crypto project, an IoT project, every time we’d get to the end, there was always the cyber people that would go and sort of rain on the parade and block the projects.I’m like, there must be something to this and actually,a teammate ended up incubating and scaling a couple of companies at the intersection of Fintech and cyber one of them was curve, which we actually sold to Pay Pal and became their, their digital asset team.And about two years back,started looking at the future of consumer finance, primarily here in the US and sort of started to develop this thesis with the team that the digital story in financial services has largely played out in the sense that we’ve really increased access.And democratised many of our services. And our belief about the next decade is that it’s going to be all about intelligence. And this was sort of before the AI boom over the last couple of years. And so the intersection in terms of motifs and themes, obviously plays very well. But for me, it was all about looking at what are the missing pieces, obviously, we have digital checking, and investing and crypto and pretty direct indexing, whatever it is you want to do. And tax is just this anomaly. It’s the largest expense item on most American,you know, home household p&l is but it’s really missing from everyday finance, right? We don’t really think about it, we call it sort of the forgotten child of fintech. And so when we looked at the big data problems,the big datasets, and financial services and where we could help people make an impact, it was really about integrating tax into day-to-day finances. And we believe that that would not only solve the tough problem that Americans are facing but also lead to better financial outcomes.
Isabelle Castro: 4:25
Okay. Why do you think that tax has been left out of the kind of scope of innovation?
Ben Borodach: 4:31
Yeah, I think it’s a really difficult problem. Right? It is both at the federal state and city level here in the US. The technologies are are by the IRS, its own admission, quite old. And so it’s it’s a difficult problem set. And you have this tax law, which has increased 300% Over the last couple of decades. And it’s now8500 pages just at the federal level. And so you had these tacks and so it fits very well with the theme that we were just discussing which is that 20 and30 years ago, you had these tax software companies like the intuits of the world that took what was a essentially paper process. And they made, they made it digital. And since we’re now in the age of intelligence,we saw this really big opportunity to leverage advancements in machine learning, and natural language processing, to accelerate our ability to bring a new, a new software to market. And that’s the gap is that this problem has gotten so big, that until AI advanced enough really getting the new product to market with a reasonable time, money and effort almost became impossible.
Isabelle Castro: 5:34
Yeah, so nowadays, I mean, I think I saw a survey most people use TurboTax, yours sounds completely different to that.But I think it’s probably put into the same scope, maybe give an outline of how it’s different. And where you’re improving on TurboTax.
Ben Borodach: 5:51
Yeah, look, I mean, obviously, Intuit has built a behemoth of the business. You know, they’re sort of the the giant gorilla in the room, if you will, you know,there’s about 170 million US taxpayers. So TurboTax serves the lion’s share of the do it yourself digital market, which is about half the market, maybe a little bit less. So there’s still a lot of the market that’s filing through accountants or brick and mortar and other mechanisms. And what APR really differentiates on is really three things. One is personalization. So right now we kind of have a tax process,which is one size fits, all right? Everybody goes in and they get 1000s of questions, and it takes, you know, 1010 plus hours and a lot of time and money. So the first is how can we tailor the experience leveraging AI so that each US taxpayer has a has a process that’s curated specifically to them, which makes it more accessible, and far less daunting. The second thing we can do is embedded in services that you use every day. So our view is that hubs are developing around financial services,Walmart’s been out in the market, talking about their financial services, Apple is making inroads leveraging devices, Pay Pal has been doing interesting things and and continuing to build out their,their their bundled service. And so as we bundled services, it only makes sense that tax is a core part of that activity set.And when you do that, you can really reduce the friction and bring that knowledge. Like if you think about a credit check,for example, people don’t know what their credit score is naturally, and we developed a scoring mechanism. So not just the lender, but the individual can now track their credit worthiness and understand how can they improve and our belief is tax should work the same way you should be able to know at any point in time through an app that you’re comfortable using and otherwise use for your finances. What your tax situation is, are you going to owe the tax authorities? Are you going to get owed? And then what are you doing with those funds?So it’s really those three core pieces of personalization,embedded and continuous planning.
