Removing Anxiety from the Tax Filing Process with Ben Borodach of April

Our Guest: Tech Visionary Ben Borodach on Transforming Tax Filing Dynamics

Ben Borodach, a seasoned professional at the crossroads of finance and technology, has left an indelible mark on the industry throughout his illustrious career. Notably, he played a pivotal role in scaling Team8 Group into a multi-hundred million AUM fund, where he not only oversaw the firm’s strategy arm and US office but also orchestrated the successful launch of an award-winning cyber ETF and Ph.D. program. His influence extended to deal-making, with several FinTech companies finding new homes through strategic sales to industry giants like PayPal and BitSight. Ben’s expertise also shines through his advisory role at the World Economic Forum, where he contributed insights on central bank digital currencies.

Before joining Team8, Ben served as a FinTech strategist at Deloitte Consulting, where he provided strategic counsel to major US banks and insurers. His expertise spanned diverse areas, including business, technology, M&A, and venture strategies. Ben’s educational journey culminated at NYU, where he graduated with honors, holding a degree in Economics and Business. His commitment to excellence is evident in his Dean’s List and Presidential Honors Scholar distinctions.

In his most recent venture, Ben Borodach, co-founded April, driven by a vision to democratize access to the tax code, making the tax experience more equitable for all Americans. Through April, he aims to empower companies to seamlessly integrate tax features and filing capabilities into their applications, revolutionizing the accessibility and inclusivity of tax-related services.

Episode Transcript

Ben Borodach: If you look at the US market in financial services, still much of the cost is driven around regulation and compliance. And it’s not that the regulation and compliance is bad, it’s there for a good reason, but the cost of maintaining it has gotten so high that it sucked the life out of real innovation from mainstream financial services, even within fintech. And I think if we can find technologies that can deliver compliant solutions in a way that is far more affordable and capital efficient, then we can deliver better consumers to customers at lower costs. And that’s the name of the game of capitalism and innovation. And then everybody wins.

Jacob Hollabaugh: 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’re going to be talking about everyone’s favorite topic come the first few months of a new year, Taxes. Now, I do say favorite topic in just a little bit. As we know, the reality is taxes can be a bit of an annoyance in our personal lives, sometimes even a burden in our business lives, but they are necessary, in the combination of necessary with oftentimes frustrating is exactly what makes the world of tax filing so ripe for fintech innovation and improvement. So that potential improvement is what we’re here to talk about and discuss today. And I’m pleased to be joined by an expert who, with his company is working on this exact problem. I’ve got Ben Bordach with me, co-founder and CEO at April, the company powering financial greatness by integrating intelligent tax experiences wherever people make financial decisions. Ben, welcome to the show. Thanks so much for being here.

Ben Borodach: Thanks so much for having me, Jacob. It’s great to be here.

Jacob Hollabaugh: Yes, I’m excited too. The timing wasn’t purposeful when we booked this, but as we are speaking here early in a new year, I know I actually literally a couple hours ago had my first call of the year with my and my wife’s and our businesses financial planner started talking about tax-related items. So it is going to be that time of the year. The topic matter is going to be timely here. Let’s start back where April itself started. What was it leading up to? I think it was fall 2021, if I’ve got my dates correct here. When it was founded and launched, what was it leading up to that point that gave you the idea for April, or how did you come to decide that helping people more easily file taxes was the mission for you?

