How Fintech’s Third Wave Will Change How You Bank

November 13, 2019, 1:30 PM UTC

The origins of today’s boom in consumer-focused “fintech,” or financial technology, trace back to the global economic meltdown in 2008.

Since that disaster struck, the industry has evolved through three discrete phases, says Jason Brown, CEO and cofounder of Tally, a fintech startup, on Balancing The Ledger, Fortune’s show covering the intersection of finance and tech.

The first wave met demands resulting from the aftermath of the financial crisis: A need for credit fueled alternative lenders. Online and peer-to-peer marketplaces, such as Prosper and LendingClub, flourished, while laid-off workers seeking to re-skill buoyed student loan providers like Social Finance, or SoFi.

The next wave swelled atop a flood of mobile devices that came after Apple debuted the iPhone in 2007. Access to consumers became the primary object for upstarts. Apps appealed to younger generations, used to flicking and tapping smartphone screens rather than visiting branch offices.

This paradigm is still in full swing. Some of its best-known champions: Credit Karma, a free credit score provider, Internet-only “neobanks” like Chime, Monzo, and N26, and online stock traders like Robinhood. “These are just really easy-to-use mobile tools that you can open up the toolbox and do your financial work,” Brown says,

Even as the second wave crests, a third is beginning to rise: Automation. “It’s going to a world where there’s an intelligent service that actually is doing that thinking and work for you,” Brown says. “Instead of you having to spend your time and figure out what should I do? It has already figured that out based on your goals.”

Brown is talking his own book, of course. His business, Tally, automates people’s credit card debt repayments, lowering their interest rates, and helping avoid late fees, the company claims. The firm also offers a savings product that automatically squirrels away funds, but pays no interest.

Tally’s approach to savings differs substantially from many of its peers. Rivals like Goldman Sachs’ Marcus, digital bank Ally, and so-called robo-advisers such as Betterment and Wealthfront are vying to offer the highest-yield savings account possible, usually around 2%. But Brown isn’t interested in that race, he says.

“What matters a lot is who your customer is,” Brown says, noting that Tally is going after “the middle 50% of Americans,” not the so-called HENRYs, or “high earners not rich yet,” a demographic over whom the others are battling. “Normal consumers, they do not care about $0.30 a month in interest,” he says.

If automation is truly fintech’s next big trend, the shift toward it raises a question: How can one be certain an automated service is keeping a customer’s best interests in mind?

Brown advises people to follow the money. Ad-supported businesses’ true customers are advertisers, he says, and their interests are ultimately misaligned with consumers’. “That puts you in a difficult situation because you’re not always going to do what’s best,” he says.

Brown says Tally is designed to make money only when it is saving money for customers who are paying back credit card debt. On average customers are $15,000 in the hole, Brown says—about the same as the national average—and Tally saves them about $5,000 on average, money they would otherwise be spending on interest.

Combine that business model with an “auditable log” tracking why each decision made Tally’s systems was the best one possible at any given time and people can rest assured they’re in good care, Brown says.

“There’s no ads, there’s no drop-downs, there’s no recommendations or charts,” Brown says. “We’ve built a system that can actually do it all for you.”

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