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  • Jeff Jones took the helm of H&R Block in 2017 on a mission to jumpstart growth at the tax-prep giant.
  • Part of that strategy includes expanding into financial services, outlined at investor day last December.
  • Insider spoke to Jones about why he thinks H&R Block is well-positioned to compete against upstart fintechs.
  • See more stories on Insider’s business page.

Tax filing isn’t the flashiest part of financial services. But it’s a quintessential service that reaches virtually every consumer and business.

H&R Block, one of the nation’s largest tax-prep firms, had spent years leaning on its role as an essential service, without much motivation to grow. All that changed when it hired a new CEO in 2017.

Jeff Jones was brought on when H&R Block chairman Robert Gerard decided that it was time for the period of static growth to end. Jones, formerly president of Uber, is a seasoned exec with experience at massive consumer-facing companies including Target and Gap, as well as advertising agency McKinney.

“For a period of about 10 years, the company had been raising prices and cutting costs. We at one point raised debt to buy back our own stock, and we were losing clients year-over-year-over year,” Jones told Insider, describing the situation at H&R Block when he arrived.

The opportunity to kick start the growth at the tax-prep giant was one of the main reasons Jones took on the role, he said.

“The very first thing we did, like probably any new CEO does, is just, ‘How did we get here?’ And for us, that meant that we looked at about 17 years of history. What had gone well, what had gone wrong?” said Jones.

H&R Block is hoping to leverage its brand awareness to nab new customers

Jones is now leading a three-part mission focused on growth, a part of which will come from adding financial offerings beyond tax prep, including consumer and small-business checking accounts , savings accounts, and advanced lines of credit.

As part of its five-year roadmap laid out during an investor day last December, Jones’ other two strategic priorities involve reaching more small-business customers and uniting its digital and human-centric tax services into a more flexible product.

Jones is banking on the fact that H&R Block, unlike many upstart fintechs looking to gain market share in the crowded field of banking, won’t have to go chasing new customers.

“We know we have a trusted brand. We know we have an acquisition engine built in because we have tens of millions of customers that come every year for the [tax] refund,” Jones said. “And so that, we believe, gives us an advantage over some great brands that are building scale, but are starting from scratch on technology, brand, customer acquisition, et cetera.”

In 2019, the firm further expanded its financial tools with the acquisition of Wave Financial, a small-business financial management company, in a $405 million, all-cash deal.

The move allowed H&R Block to take a two-pronged approach to handling small-business customers.

“The simple strategy there is in small-business services, we go to market through two brands: Block Advisors, which is a physical help model, or Wave, which is a DIY model,” Jones said.

Wave targets services-based small businesses that are looking for digital, seamless invoicing and payments. The business primarily makes money through charging interchange fees, Jones said.

Jones sees big opportunity in the consumer space

On the consumer side, H&R Block currently offers a prepaid debit-card account as well as a savings product and early access to tax refunds. 

H&R Block had its own bank charter until 2014, when it divested and opted instead to work with a partner bank. In December, the firm announced the transition of its partnership from Axos Bank to South Dakota-based MetaBank.

Though he has ambitions to build a full-fledged banking offering for customers, Jones said he sees no reason to pursue a new bank charter as the company builds out its financial products.

“The company learned a lot when we were a federally chartered bank — in particular, the capital requirements required relative to the seasonality of our business and paying a dividend,” Jones said. “We’ve said publicly that the move from Axos to Meta got us great partner capabilities and very favorable economics. And that feels like a very strong win for us.”

Bank charters have become popular in recent years, with fintechs like Varo, SoFi, and Revolut all having either been approved or aiming to gain approval for one. 

Chartered or not, H&R Block is hardly the only firm to recognize the opportunity in financial services, where bank account and stock trading fees at startups and even established competitors have been cut to zero or next-to-nothing. 

“The fee structure is putting such a large burden on customers who are struggling to have minimum balances, so the problem is clear. We all see the problem. And I think any time there’s a very large market and a very clear problem, it attracts a lot of money,” Jones said.

“The landscape is very wide. I think Chime and Varo, MoneyLion, are brands that are probably more middle market, but you see many of them quickly moving into lending, offering credit products. The jury’s still out on where does this industry settle once it matters making money,” he said.