Isabelle Castro: 7:49
Okay, cool.Yeah, it sounds like it will change a lot of lives,especially on the kind of education front. How do you expect this to kind of play out with consumers who use your,your tool?
Ben Borodach: 8:04
Yeah, I think what we’re seeing is that consumers,you know, want to understand, we had run a state of the American taxpayer report, which we had spoken about in a private conversation. And there, we found that 40% of Americans are looking to engage more with their taxes. And it only makes sense, I think, purely at a at a financial and a very technical level, like people want to know,am I going to owe money? It’s like scary, I don’t know, am I putting money aside or not? And then when I, when am I, when I go to file my taxes? Am I even answering the right questions.And so by having something that’s highly curated, we can give people more confidence. And I think if we give people more confidence in the system,overall, they’ll feel better.And this is a bit more philosophical about my personal beliefs. But But tax in the US is much more than just sort of revenue collection, if you will.It’s really the amalgamation of our social contract. And our economic incentives that we have here. We’re administering the earned income tax credit, the child tax credit, we’re giving energy credits, small business credits. And so this is really our economic incentive flywheel.And so we want Americans to be able to engage in this process and feel like they understand how their lives and their specific specific circumstance is lining up with the laws that the elected officials they put in place are creating for them.
Isabelle Castro: 9:23
It really sounds amazing. I wish you were in Europe. This kind of approach, it sounds even more than tax. It’s like financial advisory, right? Could this be applied to a more general financial sphere? In your eyes?
Ben Borodach: 9:41
Yeah. Well, when you look at actually, where we started the company, it was really, how do you help people achieve better financial outcomes? And so tax became the linchpin of when we looked around and we said this is fundamentally missing, because I can see my credit worthiness I can see my wealth, these are things that are fairly well tablished and, and have played out, but I’m missing this major liability that I have throughout the year and how it intersects my finances. And the other thing that tax does in a very unique way is it’s sort of a government mandated financial health check,right? We’ve been talking about financial wellness for years in this industry, but we haven’t really quite gotten there yet.And that’s partly because to actually give someone financial advice, you need a lot more than just their account balances, you really need to understand who they are, do they have a small business? Do they have dependents? Did they move? Do they have debt today suffer the loss of a loved one. And so many of these things come out? Over the course of the tax process,and Americans are already doing this, it’s just that it’s sort of a last activity because it goes into the ethers, right,everyone kind of comes into tax season is like, Oh, my God, I just have to get this thing done. It’s so painful, it’s so terrible. But if we could actually capture that, and let someone take control of their own data set and work with their financial provider, to get better planning and advice, you can think about plugging that into their finances, right,where now you can get, you really could have digital autonomous money, where there’s a platform that knows who you are, and can actually serve up,oh, you had a kid this year?Here’s the few products that you need, or you are having trouble paying down debt, here are some ways that we can do it, and it’s far more actionable and tailored.
Isabelle Castro: 11:18
Okay. Yeah, it sounds amazing. Um, I guess this is going to have this is going to be impacted quite a lot about evolving, is going to be impacted by evolving kind of data, access laws kind of tell,you must have a kind of view on where this is going. Tell me about that.
Ben Borodach: 11:43
Yeah, look, data is. And I think as much as you know, when you look at the financial services business, and sort of what it’s become,obviously, it’s a business of risk and complexity. But I think I would argue, generally speaking, it’s also a business of data, when you look at fundamentally what credit and investing, you know, our tax are all about sort of like the fundamental underpinnings. And so privacy is a central theme.And data protection is a central theme. Obviously, we are subject to different IRS regulations,both in terms of cybersecurity and data privacy, but also our,you know, looking and, and are subject to the different state and, and federal law. So we try to take a unified view, and sort of the ultimate kind of conclusion is that the data is the taxpayers. And it’s really up to the taxpayer, to decide if they want to share that data with their financial institution, and it’s up to them. And there’s a very clear consent that they have to sign and they can sign it or not, and they can revoke that access at their discretion. So that’s kind of our view, it’s really, we safeguard the information. We’re kind of like a data custodian.And if the taxpayer wants to share that data with their financial services provider they can.
