Michael Broughton Of Altro On The Future Of Money and Banking
An Interview With David Liu
Confidence: How you built your confidence + how it’s helped your business.
The way we bank has changed dramatically over the last decade. It was not too long ago when you had to wait in line in a bank to deposit money. Today things are totally different. You can do your banking without ever walking into a bank. In addition, the whole concept of money has changed. In the recent past, money usually meant bills and coins. But today, the concept of money has expanded to include digital currency and NFTs. What other innovations should we expect to see in banking in the short and medium term?
In the coming years, I’m expecting to see increased decentralization and democratization of financial institutions and assets.
Our current financial system was designed by and for those that are financially privileged — essentially, a small fraction of the population. As millions continue to be affected by the shortcomings of contemporary banking, we’re seeing increased calls for more access, accountability and decentralization of financial institutions.
We’re already seeing this with cryptocurrencies and its emphasis on decentralization. As interest continues to build, I believe we’ll see a similar trend across all aspects of banking and finance, including credit, loans, personal banking accounts and more.
To address this, we are talking to leaders in the banking, finance, and fintech worlds, to discuss the future of banking and money over the next few years. As a part of this series, I had the pleasure of interviewing Michael Broughton.
Michael Broughton is the co-founder and CEO of Altro, a free-to-use app that allows anyone to build credit using nontraditional forms of payments, including rent and monthly subscriptions like Netflix and Spotify.
Michael came up with the idea for Altro when he was denied a $10K loan to cover the cost of tuition at the University of Southern California. Without credit history, he couldn’t get a loan, but a loan was required to build credit history.
Fed up with this catch-22, Michael set out to create a better way to build credit to help millions of unbanked and underbanked Americans gain financial freedom.
In addition to founding Altro, with investors like Jay-Z and Citi, Michael has since graduated from Y Combinator as a Thiel Fellow. He is also an investor in Drink Barcode and has been the Vice Chairman for USC Credit Union’s Board of Directors since 2017.
Growing up in a military family, Michael lived in South Korea and Japan, and eventually moved to South Dakota. He currently resides in Los Angeles, California.
Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started in this industry?
While I was attending the University of Southern California, I was denied a $10k student loan that was needed to cover the remainder of my tuition. As with most other college students, I had little credit history and no credit score, and was denied the loan on these grounds. This catch-22 inspired me to create Altro — to help individuals similar to myself that have been denied access to financial necessities.
Furthermore, in 2017, I was named the Vice Chairman on the Board of Directors for the USC Credit Union — which manages $850M in assets. In this capacity, I helped launch a credit card line for low-income and international students. This experience has been invaluable in navigating the credit-building space.
I was also named a Thiel Fellow and had the opportunity to attend the Y Combinator, with both affording me the resources, experience and mentorship needed to navigate the harsh startup environment.
Can you share the most interesting story that happened to you since you began your career?
The most interesting story that has happened to me since I began my career was my interaction with our first-ever user. I learned from them that what we are building at Altro is not just another startup, SaaS tool or social media platform. Rather, what we are building is a potentially life-changing experience for millions of people, including those I grew up with and know to be my family. We have a responsibility to help change lives, and the stories that I have heard from our users– almost every day — confirm this mission for us!
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
My favorite “Life Lesson Quote” is to “Start Tonight”. It means that no matter what you inspire to achieve, do or build, you can always take one more step forward tonight. These small steps or five more minutes of effort make the difference in your success.
Ok wonderful. Let’s now shift to the main focus of our interview. Can you tell our readers about the most interesting projects you are working on now?
My most interesting project and primary focus is Altro, which we founded in 2019. The platform allows users to build credit by reporting nontraditional forms of payments, including rent and monthly subscriptions like Hulu or Netflix. Altro also offers a financial literacy library of more than 350 audio clips covering cryptocurrencies, investing and more. By listening to these clips, users can increase their confidence score — Altro’s alternative to a traditional credit score.
Democratizing credit-building and reinventing our financial institutions is no easy task, yet, my team and I are committed to reinventing the credit system as we know it. In April, we began onboarding our waitlist of more than 200,000 users. We’re on track to have 1,000,000 active users by the end of 2022, and we’re continuing to expand our features, capabilities and financial literacy resources. We’re also exploring a number of partnerships that will allow us to bring Altro to the 63M Americans who are unbanked or underbanked and deserve an inclusive solution to building credit.
How do you think this might change the world?
The world-changing potential of Altro is enormous, and we’ve already seen some of our users achieve life-changing results.
For example, take Sam — one of Altro’s earliest users. Sam was an Uber driver in Los Angeles who dreamed of being able to move to Michigan to live with his daughter. However, he was routinely denied from apartment applications due to his credit score. With Altro, we helped Sam raise his score from 560 to 714 in only two weeks. Sam was then able to successfully apply for housing in Michigan, where he now lives with his daughter.