Ben Borodach: Yeah, it’s a great question, and I think the answer isn’t trivial because I’m not an accountant by trade. I started my career at Deloitte Consulting and spent time with some of the largest US financial services providers, helping them build their business, usually at the C-suite or board level. And for the last five or so years, I was at a place called Team8, where I built and scaled, and sold a couple of companies that were at the intersection of cybersecurity and fintech. And so I’ve built my career around integrating new technologies. So this could be like multi-party computation, leveraging it to secure digital assets or understanding cyber risk and using it to inform the credit score, and selling those capabilities to companies like PayPal and Moody’s and others. And so develop this knack for a holistic understanding of financial services and understanding how we could apply novel technologies or new technologies and introduce them in a reliable and trusted way. And so a few years ago, when we started looking at the future of consumer finance. There was a few things that sort of stuck out to us. A lot of the things in the digital story had played out over the last decade, right? The last decade in financial services has been all about bringing on capabilities that used to be available only to the very select wealthy or were only available in a brick-and-mortar store and bringing those online. And I think over the last 10, 15 years since the great financial crisis, overall the industry has done a great job. This is both traditional providers, like The Chase’s of the world or the Charles Schwab’s of the world, and, you know, new providers in the market, like a Chime or Acorns or a Robinhood or someone like that. And so there’s now many kinds of services that are available, whether that’s your traditional checking account or getting paid early, or investing in an ETF. There are many things that are now available to most Americans. And when we looked at it, we thought and said, maybe the story of fintech is over. Maybe there are things to do globally. But maybe in the US things have all played out and there’s not much left to innovate. And what struck us is that now that all of these services have been integrated online, we’ve lost that personal touch. All of those Americans that are used to working with a banker or someone locally don’t necessarily have that opportunity because those branches are closing or going away or their hours are reduced, or that’s just no longer how they’re working. And what became clear is that taxes, the abandoned child of fintech. It is either the largest expense that an American has throughout the year. And that’s in terms of their taxes owed, their federal taxes owed, or does the largest single paycheck in the form of the tax refund that an American is going to get. There’s about $300 billion remitted each year in the form of tax refunds. So we’re talking about massive amounts of money that have a dramatic impact on the outcome of American households and small businesses. And what we found is that these are just absent from financial platforms. If you go to your bank, your credit card issuer, your investment provider, or small business accounting firm, you can’t do your taxes. You can’t even get tax insights. And by integrating tax where you transact, where you’re managing your money, we can help Americans gain better control over their overall finances. And that’s really the goal behind April is to deliver a better tax experience, not just filing, but also providing visibility throughout the year. And by doing so, we can actually not just have a better filing experience, but we can actually change the financial outcomes that American households and small businesses are having.

Jacob Hollabaugh: Yeah, it makes some sense, especially with my intro there of kind of the mindset around this world, that it would be one of the maybe left to the end of the line of places for people to come in and innovate. And I think you’re spot on with with every guest we have on the show. We’re talking to all these different fintechs, and it does seem like we have hit a point where there’s less and less of the this is brand new. We’re creating a new little industry, a little niche within the payments chain, the financial chain, whatever, and more. We are trying to do it better. There’s room to do each of these things better, but we’ve filled most of the digital gap that existed over the last decade and a half. Now I’ve got some April-specific questions for you in a minute, but to continue setting the stage first about just the world of taxes in general fill me in because I think so many people don’t think about taxes other than the one time they have to do it. And so the experience is very individualized of like, “I know where I go to or I used to do my taxes.” But I can think of the couple of big names out there that I’m going to see the commercials from any day now, starting where though do right now before services like yours are coming in where do people, for the most part, file their taxes? How do they file? What’s like the common industry process look like prior to how you’re trying to change it?

