Building a Solution for Dormant Accounts and Escheatment with Stephanie Mertz of Eisen
Do you know what happens to your financial accounts after several years of inactivity? In this episode of PayPod, host Jacob Hollabaugh sits down with Stephanie Mertz of Eisen to discuss the importance of technology, data security and integrity, and the need for standardization across the industry. Eisen is the first automated escheatment management system for banks and fintech. Watch this episode for a fun interesting dive into this latest development in payments and fintech.
Payments & Fintech Insights In This Episode
- Inactivity on a financial account may render it dormant, after which the financial institution may consider it to be no longer in use.
- The lack of a good system in place to deal with dormant accounts is a problem that can be solved with the aid of technology.
- Financial data security and integrity are essential considerations in creating any product in the financial industry.
- There is a need for small companies dedicated to taking product risks in the early stages of product building, but consolidation is necessary as the product development life cycle matures.
- It is crucial to break down complex problems to fundamentals when designing solutions.
- The lending industry is not exempt from the dormancy problem, just like most other financial institutions.
- And SO much more!
Stephanie Mertz : Eisen
Eisen is the first automated escheatment management system for banks and FinTechs. They work with banks, brokerages, FinTechs, and financial service firms to manage their dormant accounts. No customer wants to be escheated, but it’s too hard to reactivate them. They’re the compliant sidekick you need.
Featured on the Show
PayPod is the leading voice in the payments and fintech industry, covering payments, risk management and new technology. Host Jacob Hollabaugh interviews leaders who are shaping the payments and fintech world, as they discuss the latest developments in the payments and fintech industry.
Jacob: Welcome to PayPod, the Payments Industry podcast. Each week, we’ll bring you in-depth conversations with leaders who are shaping the payments and fintech world from payment processing to risk management and from new technology to entirely new payment types. If you want to know what’s happening in the world of fintech and payments, you’re in the right place. Hello, everyone, and welcome to PayPod. I’m your host, Jacob Hollabaugh. And today on the show, we are diving into a portion of the financial ecosystem that doesn’t get the spotlight very often here on this show, or really in many places for that matter, which is dormant accounts. We’re always so focused on the activity side of things that we overlook the big problem that is inactivity and what to do when things are signed up for accounts are created and then they just sit there. They’re never used, but they’re also never closed. And who knows? You listening right now may even have a dormant account or two of your own. That needs tended to because it turned out that I did, because in preparation for this conversation, I did a little audit, and I’m a little embarrassed to admit that I did find an old credit card that I thought was closed long ago. Haven’t thought about in multiple years. And lo and behold, still open, sitting there dormant. And luckily it had no balance on it. There was nothing super bad happening on my end. It’s all taken care of now. But it goes to show that these things do happen in this topic is one worth spending some time on learning more about. So that is what we’re going to do today. And of course I’ve got an expert with me to do just that. Join me today to dive into this world of dormant accounts is Stephanie Mertz, co-founder and CTO of Eisen, the company Building Compliance Tech for FinTechs, currently focused on unclaimed, dormant and fraud account management. Stephanie, welcome to the show. Thank you so much for being here.
Stephanie: Thanks so much for having me. What a great backstory to kick us off.
Jacob: Yeah, I will say I’m not normally coming into these conversations with a little bit of embarrassment, but this one I am because I literally was like, it seems like a the obvious thing to do when researching this a little bit is check in. And I was like, Oh yeah, and didn’t think that was still open. And it think that that even I could log into that financial institution site anymore and low and behold I could no longer anymore. That is officially I think, closed now. So we’re all good. But let’s start with a bit of an overview, if you will, because I’m sure while you say dormant account, I think most people can, if they have no idea what that is, can decipher more or less what it is. But can you give us what are the parameters that define a dormant account and how prevalent those are?
Stephanie: Definitely there’s kind of three stages of activity inactivity that we think about. Once you haven’t had activity on an account, we call it inactive. So that’s one phase. You haven’t logged in a while, you haven’t used the account. If that period of time has been quite long, the account might be considered dormant by the financial institution. This is defined by each financial institution. There’s no agreed upon definition, but generally over the period of years, what is agreed on is when these accounts are now past a dormancy period that is acceptable. They actually have to be exceeded and sent over to the state. Generally, the state in which the last known address of the owner is located in. So you definitely got lucky in that you got there in time because if there is any balance that’s typically actually afforded by the financial institution, you then have to go claim it back from the state.