At a larger scale, we’re using Altro to repeat Sam’s story across the nation. As previously mentioned, 63M Americans are unbanked or underbanked — meaning these individuals do not have adequate access credit, for example. Credit is the cornerstone of personal finance in America, and without access to it, how can families and individuals purchase or rent cars and homes? Essentially, without credit, Americans are doomed to a reality in which they cannot build wealth and access the perks that come with it.
This is why we built Altro. Millions of underserved Americans have waited too long for the opportunity to change their financial well-being, and instead of waiting on businesses and legislators to find a solution, we created one.
What most excites you about the banking or payments industry as it is today? Can you explain what you mean?
I’m most excited about the exploding popularity of decentralized finance. From the housing market crash in 2008 to racism plaguing loan approvals, the banking industry has and continues to take advantage of millions of vulnerable Americans. However, we’re now seeing folks organizing across the business and political spectrums to put the power of banking in the hands of the stakeholders — the public. Although this will be a long, difficult battle, the Altro team and I are proud to play our part in decentralizing finance for the better good.
What most concerns you about the banking or payments industry as it is today? What would you suggest needs to be done to address that?
I’m most concerned about how minority communities are largely excluded from the perks of contemporary banking.
Racism in banking and finance is nothing new and has existed across these institutions since their conception. For instance, take the Jim Crow era practice of redlining, which denied black and brown communities from acquiring home loans — even if an applicant was creditworthy. Though this practice is now illegal, the effects of redlining and similar discriminatory practices extend to marginalized communities in the present.
In addition to the lack of trust fostered by discrimination in finance, black and brown communities still remain disadvantaged when purchasing homes. A study from the University of California, Berkeley reported that black and Latinx/Hispanic applicants were charged higher interest rates than their white counterparts. These communities also receive lower loan approval rates, corresponding to lower personal wealth and homeownership rates.
Discriminatory practices need to be addressed head-on by legislators. We’ve seen legislation in the past, such as the Fair Housing Act of 1968 and the Equal Credit Opportunity Act of 1974, attempt to repair these inequities. However, they simply have not done enough for underserved communities. Local, state and federal governments need to continue expanding on these laws to ensure every American has an equal, unhindered ability to participate in our financial systems.
Businesses, too, must work to fight against these forms of discrimination. This is exactly what we’ve done with Altro. By providing Americans with a no-cost alternative to traditional credit-building, we’re enabling overlooked communities to enjoy the luxuries of financial systems. Other businesses must do the same. If lenders — particularly those who continue to disproportionately deny black and brown individuals loans — do not hold themselves accountable, forward progress will stagnate.
How would you articulate how the concept of money has changed in recent times? Is it really a change? How is it still the same? Can you explain what you mean?
Money, as we know it, has significantly changed in the past few decades.
We’ve essentially gotten rid of cash transactions in favor of credit and debit cards, and more recently, we’ve seen increasing interest in alternative currencies like crypto. While some remain skeptical of cryptocurrencies, its popularity is undeniable: roughly 46 million Americans — or 22% — owned Bitcoin shares in 2021. This statistic speaks volume about the perceived popularity and emphasis on decentralized finance, a concept that ideally takes power and control from the hands of banks and financial institutions and gives it to the people.
The notion of decentralized finance comes as those around the globe feel the modern financial system has neglected them. However, as the concept increases in popularity and importance, I believe it’s still too early to observe institution-wide changes. Thus far, cryptocurrencies have proved to be volatile and federal legislators have failed to impose significant regulations on these coins. Essentially, finance in the United States is still largely backed and dominated by the US dollar, rendering crypto as more of an investment than a currency.
Based on your vantage point as an insider in the finance industry, what innovations should we expect to see in banking in the short and medium term?
I strongly believe that banking and financial services will become extremely personalized to each consumer. It’s comparable to how personalized social media and gaming have become, where you are only exposed to what you want to see. Banking has had a vague and wide reach that has kept users ubiquity satisfied, but now given the power of fintech and modern innovation, you are seeing a straightforward product offering from newer institutions focused on specific niches, demographics and personalities. Banks for travelers or low-income individuals, for Black & Latino audiences or reward chasing consumers. You will see banking become extremely diverse and spread across sectors very quickly.
In your particular experience, how has the pandemic changed the way you interact with, and engage your customers?
As with other businesses, banks’ in-person operations have been greatly impacted by the COVID-19 pandemic. Social distancing guidelines, occupation capacity restrictions and temporarily closed branches have paved the way for an increase in online banking, with a 200% increase in mobile banking registrations in April 2021 alone. Though online banking has become popular in recent years, those 65 and older have typically been reluctant to embrace online banking. However, the pandemic has caused this segment to ditch bank tellers as their most frequently used method for account access.