Ben Borodach: It’s a great question. Let me take a step back and talk about how we got to where we are because the US system in and of itself is quite unusual. It’s unusual for a few reasons, right? The first is that we have a separate federal and state system. So you owe federal taxes to the US government, and you also have state taxes in about 43 states. And those systems are not interoperable. They work together in some ways, but they’re basically separate entities. And so and then some of them even have municipalities and jurisdictions within them. And that makes it very obtuse and asymmetric for an American taxpayer to understand what their taxes might be and even who they may owe them to. Right? Sometimes you live in one state, work in another, and that may not be straightforward. The second thing is we’ve had what we call the Moore’s law of taxes, which is we’ve had a hyperinflation of the tax law over the last few decades. And so we’ve gone through about a 350% growth. And so the tax law keeps growing. And so that we seem to add but not subtract. And that makes this process both ever more cumbersome for Americans and small businesses. And it also makes it more difficult for new entrants to enter the market, which I want to talk about in a minute. The third component of our system, which is also unique, but very American, is that we put the onus all on the taxpayer. Right? We don’t really withhold the taxes. We say it’s your problem and if you screw it up, we’re going to give you a penalty and maybe something worse if you do it intentionally. And when you look at those things, it makes the process one that provides a tremendous amount of anxiety to Americans. And I think that’s true of all Americans. I think you’re right that different taxpayers are going to experience that anxiety in a different way. So if you’re a lower-income American and you rely on your refund to fund your life, then you’re dependent on that check. So it is paramount that amount of money is the maximum amount it can be, and your reliance on getting that money quickly. And if you’re someone that may have more means you may want to reduce the amount of taxes paid, but you also start to get anxious about am I reporting everything. Do I have all my documents? Am I doing this correctly? Does my advisor know what they’re doing? And the process is such that it’s very difficult to have visibility and true confidence in what you’re doing. And so when you look at the providers to answer your question directly in the market is you basically have two traditional options, right? There are some shades of gray within that. But either you go to an accountant, that could be a true accounting firm, or it could be a small mom-and-pop accountant, and you’re going to work with them probably over email or some kind of digital organizer, and you’re going to do some exchange of documents, and they’re going to use an accounting software in the background and produce your return. So that’s going to be way number one. That’s about 60-odd percent of the market plus or minus. And then the other part is going to be the do-it-yourself part of the market. That’s going to be the TurboTax that folks are familiar with. That’s been the behemoth in the industry where you can go online, and now they have a litany of different options for how you can file. You can do it on your own. You can do it with someone in a parallel track with you and pay some more money.

Jacob Hollabaugh: So you mentioned a new, I remember looking on your site too. You’d had a really good graph, like the tax code, how much it’s expanded and expanded over the years. Would you say that it is all been necessary? Because I would assume we talked about the digitization of everything in the commercial world over the last decade and a half. So you would assume, obviously, the tax would get more complex to some degree with all of those changes, but maybe not as bigger as it has or as complex as it has. Maybe there was room to get more efficiencies built in. How have you perceived the tax code changing in the last decade and a half, or dealing with the digitization of the commercial world?

Ben Borodach: Yeah, I think it’s due to a few things. I think one is digitization, as you astutely pointed out. I think the second is globalization. And then the third is just a changing economy. Right? And so when you look and this is somewhat more of a philosophical conversation, but since we’re on a podcast, we’ll daydream a little bit. When you look at taxation in the United States, it’s not really taxation in the classic sense, right? Taxation in the classic sense basically says, “Hey, as government, we need to fund our government. We have a population of constituency, they’re earning money, and we’re going to take a share of that money, and we’re going to use it to fund our operations.” One, it’s not really how we fund the federal government anymore. It is how we fund state and local government. But secondly, if you look at our system and you look at the law, which you actually find is a socioeconomic construct that delineates different incentives that we want, we’ve decided we’re going to create for our population. So, “Hey, if you buy an electric vehicle, you can get some additional credit back if you had children, because we want to have population growth because it’s good for our economy, it’s good for our civilization. We’re going to reduce your bill. And because you have an additional burden.” And so there’s all these things that have piled in over years. It’s true that they could be simplified. But we’re also a huge country. We’re 330-odd million people, and we baked a lot into the system in order to account for that. And to your point, not necessarily reduce it all. And we have new things like cryptocurrency and climate change that are adding to those pressures. And then we also have states and we have the interoperability between state and federal. And then things that the states do individually, some of which are specific to certain geographies, right, like Montana or North Dakota, are going to have different needs than Hawaii or Texas or Vermont. And so those tax codes reflect those constituencies. And you can look at it as a feature or a bug. Right? Either you can say, this is so terrible. It’s so complicated. Nobody can figure it out or you can say, we have a big country and we provide a level of customization for the different groups of people across a very large black North Atlantic continent.