Isabelle Castro: 12:50
Your tool is powered by AI. Are there any kind of specific technology advances? And maybe the next couple of years that you’re particularly excited about?
Ben Borodach: 13:01
Yeah, I mean, I think that, you know, when we when we look at MLMs, we’ve been working with these for two years. So my partner Daniel was the CTO of waves and the lead data scientist for Google Israel. And so when we were looking at this problem set, we said, look, we really need to build a fundamentally different tax engine, which we call the APR OS. Because if we want to deliver this personalised,embedded continuous experience,none of the legacy solutions enable you to do this. And so the first sort of step is, how do you actually do this,because, you know, there’s a finite number of resources and amount of time you can do. And so we had this sort of ambitious idea, to imply large language models to the reading of and the interpret interpretation of the tax law, and turning it into code, sort of increasing our velocity and ability to do this.Now everything is reviewed by a human, but it accelerates velocity dramatically. And so we’ve been building our own discrete data models on top of both proprietary and publicly available AI models to be able to do just that. And it’s seen a dramatic increase in our ability to execute. So that’s sort of one area. The second area is because there are so many questions that could apply to someone you’re trying to sort of chart the most efficient path through the process. And so leveraging AI we’re able to develop a personalised path for each taxpayer. Right now,there’s 1.2 septillion, which is kind of a hard number to even fathom what that is, it’s, it’s just a dramatic number, but it gives you a a sense of the complexity. You know, that’s developed in the in the tax law at our level of personalization and customization, depending on how you want to look at it. And so we can really leverage that to to to devise something that’s very tailored for each individual. So that’s sort of the second piece and then the third piece is is on the customer support side. And you know, there I think that’s sort of like playing out and fairly well understood the market but obviously tax has complexities people have Have questions. And so there’s a lot of opportunity to leverage AI to provide a better and more efficient customer service.
Isabelle Castro: 15:06
Nice. Nice.What do you think your biggest challenge has been in kind of setting this up?
Ben Borodach: 15:13
Yeah, you know, I mean, I think building any startup is hard. Certainly we’ve seen in this environment, it can be especially hard, I think like, the Financial Services presents a different sort of challenge, do you want to be a trusted brand that’s operating in a high level of highly regulated environment, and especially at a time where there’s probably been more regulatory uncertainty, just generally speaking, in financial services, then then in a while,just across the board. And then the second piece is that there’s not really a playbook on how to do this. So, you know,congressional bodies put out tax law, which is paragraphs of words. And then state authorities and IRS put out sort of forms that you have to conform to, but we actually have to build the tax code, and we have to integrate with the systems and the state’s work differently. And there’s not necessarily a rulebook on how to do that. And so, you know,obviously, we bring together advisors from different backgrounds that that can help us be more effective there. But a lot of the stuff is sort of feeling your way through it. And you know, because there’s only like a handful of companies that have ever done this. You know,that just presents sort of a very unique challenge.
Isabelle Castro: 16:19
Well, yeah, I mean, when I first met you guys,and did my first article, and you guys, I thought this was amazing. I’m really hoping you get to Europe. Okay, so moving on, to the kind of like final questions where I get to know you a little bit more? What’s a piece of advice that you’ve been given that you would give to someone else?