Fortunately, with Altro, we’ve had little change in customer interaction given the nature of our platform. Altro’s simplicity allows users to build their credit score entirely from their phones, without ever needing to visit a physical location. Though we operate entirely through our platform, we think it is important to meet with users to understand their circumstances, and how we can use Altro to positively impact their finances. However, as we continue to meet and engage with users, we have remained mindful of COVID-19 protocols and the health of others.
In my work in the telecom space, I’m very interested in the importance of user experience. How much of your interactions have moved to digital such as chatbots, encrypted messaging apps, phone, or video calls? How has this shift impacted the user and customer experience? What challenges do these apps present when used as a customer engagement tool?
Given that Altro was founded right before the pandemic, coupled with our company operating via mobile app and website, we’ve been largely digital since our conception. While the lack of daily face-to-face interaction may pose a barrier to customer engagement, I still greatly value the ability to meet directly with Altro’s users. These meetings are essential in understanding the emotions and experiences of those who have been neglected by our financial systems. For instance, in the coming months, I’m planning to speak at HBCUs across the nation to educate students about financial wellness and how solutions like Altro can further the achievement of such wellness. Our team and I are also meeting with legislators in April.
If you could design the perfect communication feature or system to help your business, what would it be?
Part of democratizing credit access is ensuring that our users have access to the latest information in order to make the most out of their credit-building experience.
I would love to implement a live stream of information on the latest developments in the credit space, including pending legislation, consumer watchdog announcements and so forth. Rather than have a newsletter sent to the ether of users’ email inboxes, this feature would be easily accessible in our app and concise, instead of long-winded legislative paragraphs.
Fantastic. Here is the main question of our interview. What are your “5 Things You Need To Create A Highly Successful Career In The Modern Finance, Banking and Fintech industries?
- Confidence: How you built your confidence + how it’s helped your business.
When nobody would give us money to start Altro, I went and pitched hundreds of competitions and investors until we finally got our first yes, which was $1,000 from USC. From there, we grew to take on more and more interest and small checks, until we grew to where we are now! Being tenacious through the many rejections has given me a great deal of confidence and self-awareness.
2. Mentorship: Any mentors that have guided you along the way?
Throughout the process of securing funding, I have been given the opportunity to meet some great advisors and mentors from many different industries. These advisors have done more than just help build confidence in our model and company, but also confidence in myself and our mission. People like Sean Mendy, Robbie Robinson and Larry Marcus are all crucial advisors who have helped in getting to where we are now. My first ever mentors though, were Sebastian DeVivo and Gary Perez, both of whom believed in me far before Altro became realized.
When looking to solve such an ambitious goal, it has been critical to have similar-minded, experimental and ambitious people around me and the company. The network we have built are all dreamers — people who aspire to change the world as it is seen at face value and build a future that affects the next generation. It has been a massive difference-maker to have a network of like-minded people all together on this mission!
When building a company in your early twenties, you have to build a level of respectable rapport to have serious conversations in meeting rooms with developed professionals. With this, much of my time has been spent building a team around me of professionals but also building my own knowledge base. Much of my experience comes from my being the Vice Chairman on the Board of Directors for the USC Credit Union, where I helped launch products and developed a mindset around the voice of our members. I have been able to see the problem my company is solving firsthand through my own experience as well as through my Credit Union experience.
5. Understanding the needs of stakeholders:
Being in the fintech space, knowing but also BUILDING towards your stakeholders is imperative. From the beginning, the main stakeholder that we have always prioritized is our members, the people using our product. We know that they come from many different walks of life, each with their own aspirations and life goals. For me, I needed credit to start my college education and I needed that education to prepare myself for what I am doing right now. It is similar to our members, we have heard stories of people who are in need of a new car to get to their jobs or fathers who need to get approved for apartments in locations closer to their children. Understanding these needs is imperative on our journey to successfully fulfill our mission to financially empower all.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
I would love to inspire an overhaul of our current credit system.
For instance, in March of this year, the Consumer Financial Protection Bureau — the government watchdog responsible for protecting consumer finances — argued that medical debt should not be reported to credit bureaus or affect credit scores. With more than half of Americans having some form of medical debt, there is no surprise as to why this is substantially impacting individuals across the nation.
Medical debt is just one example of why everyday individuals struggle to retain an adequate credit score. People are tired of being denied home and car loans as a result of damaged credit scores produced by a system that has not been designed for the common American. I think we’re already seeing this movement gain traction, and I hope businesses across the nation join the Altro team and I in revamping the credit system.
How can our readers further follow your work online?
Thank you so much for the time you spent doing this interview. This was very inspirational, and we wish you continued success.
Thank you for having me, David. It’s been a pleasure sharing how we can use finance to bring about positive change across our nation.