Jacob: Yeah, certainly. And what are like some of the main causes of dormant accounts? Are there any specific things that can be pointed to as to why people might stop using an account without closing it or emptying it out or any the places it’s most prevalent or the types of situations we see it popping up the most in?
Stephanie: Yeah, it definitely depends a little bit on the type of financial institution in the fintech space. We’re seeing a lot of causes where users saw a subway ad, they were really curious about the fintech. They tried it out so they might not have like their primary source of income or direct deposit in this account, but there’s some amount of funds and then they stop interacting with it. Maybe they forgotten the password, maybe they’ve moved. Now it’s really hard to get in contact with that owner by the financial institution and this owner is completely forgotten about this account. Kind of sounds like also your credit card experience just slips your mind. It’s not your primary use. So that’s been what we’ve seen primarily, is this loss of contact, loss of awareness, not necessarily that there’s any huge life event that may have even caused this in the first place.
Jacob: And what types of companies or tools are seeing these pop up the most? Is there a specific like industry within the financial world that’s like, Oh, they deal with this much more than your regular checking or savings account? Is there anyone that stands out as the dealing with this the most?
Stephanie: We’ve been seeing it as a really hard problem in a space where fintechs have a separate bank as a service provider, where the bank is generally the one who’s responsible for handling the achievement process. They see all these accounts that are dormant that they need to figure out what to do with, but they’ve never had contact with the owner in the first place. It was through the fintech. And that’s created this really hard problem where if the bank reaches out, you might not have even heard of this underlying bank name. You’re used to the fintech and the fintech might not have heard from you in quite a while and not have an easy way to get in contact. A push notification is not going to work if you deleted the app. So we’ve seen that as a really tricky problem in this. Space where people are excited to try out new technology and new fintechs and then. Don’t switch that to be their primary banking source.
Jacob: Yeah, and it makes sense that it’s already hard enough to get in touch with someone who’s abandoned an account if you’re just you’re the actual one they abandoned. But when it’s an extra step away and I could see so many if you’re like, I never knew that I was doing business with this bank. I see some bank. I’ve never heard of an email. I think it’s spam. I think it’s a scam. I need to delete this and never see it again and certainly not open it or click on anything or read anything or do what it says. So that makes a lot of sense. You’ve mentioned the word achievement a couple of times now. Could you then define what that is for us, what that process is, and then fill us in on what is the real problem that that causes those financial institutions having to go through that process.
Stephanie: Achievements, the legal process where those funds are turned over to the state. How that works per state is different in each state.
Jacob: Of course, it always is in the financial world. Can’t be easy. Got to have 50 different ways to do it.
Stephanie: Yep. There’d be no fun in that, at least from engineering perspective. Definitely adds a fun level of complexity. But from the financial institution side, it’s tricky. I hadn’t heard of achievement before. We had really gone down this path. Neither have most consumers. So if you call up your bank, you call up this fintech and you’re like, Hey, I thought I had this credit card. I found some record of this account that I had or this fintech account. Maybe it’s a brokerage account, you call them, and they say, Oh, wow, that was years ago. We’ve cheated your account. Your reaction is confusion. It’s usually displeasure like I gave you my funds. I trusted you as a financial institution to take care of them. And you’ve gotten rid of them. What is this? So there’s a huge headline risk in the customer experience that this causes due to the lack of knowledge on how this process works.
Jacob: Does it work on both money owed or money had? Because like I’m thinking my credit card story here, it had a zero balance, but like if it had a balance, it’s a credit card. I would have owed money. I’m guessing they would have been a little more. There would have been even more notifications or attempt to contact when it’s, Hey, you still owe us money and like you’re accruing more money that you owe us and penalties and fees and everything versus the it’s a brokerage account. And I just forgot that I had $500 sitting in some brokerage account and years and years and years down the road, I’m like, Oh, that should still exist or whatever. So does this process happen for both sides of that of if you have money sitting somewhere that’s never used and never active versus you owe money, is it the same for both sides of that or is are the is it different on either side?
Stephanie: It’s different on both sides. It’s almost the inverse of a debt collector problem. So generally, this could still happen even with someone who gives loans like a credit card provider. Let’s say you overpay your credit card bill. Now they have money that they owe you. So it does affect many industries. But if they were looking for money from you, they would probably be pretty active in finding it and slightly different process.
Jacob: Yeah, I don’t think it would have taken until a couple of days ago for me to know that that existed if it wasn’t zeroed out and just not being used. Let’s move then to you and your company. Eisen and what you’re doing about this. When did you start the company and how did you come across this particular problem as the first one to go into? And what was it about the approach to the problem of dormant accounts that you wanted to try to do differently than what was already out there?