Jacob Hollabaugh: Yeah, absolutely. And we’ve both referenced a bit throughout this, the last kind of high-level thing I want to ask, and then I want to get into a little bit about April specifically, but we both referenced and I opened with that. This is a frustration for a lot of people. This brings a lot of anxiety to a lot of different people for different reasons, depending where you’re at in life or what you have going on. But there is a lot of negative feelings that come around the world of taxes, and I wonder how much of the problem is just getting rid of that mindset, or being able to rid the anxiety itself. Like, is there a lot of benefit to be derived simply from just taking the fear and frustration out of the equation for people outside of then getting into like where within this tax code? Could you be doing this and do things better, whatnot? How much benefit is just derived from like, if we could make taxes something that people the moment I say it doesn’t bring up anxiety in people and doesn’t drive them crazy with frustration?

Ben Borodach: Yeah. Our sense is that generally, people are anxious and fearful about things that they either a) don’t understand or b) feel like is not working for them. That’s the case for the lion’s share of Americans. I think most people understand we need to pay taxes. We can argue about whether they’re going to the right places and how effective our governments are, which is, you know, is separate but related issue. But I think ultimately the system is set up such that in the models with the accountant or with an existing incumbent DIY provider, you just don’t understand how what you’re providing correlates with your outcome. You’re like, what credits and deductions did I get? How did this work? Why was I asked all these questions? And so at April, we’re centered on three tenants. One is being continuous. So that means that you can track your taxes all year. So by the time you go to file, you should actually have an understanding of your outcome. And having the opportunity to update your income or your capital gains or your family situation, and seeing how that changes your outcome should provide both a level of control and familiarity with the process and understanding of what to expect. Right? People hate surprises. And we just talked about how big of an expense or paycheck that is like if you’re expecting a $3,000 tax refund and that’s the biggest check you’re going to get as a family throughout the year, and that number is $2,200 like that hurts. You just finished holiday season. You probably need that money to pay down some debt or fund something for this year. And that’s a direct hit. And so being able to monitor that and be able to plan for that and be like, “Okay, the tax law has changed this year. The money that I got maybe less or I had a change in income. And so it’s going to be different,” is one big step in the direction. The second step is to make this personalized. When you look at the status quo in the industry, it basically says we want this to be complicated because the more complicated it is, the more you’re going to have to pay for us to resolve it. And so in April, we curate a personalized tax interview for every single taxpayer. Basically, the system learns about you as you go, and we ask questions that are correlated specific to your situation. So an Uber driver is going to see very different questions than a W-2. And someone that earned interest income is going to see different questions and someone that earned investment income and so on and so forth. And by doing that, we can build confidence, because now you’re seeing things and you’re answering questions and you’re seeing more questions or fewer questions around a topic based on your situation. It can create a level of confidence from the taxpayer around the system and how it works and how their system relates to the outcome. And the third is we can embed it inside of an app that you already use. And that’s a big paradigm shift. And it’s the third cornerstone of April that allows us to really break the status quo because the status quo is all about leveraging the asymmetry, the fear of the unknown, and convincing the consumer that they need to pay the maximum amount possible in order to resolve the issue. And if we just told everybody, hey, you’re going to have the best possible experience and you’re going to know upfront what you’re going to pay, and we’re going to put it inside of an app that you’re already using to manage some of your money, or be paid or trust with some aspect of your financial life. Oh, and by the way, we’re going to leverage the data that platform already has to further experience, and we can give people much more confidence that this is actually something that can work for the American taxpayer and that they can take control of. And that’s what I find is the unlock is when you feel like the system works for you, you feel like you’re getting ahead and you feel like you’re in control. Your perspective changes on how you view the topic.

