CEO Corner: Customers who do nothing may no longer be good for business

Here’s a good business model: Lend someone money at a 24% interest rate. Wait a year or two until their credit improves enough that they could borrow at 12%. Keep charging them 24%.  Maybe good is the wrong word.  It is at least a profitable business model.

Another one: pay someone 0.1% per year on their bank deposits.  When interest rates go up to the point that bank deposits are now worth 4.2%, keep paying them 0.1%.

A surprising amount of consumer finance works this way.  Companies make money by getting people into sub-optimal products and keeping them there.  If you are reading this article there are almost certainly some aspects of your finances that are sub-optimal.  And you probably already know it, but just haven’t got around to dealing with it.  How about subscriptions? I don’t think that even requires further explanation.  You can even sign up for a subscription to help get rid of your subscriptions.  I haven’t decided if that is bad or good, but it is definitely weird.

There are a host of human behaviors that explain this stuff.  Behaviors like the Endowment Effect, Status Quo Bias, and Loss Aversion.  Some smart people have written extremely interesting and surprisingly fun (i.e., not too academic) books on the topic, like Predictably Irrational by behavioral economist Dan Ariely and The Undoing Project by Michael Lewis (about behavioral economists Daniel Kahneman and Amos Tversky).

Seriously, read those books if you find this stuff interesting, but for now just know that human behavior is working against you in favor of large financial companies.  It might be only a slight exaggeration to say that irrational behavior is keeping the entire financial system together.  If every single consumer optimized their finances tomorrow, would the entire banking system’s profits turn negative immediately?  I don’t know, maybe?  I just pulled a couple random (and nameless) banks’ financial statements, and back-of-the-envelope math shows that if they were paying 4.2% interest on all their deposits (similar to what large banks are offering to new customers today), it would wipe out more than 50% of the banks’ net income overnight.  And that is just looking at one side of the banks’ balance sheets.  If all of their consumer loans were refinanced into optimal consumer loans, that could easily wipe out the other half, and probably much more than that (the banks I looked at earn about 5 times more in interest income on consumer loans than they pay in interest expense on their customers’ deposits, meaning small changes in the rate banks are earning on their loans would have a disproportionate impact on their net income).

AI Agents to the Rescue

One of the significant insights from behavioral economists is that knowing about all these biases is not enough to overcome them.  They are too powerful, and grounded in how we have evolved as a species over millions of years.  

But with the advent of agentic AI, we may finally have the tools to overcome our irrational biases.

Consider that same person discussed in the first paragraph who is paying 24% interest on a $20,000 loan, but whose profile has changed so they could qualify for a 12% loan.

The borrower should be exploring a refinance. It could reduce their interest costs by about $200 in the first month alone.  Real money.  But that requires comparing offers, understanding fees, filling out applications, possibly talking to someone on the phone, and ultimately taking action.

Or they could do nothing - it takes exactly zero minutes and no mental energy.  Status quo bias takes hold.

Now imagine an AI agent that continuously monitors the borrower's financial position. On Tuesday morning, it says: "You're paying 24%. You qualify for 12%. Would you like me to take care of it?"

The borrower says yes. The agent handles the rest, and the business model that counts on consumer inertia to drive profits has a problem.

Achieve’s Approach

This is really exciting to us at Achieve.  My co-founder Brad Stroh and I started Achieve because we believed there had to be a way to create a consumer finance business that makes money by helping people better manage their debts, rather than by trying to keep people in debt.  Most people think of their assets as a portfolio to be optimized.  Almost no one thinks of their liabilities that way.  Asset management products are sold as a holistic solution. Credit products are sold as a bunch of individual point products (credit card, auto, student, mortgage, etc).

We’ve come a long way toward building that vision, offering a suite of services designed to help consumers manage their liabilities and migrate over time to lower-cost credit.   We have helped over 2 million people consolidate or negotiate over $40 billion in debt.  But one of our biggest challenges has always been getting people to act.

AI can fundamentally change that equation.

With a consumer’s permission, an agent can monitor borrowing costs, recognize when better terms become available and help complete the steps to secure them.  As your credit improves or your circumstances change, your agent could revisit decisions that otherwise might go untouched for years.

For companies built around helping consumers improve their finances, that is an enormous opportunity. For companies whose economics depend on customers doing nothing, it is an enormous threat.

You are already seeing financial institutions start to block consumer-permissioned AI agents from accessing their systems.  The banks claim it is about data security and fraud.  And those are real concerns.  But they are completely solvable problems.  Banks have solved much larger problems than this one.  But banks are also some of the largest, most profitable businesses in the world, and agents are threatening those profits, so they will not make it easy.  Look for more intense fights over consumers’ rights to enable agents to access their accounts.  Look for banks to continue fighting back, and look for Washington to get involved.

In the meantime, we are very excited about the agentic future we are building at Achieve - in a way it is enabling our original vision from nearly 24 (!) years ago finally come to fruition.  Stay tuned for more to come from us on this.