Stephanie: We started Isan at the end of 2021, and both my co-founder and myself and other people on the team have prior experience working at financial institutions and we were all shocked at how there was no good system in place to handle this. It’s all very human based, very Excel based, and Excel is a great tool, but it’s also a very error prone tool. When it’s not purpose built and you’re on your own trying to define your own process for 50 different states. So we were really excited by how we thought technology could help make this a much easier problem to solve for financial institutions shouldn’t be a huge analysis problem. Data comes from so many different sources. Maybe it’s coming from the fintech don’t want to shoot someone who logged in last week just because they haven’t transacted in the account. You still know where they are. So making sure you’re looking at all data sources and doing it in a much more hands off way just felt like a really natural answer to us. But we couldn’t find anything that already existed like that.
Jacob: Yeah, and it would it would make sense going back to something you had said earlier, with especially this being more prolific with like fintechs where you’re adding that layer, that extra step away from someone that the problem has always existed, but probably has gotten significantly worse in the age of digitization, all these fintechs, all these niche as a service companies coming in that I’m guessing there’s more companies having to deal with this that have not had to before or maybe made it a little more complicated. So there’s an even greater need probably in the last few years and is maybe why no one up until you guys came around was trying to do or solve this because it maybe while it was always a problem, maybe it wasn’t as big of a problem as it is in the world of a new fintech every day and new as a service company popping up every day and like, do you have any idea how the size of the problem and when it may be proliferated the most?
Stephanie: Yeah, that’s certainly spot on. When you lived near your local bank and you went in person, this bank probably only had customers in that one state. It’s a relatively simple, straightforward process. When you can narrow it down like that, you probably even know people’s faces. They come into bank branches. It’s a very different relationship with your customer than in this digital age. We did see a bit of a lag from when FinTechs really started hitting it off to when this problem became a big enough issue because it takes some time for accounts to go dormant. So it’s not the first day that the first fintech opens. It’s not a problem, day one. And now we’re seeing a huge number of these fintechs really start to breach where the number of accounts that they have to deal with is not something that’s possible to really do in this manual way.
Jacob: Yeah, certainly. And where all do you operate and what are some of the types of companies that you’re working with the most?
Stephanie: We prefer names that have some kind of digital footprint makes for much interesting but also harder problem On where data sources come from that operate across 50 states or some significant percentage of those. But we’re not asset specific, whether it’s brokerage accounts, whether it’s checking accounts, different problems lie in different types of assets. But we’ve been really fascinated across the board and are able to handle including things like crypto.
Jacob: Yeah, love it. Well, I want to pivot for a moment. We will wrap back around and get back to the company here at the end and some of the kind of things looking towards the future of the company. But I want to pivot for a minute to the fintech world more broadly, and especially just the tech part of fintech, as you very much reside in that half as a CTO in a software engineer, I want to first just start with I’m always interested in a little personal history of your own. What made you want to be an engineer and what made you want to work in building tech and maybe even within the financial world?
Stephanie: One thing definitely led to another, but it was so fascinating seeing how things used were built. I loved the game Minesweeper when I was young and one of my initial college projects was Build Minesweeper and it blew my mind that I was capable of understanding and recreating how that worked. And since then, it’s gotten more complicated than Minesweeper too. How does the whole financial system that I’m a consumer of that I use, how does this work? So I think it’s the same problem solving curiosity on enjoying complex operational problems that also leads to enjoying engineering and thinking about how systems are put together.
Jacob: Love it. Do you still play Minesweeper? Is it still around? I can obviously get that on my computer. Right. I haven’t thought about it in a long time, but I also was it was very my family was a very competitive minesweeper, family. All mom, dad and brother and I all would take our turns at the computer. And definitely I never really helped. My dad always had the record we could never quite beat him on Be faster than him, but loved playing that. So that’s amazing. That was the introduction point. Very cool coming from that tech and engineer side of things then, is there anything about the financial world that kind of stands out that makes building tech for it especially hard or unique compared to building tech for other fields?
Stephanie: Most certainly. I think obviously the first thing that comes to mind is security. The information that you have access to in the financial world is people’s private information in multiple different dimensions, whether that’s information or their banking information. There is no such thing as building an MVP that doesn’t take security in as a first consideration. But outside of security, there’s also thinking about data integrity. It’s one thing to keep it private. It’s another thing if I mess up your bank balance and consider it someone else’s, it’s still private. That’s still not okay. So the level of data, integrity and privacy that you have to have in any product just creates a really high watermark of where first versions have to be, which I think can be a high barrier to entry because it can be hard to prototype something and get feedback when that first version has to be really solid.
