(Ep 27) STEP -> Banking for the new kids on the block 💳

CJ MacDonald | Co-Founder & CEO

Oct 21, 2020

Hey friends,

Back again with another edition of The Founder Newsletter - this is Episode 27. If you’re new here, my goal is to give you a quick synopsis of what got me thinking from this week’s episode of The Founder Podcast in 5 minutes or less.

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And who am I?

I’m Kallaway - a future founder trying to get some answers before I jump in the ball pit myself.

Let’s get it.

This Week’s Episode (Ep 27) 💳

Guest -> CJ MacDonald, Co-Founder & CEO of Step

Mission -> Step aims to become the first “step” in the financial journey and not only provide easier access to send & receive money, but also educate the next generation on the fundamentals of personal finance.

Episode available on -> Apple Podcasts | Spotify | Website

In this episode we talk with CJ about…

🔮 The future of banking, payments and fintech

👨‍👩‍👧 Gen-Z demographic tendencies and behaviors

🗣️ Referral programs and building virality

❌ Why businesses actually hate selling gift cards

📋 How Step is different from a traditional bank

Summary 🔍

What is Step and how did CJ get started?

CJ grew up in Bay area and always had the entrepreneurial itch.

Whether it was his paper route or baseball card shop, he was always hustling and realized he loved building things, a characteristic that would serve him well throughout his career.

After playing competitive hockey on the east coast during boarding school and college, he was ready to enter the business world and immediately gravitated towards startups.

He spent time in the early stages at a couple of startups before founding Gyft, a digital solution for gift cards that he sold to First Data Corporation in 2014. After a few years at First Data and thinking about what could be next, he realized there was a major gap in the market for banking products that were designed for kids and families in the digital age.

That was the initial spark for Step.

Today at Step, CJ and his team are revolutionizing banking and financial literacy for the next generation. Step was built specifically for teenagers so anyone 13 years and older is eligible to enroll.

When a new user signs up (with proper parent approvals), they’ll receive access to a free FDIC insured bank account and Visa spending card.

Step’s goal is to become the first step in the financial journey and not only provide easier access to send & receive money, but also educate the next generation on the fundamentals of personal finance.

After a closed beta with rave reviews from early users, Step launched publicly a few weeks ago with support and endorsement from TikTok stars Charli D’Amelio, Addison Rae and several others. Safe to say they are off to a fast start.

Here’s why I’m a fan and excited about the future for Step:

Step is playing in a previously unserved market. Traditionally, pre-teens and teens (12-15) don’t have their own bank accounts (they’re typically added to their parents) and are unable to access things like Venmo/PayPal/CashApp because they are under 18 and need an underlying bank account to access. In today’s world, digital commerce is ubiquitous and there are many situations that a teen would benefit from having their own card/account
Step is able to be the first stop for teens. When it comes to money, typically people are loyal to the institutions they grew up with. My parents opened an account for me when I was 18 at Fifth Third and it took a lot for me to switch. If Step is the underlying financial provider for millions of teens around the world, it will be interesting to see what happens as they grow up. This could lead to a lot of potential partnerships for Step
Step’s mission is to improve financial literacy. I think the lack of financial education in this country is a crime. Step has the ability to introduce basic financial principles to teens at an early age and build important habits that will last a lifetime

CJ’s Startup Manifesto 📜

What’s a Startup Manifesto?

At the end of every episode, I ask all of my founder guests the same question:

If you had to write a Startup Manifesto with 5 of the most important key lessons or pitfalls to avoid when starting out, what would they be?

Here’s what CJ had to say:

Persistence – you’re going to face a lot of adversity no matter what you do. Being able to be persistent in your everyday life and business is super important
If it were easy, everyone would be doing it. Life is not easy. Business is not easy. Doing a startup is not easy. Where you can really separate people is in that work ethic. Don’t take the traditional path.
The people. Surround yourself with people smarter than you and that make you a better person. The people aspect is so important to get right.
Execution is key. People have great ideas but can they actually execute on them? There’s a big difference between people who can and people who can’t.
Sacrifice. You gotta make sacrifices in life and business. Some of that may be your mental health and wellness. You have to be flexible and adjust to situations. Sometimes people only have a lens of looking one way and the startup world is nothing like that.

What Got Me Thinking From the Episode 🤔

After reflecting on my conversation with CJ, here’s something that really got my wheels spinning:

Customer-driven product development 🤯

If you listen to CJ’s founding story for Step, he originally came up with the idea for the company when he was trying to give his parents ideas for gifts to get his kids.

He said that when he was growing up, the default was for friends and family to get AAA certified US Savings Bonds. He said for every holiday and birthday, his grandfather would give him a savings bond that his parents held onto.

When he was 25, he was able to cash in those bonds and use it as a down payment on a house. Without those bonds, he wouldn’t have been able to get into real estate.

As he looked to build the digital version of bonds, he thought it would be compelling to offer a digital account that family and friends could use to deposit money as gifts that would start his kid’s financial future on the right path.

But when he started doing customer research with kids and parents, he realized the opportunity was much much bigger than he thought.

Kids wanted the ability to have a bank account and a spending card that was theirs. They wanted to go to the mall or the movies and swipe their card for the things they wanted. And parents, who knew the importance of teaching their kids financial literacy, wanted a way to have a secured card that they could control and send funds to when needed.

The gifting aspect of the card was just a feature and quickly became a few lines in the backlog.

Without doing copious customer interviews and trying to understand both sets of customers (parents and kids) at their core, CJ would never have unearthed this massive unmet need and Step may have gotten off to the wrong start.

CJ and his team may have developed a different product, not gone after the necessary approvals to operate as an FDIC insured bank, and been down a different path. Who knows if the pure gifting product would have been a success on its own.

Starting with what the customer wants and actually listening to them is so critical n the early stages.

I imagine CJ was so excited when he came up with the original idea and maybe already started to build concepts in his head.

The best entrepreneurs are the ones that can shift their focus to what the customer wants and leave their favorite ideas at the door if there’s a disconnect.

Can’t wait to watch Step take over the teen market.

Wrapping it Up 📕

I hope you found this interesting and inspiring! If so and you want to help support my journey to bring The Founder to millions of people across the world, here’s a couple things that would be really valuable to me and the show:

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Till next time ✌️

Kallaway