How do you reclaim a value system at Fintech?
Fintech's technologies point to a world of access, transparency, and inclusivity, with a focus on empowerment and access. And yet the past few years tell a story in which Fintech's most prominent players have been out of line with those values.
That's a problem, because the world needs fintech to tackle some of the biggest challenges it encounters - aggregating and mobilizing capital, enabling the unbanked and underbanked, powering social mobility, and bringing stability to the financial system.
How can Fintech innovators and investors lean into the current economic situation? Can they reclaim their industries' value, reclaim their promise, and regain the world's trust? Looking back, one of the frustrations that has emerged in Fintech's recent blowups is that so many have involved applications and business models that have shown so much potential to make a positive difference.
Cryptocurrencies and the blockchain, designed to provide transparency, trust, and resiliency in financial transactions, were at the hands of a company - FTX - whose business model subverted all of those ideals.
Today, the field of'social finance' is more closely associated with Reddit traders, Robinhood and the GameStop short squeeze. While fintech founders get little credit for the surge in the number of young people who open retirement accounts, they aren't a threat to their financial well-being.
The ultimate irony may have arisen when Silicon Valley Bank, once renowned for bringing in more than 70% of all fintech IPOs between 2020 and 2022, fell to America's first-ever fintech-enabled bank run. Is it surprising that federal bank regulators have made it almost impossible for a fintech to get a bank charter?
In order to reassert their industry's reputational birthright, fintechs should focus on applications that blur the impact of inflation and financial uncertainty on workers and consumers. What are the key areas in which financial technology can lead the way in the future.
We can turn the economic cycle to the benefit of more individuals.
You've likely heard of BNPL - buy now, pay later - a way to give consumers more purchasing power at the online point of sale.
My company is taking on the old 'layaway plan' concept, where consumers would invest in an item they wish to buy until they have accumulated the full purchase price. Employers can benefit from today's higher rates by giving them the benefit of their salary, allowing them to roll a portion of their salary into an account that pays 4% or more.
This service can be beneficial for workers who don't have a high-yield account of their own. Especially if they find they cannot pay for the item after all, they will have saved money and not triggered any of the predatory terms inherent in many BNPL services.
With technology-enabled financial education, we can double our chances of being successful.
One of the biggest lessons from the social finance backlash is that education alone can do more harm than good. Not surprisingly, many innovative fintechs - maybe better seen as hybrid fintech/edtechs - are building better financial literacy and education models and technologies. This is something many schools don't teach.
This new crop of players is often at the heart of innovative incentives. For example, Zogo, a technology company in Austin, works with financial institutions to promote financial education and well-being through short-form content. Its modularized platform provides tangible incentives for financial literacy and education to be accessible and gratifying.
The School of New Africa, based in Ghana, is a gamified learning platform that aims to educate young people about African history, culture, and language, while also promoting financial literacy.
The platform - backed by producer-rapper Fuse ODG - has many inbuilt financial services, including one that allows children to progressively earn a parent-provided 'allowance' by successfully working through learning curricula.
Workers may no longer be quitting, but they are still under financial stress - which is not good for them and is corrosive of their employers' success. While salary increases are not widely available, employers have other levers to pull when it's no longer a widely available option. The services offered by fintech that enhance workers' standard of living in concrete ways, with services that enable them and take some of the stress out of the day-to-day grind.
Those services may include simple HR systems that provide better access to everything from 'time cards' to intra-company promotions. And they could also include financial management tools and resources, such as more flexible payment terms. Employers of a certain scale are ideally positioned to push back against one of society's most persistent sources of economic inequity - unbanked and underbanked workers exploited by high-fee financial service providers.
Inflation has impacted workers, reducing their purchasing power and squeezing monthly budgets. Home prices and rents have risen, resulting in a rise in home prices and rents. Employers can lower the amount of burden by providing fully functional and well-priced bank accounts, debit cards, and earned-wage access and early pay.
The earned-wage access is, essentially, an on-demand payment for hours worked. Normally, biweekly or monthly pay periods are set to make company cash flow and accounting easier. But for certain workers, especially those in hospitality, retail, manufacturing, and skilled and unskilled trades, on-demand pay is a boon.
All of these products and services are a far cry from meme stocks and digital bank runs. But at this moment in our economic and social history, we can't afford to have fintech held back by those who would subvert the very values its technologies are meant to elevate.