Jacob: Yeah, there’s certainly some industries where it’s okay to put something out with a bunch of bugs that you’ll slowly fix over the long haul. But yeah, financial worlds probably. I would say the highest risk possible of like this all has to be locked in and ready to go from day one moment one there is fixing bugs down the line, but it comes with a higher risk and a higher cost in this world. I had another CTO on a few months back who said something really interesting, which was that the CTO position and they were a few multiple decades into their career, they were a little older in their career, so they’d watched this transition happen where the CTO position and the tech people in general within a company never used to also need to be a decision maker or one of the leaders of a company. But that in today’s age where the tech is the product, more often than not that CTOs have had to slowly transition into being more like the CEO and having that vision and more of a voice in the company and its path and its plan. And you obviously, as a CTO who was a co-founder of Isan, seem to be in that new mold of this new version of a CTO that is hands on and is a part of the vision and the direction of the company as much as still doing the actual technical part and leading the technical division of the company. So in an age where things are moving so fast, advances in tech are happening so fast, how important do you see it being for a fintech company or really any company to have that technology person also be one of the core drivers or decision makers of a business?
Stephanie: I think my answer is a little biased because I also really enjoy it. So I think it is important, but I think for the reason that it can be really hard to understand what’s possible if you don’t already have a solid grasp on what’s possible from a tech side. So when I came into this achievement deep dive and was really learning the problems that institutions have, instead of coming at it from more of a process automation standpoint of what do you do today and how can I write code to do that? I was able to just wipe the table clean and think about the problem as it is, break it down to fundamentals and design a solution from scratch instead of trying to build a faster horse, as the saying goes, being able to really think about it creatively from the ground up and think that’s a lot easier in partnership when someone from the tech side is involved early on as opposed to being dictated the terms and the scope of what we’re trying to do and being able to offer that creative voice from the start.
Jacob: Yeah, when the solution is technology, it’s really hard for someone who doesn’t understand the tech side or what is capable to be able to come up with a solution other than they can identify the problem still and say like, we want to solve that. But if the solving is purely through a technological solution, then you have to have that person involved that can actually tell you, well, this is a theoretical solution that we could build or this is and that is. And it makes me think it was cool to hear you say you like that part of it. And so that is like natural to you or something you want to be doing. And that the former CTO had on was someone who had struggled with that or who had noticed others more of his age that had been in the industry for a long time struggle with the transition because those weren’t necessarily skills or things they were ever asked to do before. So they weren’t always recruiting for or developing people who had this new skill set. Do you have you ever recognized any of that yourself and seeing like the difficulties of asking CTOs or engineers that to take on more of a leadership role that maybe they weren’t necessarily being developed for? Or did you know, don’t know what your educational background and everything was, but have you noticed more? So that focus really is there on making sure that the tech people also have the leadership skills, the communication skills, the interpersonal stuff to be this new hybrid model?
Stephanie: Think over the last few years it’s come a really far way in thinking about actively how engineers develop out their career trajectories. There’s been a lot of thought on how to have an individual contributor career track that goes as far as anyone else’s without having to shoehorn people into leadership who maybe don’t even enjoy it. That’s not where they really find the intellectual challenge and being able to understand where you want your career to go and focusing on that as opposed to thinking, okay, management is the only way that an engineer gets ahead. Luckily, that’s outdated philosophy and I think got really lucky that the company I was at before this thought very carefully about engineering tracks and developing the skills that you cared about developing and not thinking that one was superior to the other. In terms of result to your career, I spent most of my time on teams that were extremely close to the business side, so I was able to partner with various business teams and really get to understand what are the problems they have and then come up with tech solutions to it. So I’ve gotten to rehearse the skill that I really enjoy there as opposed to some other engineers who really enjoyed writing the fastest algorithm they could to solve a specific tech problem that still existed. And they were rewarded for that. But these were on separate teams that were able to have their own career trajectories.
