Why Ace Callwood says the rules of fintech are made to be broken by Anthony Noto

30 Sep Why Ace Callwood says the rules of fintech are made to be broken by Anthony Noto

As the U.S. “gig economy” expands, millions of 1099 workers out there are still frustrated by the challenges they face during tax season as they figure out what they owe and what’s owed them. No more, says Ace Callwood.

The 25 year-old CEO and 2016 Upstart 100 honoree spoke to us before stepping up to the stage to pitch his company — Painless1099 — to a packed house of finance pros at TechStar’s most recent demo day in New York City. Callwood has hope that an easier tomorrow is on its way for all those for-hire workers that make up companies like Uber and Handy. Today, however, there are plenty of challenges since regulators are slow or even reluctant to adapt.

Even though the disruption Painless1099 creates is a sign that financial planning is getting easier, many of the vagaries facing the tax system warrant regulatory scrutiny, Callwood explains in the Q&A below. But the needs of the end consumer should come first, he adds, citing how his determination to help the 54 million independent contractors out there stems from the fact that he knows, first hand, just how aggravating the old process can be.

What inspired you to help the freelance economy and contract workers?

I went through the freelance world. Both of my partners started there. We started building products and solutions for people like us and that’s been the common theme in our past couple of projects. It’s also something my mom beat into my head, in the best of ways: “To whom much is given much is required.” That was my first tattoo, and all my sisters have the same tattoo. It’s sentimental.

And we’re all talented in many ways. Mine is inspiring people to plug into products and really get behind one common theme, as well as helping people be more efficient and effective. The other thing I tell my team a lot is that “In every ‘no,’ there is an opportunity.” When I was a freelancer, I was asking “Hey are there health care benefits? Does this exist? Does that exist? How do we streamline this?”

Everybody told me that didn’t exist. For me, hearing that over and over again, brings me to this realization that we build things for a living, if nobody solves that problem, it’s incumbent on us to solve it.

What are some of the major innovations you’re noticing in financial technology?

Fintech has just been blown wide open. If you think about how technology has changed lending, how it changed access to credit products, or income smoothing, or what we’ve done in making taxes not only digestible but automated, I think we’re at an inflection point in financial technology specifically where we’re able to assess the individuals who can get into these products and streamline the interaction with said products.

A lot of times I talk to the guys around the horn at my shop, and the question is, how do we make this more simplified, more direct and more straightforward, for our users? It all comes down to getting people into a product, getting what they need out of it and then getting out of it.

There shouldn’t be friction, stress or frustration when you’re interacting with technology, or your financial institution’s services and that’s what this group [Barclays Accelerator] is about — making both of those things easier.

Is there anything that frustrates you about fintech these days?

Regulation, I think is my non-diplomatic CEO answer. Regulation is a pain in the you know what. But by the same token, regulation exists for a reason. There are a couple of bad apples out there and they screw things up for all of us. But it makes us think long and hard about the repercussions about not being smart or wise when it comes to some of the processes put in place.

Regulation exists for a reason, there are rules, which are sometimes meant to be broken, but by and large the way we look at regulation, is it was put in place for a good reason. Let’s give them a better reason to change, shift it or interract with.

How might regulators be hindering fintech?

We play to regulated industries. Taxes and fintech, or banking in general. For instance, KYCAML — know your customer, anti money laundering — the hurdles that one has to go through to open up a new bank account. Tons of friction to get somebody in. We collect from roughly 40 data fields to open up a new account at Painless and there are both pros and cons to that.

On the pro side, that regulation exists so no one can open an account in your name (the vetting process for opening up an account). Anti-money laundering makes sure there aren’t terrorists opening accounts and doing nefarious things. They exist for good reasons. But when you think about the end consumer, the friction for the average joe is really high to get into that product.

The beauty of what we do in fintech is streamline some of those. verifying identify and making sure the frequency and flow of money through isn’t being done poorly. By the same token, that’s all passed down to the end consumer where they have to feel part of the rub there. That’s one example of many that come to mind.

This is your latest endeavor, having previously founded ambient sound website Coffitivity. Where do you see Painless1099 next?

For us — you mention previous projects — I think all of those have really culminated in what is now painless. All of the experience going into this, all of the things that we tried and were successful at and others that we failed at have all kind of led to the product that is Painless serving an audience that we know really well.

For us, it’s “Can we give a full time employee-like benefits — the support system and infrastructure — to the fastest growing demo in our country’s workforce?” We’re thinking about the almost 54 million independent contractors out there who have no infrastructure but are building the backbone of our economy.

So when i think about the benefits package that they don’t get because they don’t have a quote, unquote “real job” — being able to provide that allows them to focus on what they know and love, while we automate the rest. That’s the bottom line for us. Plugging in to solve problems for people just like us.

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