Jacob Hollabaugh: Yeah, that control and the understanding. To take it back to the beginning of your answer, that word really rings very true for me, because I feel like I’ve certainly been this up until recent years, where I thankfully have a little bit better of a situation going on and have a lot of trust and understanding with the folks who take care of my businesses and my personal taxes. But for the longest time, and I feel like so many people like if they go to one of the DIY shops or do it on the online, they might get to the end. But I always remember feeling the question of “Okay, it’s in or I’m done. Right? Did I do it right? Okay, great, I’ll come back next year and hopefully nothing went wrong. Hopefully, I don’t get an email from the government or a letter from the government.” And removing that feeling of actually being able to like “No, it is done.” I do know that it was done properly on my benefit and everything ran smoothly and just I understand everything and can feel that anxiety gone. Definitely goes a long way. So two questions in one here for you. Where would a consumer interact with April’s products with it being embedded? You mentioned in different places where financial decisions are already being made. Give me some examples of where you would interact with some of your different services. And then along with that, what was or was there ever a choice early on? Was it always, “We’re going to go this route of kind of this embedded tech within other places?” Versus was there any thought ever of like, “No, this DIY shop, there’s a couple that exist. It’s the right foundation, just the wrong execution. And we should be this own standalone service you have to come to.” Was there ever any thought of like redoing the old model just differently versus creating this new model? And with your new model, where would I be typically interacting with your products?

Ben Borodach: Great question. So I’ll try to answer the second one and then go backwards. So you could find our products in Payroll companies, banking apps, credit card apps, savings, and investment apps. So if you’re paid in the wallet, you can get a real-time estimate of your taxes based on existing Payroll data. You can adjust your paycheck based on answering some additional questions and basically saying, I want to get close to zero, or I actually owe money and I want to make sure that I’m up to date. So we give you a sliding scale of where you want to be and create a buffer to make sure that you’re within a safe zone. And then you’ll be able to also file your taxes from within the app. And so when you look at that trifecta of being able to estimate, optimize, and file all from within a system with which you’re already being paid, there’s a lot of potential to completely change the way that users are interacting with this system. And I think when you look at the D2C model, there are just structural challenges that just exist in that model that you can’t overcome even with a better experience. Right? Like by being embedded in Payroll or by being embedded in someone’s bank, I already have some semblance of who they are. I can do things in that system because I’m living inside where they get paid or where they store their money, and so I can’t do that outside. And then we did use it out and say like, “Okay, what if we built this amazing all-year-long tax app with users come to it?” And I think the answer is like, honestly, probably not. I don’t think people want to think about their taxes. I think the dream for April is taxes are done for you. It happens in the background and you’re getting paid. You’re getting credit, you’re investing, you’re saving, and we’re optimizing this around you. And so to be able to do that, we need to live alongside where you manage your money and where you transact. And you never know where the future goes. But we’re exclusively available to your partners and plan to continue being so.

Jacob Hollabaugh: Yeah. And so at the end when the taxes are actually filed, it is then still through either my bank or a Payroll like a Gusto type of place. It isn’t. I have all the info from here. I’ve been interacting via that app, and I have to go over to an April app or something at the last minute to actually push the thing through and actually file.

Ben Borodach: Yeah, there’s a bit of like anything in financial services. It took a lot of thinking and engineering from different perspectives on how to engineer the solution, but effectively the services made available in a seamless manner where you don’t have to like create a separate login. It’s the data is connected in a compliant manner, but the actual service is provided by April.

Jacob Hollabaugh: Yeah for sure. And that makes a lot of sense. I think thinking of myself as a consumer, I agree, if it was its own standalone app, I would probably be if I heard a conversation like this convinced to download it the first time. Like I should be someone who does that. I should stay on top of my stuff, and then I would probably never open it again until it’s actually tax season. But if I do have that level of I would like to care more about it. And so if I’m presented in the moment within other apps that I am already having to go in, I could see myself being much more keeping myself in the loop, and that I want to do that. I just maybe wouldn’t actually follow through on that action if it wasn’t so easily and seamlessly presented to me. So a couple of final trend-related questions for you then. We’re now in 2024, so I can finally retire after a full year of using my same AI joke over and over I can retire it, but 2023 was the year I went mainstream. We saw massive amount of adoption and innovation happening. Your company is obviously built on an AI-driven platform, so I’ve got to ask you, not even necessarily just to your company or the tax world, but zooming back out to the financial industry as a whole. Where do you see the financial industry at as far as both realizing and harnessing the power of AI and some of these other new technologies to better the industry? And what do you see as maybe the main changes or innovations AI is going to bring to how we all interact with the financial industry, or how the industry itself operates?