Ben Borodach: 16:44
Okay, well, we could probably sit here for for a few days, but they say there’s no such thing is free advice. So So before, before this, I was working for a gentleman named Adolfo used to run Israeli military intelligence, kind of like the NSA equivalent in Israel, he founded this company called teammate in the cybersecurity space. And so we had spent a lot of time together. And there was a lot of lessons learned, some of which I agreed with, and other ones I didn’t, but the thing that he kind of, you know, instilled in me is like, we’re living in a complex world. And I think as human beings, we want to believe in this linear process, and even especially in the US and Europe,and developed nations, like,that’s kind of our upbringing,right? You, you get tests and you go to school, and if you do these things, your life will be good. And then you do this and that, and what, you know, I think when you get out there in the world, in business today,especially now, in a global environment, in an environment where, you know, all the rule books have kind of gotten thrown out, we’re reinventing lots of things, whether you’re looking at crypto, globalisation, or D,globalisation, like everything is kind of getting rewritten.And so I think it just sort of embracing that complexity and kind of learning to dance in the rain is just something you know,for any entrepreneur or business executive right now you have to kind of be be comfortable with some level of uncertainty and some level of understanding that we live in a system where it’s hard sometimes to correlate consequences with results. And so just embracing that, I think,has been something that’s helped me a lot. Just be comfortable when you kind of can’t control everything.
Isabelle Castro: 18:09
Nice. I bet that has helped a lot here.curveball question. If you could invite anyone dead or alive to lunch? Who would it be?
Ben Borodach: 18:24
You know, one of the things that I’ve been it’s a great question. And one of the things Ray Dalio had it, you know, he’s sort of always out there. Now, as the as the thought leader, I thought he put something out interesting recently. That was sort of, you know, this crossroads of self interest versus collective interest. Okay, yeah. And so I think that, that so much like emblematic, when you look at,like the spurts of nationalism we have, and I think we’re gonna look back and see that this sort of era of globalisation, were actually the world was roughly aligned in many more ways than we thought it was, was sort of this really amazing golden period. And now it’s sort of the the future is uncertain, right?And when you look at the debates, and obviously, I have somewhat of a US centric worldview, because of our business, and so on, like, I would love to sit with the Founding Fathers and of the United States and understand like, when they wrote the Constitution, like, were they really intending this document to be kind of almost biblical in nature, where people kind of interpreted and you had or did they intend for it to evolve?And how did they because I think when you look at like, some of the of the, of the debates like we would be so much better served if our if our leaders globally in the US, and I think globally could sort of put the self interest aside and figure out how to, you know, work more towards a collective future. You know, when I think about sort of, like, I have two young girls, and so when I think about the future, and what like, motivates me beyond getting up and going to work is like, how do we, how do we build a better future? And I think we all know that it’s both within our countries and globally, it’s all about this collective future,right? We’re far more intertwined in this complex world and we’re willing to admit, but it’s hard, right? The discipline to actually figure out how to get to an answer or decision or get people to work together in some kind of collective good is just far more challenging than it than it sounds. And so I think that’s just sort of the central issue.And so it’d be interesting to talk about people that set up some of these systems that we have now and, and see where they came and what their reflection would be based on
Isabelle Castro: 20:22
that. Yeah,that would be really interesting to see if it really has changed that much. You know? How can people get a hold of you?
Ben Borodach: 20:30
You can tweet at the board and you can email me at Ben at get april.com
Isabelle Castro: 20:35
Okay, perfect.Well, thank you for coming on the show. I’ve really enjoyed you. And yeah, have a good rest of your day.
Ben Borodach: 20:43
Thank you enjoy the conference.
Isabelle Castro: 20:44
Thank you. As always, you can reach out and chat with me or my personal LinkedIn or Twitter @IZYcastrowrites. But for access to great daily content, check out fintech Nexus on LinkedIn, Twitter, Facebook, or Instagram. You can also sign up for our daily newsletter bringing new straight to your inbox. For more fintech podcast fun, check out the website, where you can find more fascinating conversations hosted by Peter Renton and Todd Anderson. That’s it from me.
Until next time, enjoy your downtime.
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