Jacob: Yeah, definitely. Just being aware of it comes back to always with working with people actually know what they want and be able to create the proper paths for them versus as you said, just pigeonholing someone into we need you to do this. And once you’re hired to do that, that’s all you’re going to be asked to do or told to do or ever expected to do. And I think it’s also been very interesting. We certainly have within over the last decade to two decades, a lot of very high profile, without naming any names, but examples of engineers who built something that became one of the biggest companies in the world and suddenly they’re one of the biggest household name CEOs in the world and business leaders. And sometimes that’s gone really well. And other times it’s a little more chaotic. But we’re definitely seeing that play out on the scales large to small. The other kind of big trend I wanted to ask about and we referenced it or I started to reference it a little bit earlier, is that as a service and niche products have been the big wave of innovation of the last half to even full decade within the financial services industry and beyond. But certainly in the financial services world of everything as a service now, everything being more so a niche, I can do this one little part of the full tech stack. I can do this one little part in the financial stack and do it really well better than anyone else. Do you see that trend of kind of niche companies doing one specific part of a stack really well continuing, or do you think there might be a period of consolidation or acquisition or big companies building in-house more so again, coming in the future?
Stephanie: It’s a really good question. I hear lots of chatter on this in different places, too. The way I think about it is there is a life cycle to product building, and when you’re in the first stages of product building, you have to take product risk. You might build features that no one wants. You might come up with the wrong solution. You need to be able to spend so much time on figuring out what’s actually going to work for a niche problem, for it to actually end up working. And that risk is best taken by small companies that can dedicate that kind of focus and time and risk appetite into that kind of product building. But as the product matures, there’s less of a need for that. And on the other side, if you are using these products, it is a huge pain to interact with that many different vendors. It’s really hard from a vendor diligence perspective, from having different support channels. You’d much prefer to have streamlined operations with a more narrow set of vendors. So I think it makes sense that there’s consolidation later in the product development life cycle. But I think we’ll continue to see this fractured niche product plays. Early stage to be able to build better products.
Jacob: Yeah, maybe we’ll just be. It’ll be interesting to see if that will become like its own set funnel where that’s just the like we see that cycle play out over and over where in the last decade as everything’s gone digital and the tech has advanced so much, we feel like we’re seeing we’re seeing that funnel take shape. And it’s whether is that just a funnel that always exists in all parts of it are always existing and there’s always the new stuff coming up and down the line being acquired or built into a bigger company, or is it more of a like there’s a season and a half decade period of all of them come up and then there’s a period of consolidation and that kind of back and forth. So how which type of cycle kind of eventually plays out I think is yet to be seen. But it’s always one of my favorite things to get perspectives of from folks like yourself in the industry. The final question then I have for you coming back to Eisen. The tagline for Eisen is Building the infrastructure. Fintechs need to offer compliant services to their users. So the natural question then looking out to the future is does that include things beyond dormant accounts and achievement in the future? And if so, is there any type of compliance needs or areas of infrastructure that you’re already thinking about or focused on wanting to expand into? Or for the time being, is it doing the dormant accounts, doing it really, really well and expanding just that service?
Stephanie: The area of interest that we’re all really focused on is that account lifecycle and operation system that you need. So everything past opening dormant accounts is one direction. This goes. There are so many parallel paths to consider and to support. That’s the area we’re super interested in. But I think in order to build well for multiple processes, each one on its own needs to be great and that’s why we’ve picked one building it. Well, I think we’re we have a couple others lined up that will add on to that, and that’s the general space that we’re interested in, which is a little bit wider than dormant accounts. But my personal philosophy is by scoping down, by narrowing what you’re doing, you can do it really well and you can always increase scope. But if you bite off more than you can chew, your results just not going to be a particularly good product.
Jacob: Yeah, love it. Well, Stephanie, this has been a real pleasure. For those listening who may want to follow you or learn more about Eisen and keep up with everything you and the company have going on, where would be the best place for them to go to do so?
Stephanie: Definitely check out our LinkedIn page and we’ll be in person at the Money2020 conference. So it would always be great to meet up with anyone in person there.
Jacob: Where and when is that conference again?
Stephanie: It is October in Vegas. So it is, yeah. We got up around we got.
Jacob: A month or so so people could plan a little trip to Las Vegas. Who doesn’t want to go to Las Vegas for a weekend and learn about money while you potentially are also losing a bunch of it? Who knows? Depending who you are and your interest in Vegas, so wonderful. We will link to those in more in the show notes below. Stephanie, thank you so much for your time and knowledge today. I’ve greatly enjoyed it and hope to speak again sometime soon.
Stephanie: Thanks so much for having me. It was a pleasure.
Jacob: If you enjoyed this episode and want to hear more, head on over to Soarpay.com/podcast to subscribe on your podcast listening platform of choice. That’s s o a r p a y.com/podcast.