Ben Borodach: I don’t think AI is going away. So I think your joke, unfortunately, will have to be reused. I think we are at the early innings of this innovation and the impact that it will bring. There are commodity-type innovations that the industry is early in recognizing but will proliferate fairly quickly. I think one obvious one is in customer support, where the challenge has always been like chatbots weren’t quite good enough, but if you’re eloquent about it now, on top of that, yeah, they are pretty good for a lot of inquiries, better than FAQs, and better than waiting 20 minutes and far less expensive. So I think that’ll be a real game-changer. And then I think you’ll see bespoke, differentiated capabilities being built that are more on the back end that the user necessarily doesn’t see or interact with. We’re certainly an example of how can you accelerate or deal with the massive tax law, and how can you operationalize that and convert a lot of code. That’s one example, but I think there are others around your customer models, AML models, fraud models. We’re going from a place of small language models being able. Will deal with some data science and regression, and a couple of parameters to being able to deal with many parameters. And so in the beginning, those are going to take tuning, they’re going to give us some weird results, and we’re going to have to use them alongside humans and alongside some of our old models. But over time, we’re going to get more comfortable and we’re going to understand how to do anomaly detection better with these models. And I think it’s going to change the cost structure and the services that we can deliver. If you look at the US market in financial services, so much of the cost is driven around regulation and compliance. And it’s not that the regulation and compliance is bad. It’s there for a good reason. But the cost of maintaining it has gotten so high that it sucked the life out of real innovation from mainstream financial services, even within fintech. And I think if we can find technologies that can deliver compliant solutions in a way that is far more affordable and capital efficient, then we can deliver better consumers to customers at lower costs. And that’s the name of the game of capitalism and innovation. And then everybody wins.

Jacob Hollabaugh: Absolutely. Final question then for you, what would you say was the biggest tax-related story of last year, 2023? And then looking ahead to this new year, 2024, are there any major decisions, inflection points, announcements from the government, anything the industry is awaiting or you in April are looking towards as major inflection points in the year 2024?

Ben Borodach: We’re headed into an election year. So I think naturally you’re not seeing massive changes. I think one thing that I’ve been on top of writing about in industry, which I think actually the IRS has done a really good job, in my opinion, is bringing clarity around legislation in cryptocurrency and digital assets. So I think they’ve done a really nice job of updating the way that those assets are treated and the way that especially compared to some of their other peer regulatory bodies, I think they’ve done a really nice job of of helping. There is an incentive there because obviously, they want to collect the money, but I think they have provided a a really good amount of clarity. And I think the other area to keep an eye on is going to be more investment and opportunities around climate and seeing more credits and deductions coming that incentivize sustainable renewable energies, investments in cars, homes, and other areas. So I would keep an eye on that area. And the third that I’m keeping an eye on, although I don’t think it’s changing this year, is salt because I live in a high-taxation state and benefit less from not being able to make some of those deductions, but it’ll be interesting to see with the election cycle. My guess is that we’ll see some real things probably get pushed through in 2025.

Jacob Hollabaugh: Yeah, and it’s interesting, now that I’ve lived through enough election cycles, I feel like taxes used to be one of the preeminent topics we heard about all election season long. And the last one, I don’t think I heard about it quite as much, and I have a bad feeling maybe it won’t be a topic of conversation this time around, but that is for a very different podcast, so we will excuse ourselves from that. Ben, this has been a real pleasure for those listening, who may want to follow you or learn more about April and your services, keep up with everything, you and the company have going on. Where would be the best place for them to go to do so?

Ben Borodach: Yeah, you can find us at getapril.com, or you can reach me at ben@getapril.com.

Jacob Hollabaugh: Wonderful. We’ll link to those and more in the show notes below. Ben, thank you so much for your time and knowledge today. I’ve greatly enjoyed the conversation and hope to speak again sometime soon.

Ben Borodach: Likewise, Jacob. Appreciate it.

Jacob Hollabaugh: 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 soarpay.com/podcast.