August at The Fintech Times includes a focus on Fintech for Good. In this article, our North American Managing Editor, Adam L. Snyder, explores what Fintech for Good means to him and how a chance meeting helped him find a new appreciation of Fintech.
Celebrating an annual 20th birthday.
A few weeks ago I went to dinner for an old friend’s birthday. One of the things that I appreciate most about this friend is that she always gathers an interesting, diverse crowd. Just like the last ten times we’ve celebrated her 20th birthday, this dinner did not disappoint. As the night went on, I noticed that one person seemed to have the final answer for every topic. It didn’t matter if we discussed subjective things like art or music or more objective subjects like science or history. He spoke with authority on everything in a way that ensured everyone knew his opinions were undebatable facts.
This individual made me think of my Ashkenazi grandmother, whose mother tongue was Yiddish. It’s a beautiful language because many of its terms have poetic translations that are easier to describe with metaphors and tangible examples instead of words. She would have called this person a “schmegegge” a term that refers to someone whose head is filled with so much hot air that they can float, a know it all, or someone who speaks in absolutes even if they don’t know what they’re talking about. Since he works for a university and has a P.hD. and I respect degrees and certifications, for the remainder of this piece, I will refer to him by a formal title, ‘Dr. Schmegegge.’
When someone asked about fintech.
At one point, a woman at the table asked me about my job. As I told her about my work in fintech and a lot of what inspires me in the category, Dr. Schmegegge quickly chimed in and began explaining his view of fintech. First, he let me know that working in fintech makes me a shill for ‘the man’ (ironic considering the source of university funding and stipends). When me and another woman at the table countered by explaining the broader implications of the category; how it’s used technology to democratize access to services, address issues of classism and racism in finance, and empower women and minorities, the examples didn’t matter.
Dr. Schmegegge responded in his very absolutist tone and simply said: “Fintech is bs.” Next, he told everyone at the table that since we live in a ‘patronage society,’ any good done in the examples I mentioned is null and void because they are for-profit companies. He also told us that the job of entrepreneurs is to fight to change the balance in the system (in a way that meets his standards). If they don’t and earn a living in the process, their work is meaningless, all because Dr. Schmegegge says so.
At this point, you’re probably reading and wondering why I’m dedicating this much time to a fakakta dummkopf and his ungapatchka narish meynungen plaplen (another compilation of my grandmother’s favorite terms), there’s a good reason. While I was initially annoyed, instead of getting cross, it forced me to take a step back and think about my role as a journalist and PR leader in Fintech.
As a reporter, my focus is often on trending news, announcements, and timely topics. Any journalist will agree that we simply don’t get enough time to step back and report on the more significant impact of the issues we cover, much less write op-eds. So I wondered if I’ve done an effective job as a journalist highlighting the long list of examples that show how fintech is making a difference.
A focus on Fintech for Good.
From cryptocurrency (which Dr. Schmegegge informed me is bigger than Bitcoin), providing the means for countries to combat inflation and poverty, to platforms designed to address specific issues facing large communities, fintech is responsible for a significant amount of positive change in the world.
It also serves as a tool to reverse years of systemic injustices that have come in the form of oppression of actions and ideas from people like Dr. Schmegegge. His instant dismissal of the hard work done to help people in need is symptomatic of certain ills in our society. There’s also something disturbing about a ‘credentialed’ and ‘privileged’ male dismissing their work with no consideration of other people’s opinions, especially considering the people at this dinner were a diverse group from different races and backgrounds. Yet, the final authority on every topic was someone with the institutionalized advantages that many social movements are working against.
So I wanted to let fintech make its case. Rather than simply provide a list of companies, I asked a group of founders to write a short letter to Dr. Schmegegge and any other skeptics to explain how they’re creating change for people and communities in need. In the end, I owe Dr. Schmegegge my gratitude. His meshuggeneh umvisndik enabled me and my colleagues to learn that our initial beliefs were correct, only when it comes to Fintech for good, what we knew before had only scratched the surface.
Wise words from the innovators making a difference in the world through the powerful combination of Finance and Technology.
Financial services for marginalized communities on the outside of the banking system.
Dear Dr. Schmegegge,
Here at Daylight, we can empathize with the position that financial institutions (fintech or otherwise) are just in it for the cash. After all, our community has grown up on the pointy end of this idea – LGBTQ+ people pay $87million more in fees than we should each year because of predatory practices by incumbent banks (we’re also 78% more likely to be rejected for a mortgage, but don’t get me started on that…). So we created Daylight with a mission to end the LGBTQ+ wealth gap. This purpose is a guiding light for our business and covers everything from the way we develop content and creativity (never monetize a queer person without making sure they get paid) to how we turn up for our community (every event is centered around making a donation to a charitable fund or mutual aid program that gives more than 90% of its contributions directly to LGBTQ+ folks). Sadly, there’s no fairy godmother to wave a magic wand and address financial inequality for communities like ours. It’s such a privilege to be leading a for-profit start-up that is making a difference to the community it’s designed for.
CEO and Co-Founder, Daylight
Daylight is queering banking for the better that is fearlessly creating LGBT+ wealth, and that’s just beginning.
Helping immigrants keep more of the money they send home.
Dear Dr. Schmegge,
Growing up in Latin America, I lived firsthand how unequal society can be when it comes to accessing basic financial services. In my home country of Perú, 49% of adults do not yet have a formal bank account. But it’s not just about developing countries. In the US, as many as 60 million Americans have limited access to credit. This is especially a challenge for immigrants, as millions of them are considered “credit invisible.” Working families are forced to turn to predatory products which charge more than 400% in interest while being designed to trap borrowers in debt cycles. In 2017, there were 14,348 payday loan stores in the United States, more than McDonald’s locations.
After starting my career at Goldman Sachs, I made it my mission to channel my passion for finance towards social good. At Aura, a fintech CDFI, we built a proprietary model to provide small credit-building loans to customers with limited or no traditional FICO scores at a fraction of the cost. Aura’s loans helped 350,000 customers save over $500million by avoiding predatory lenders, while 71% improved their credit scores.
Meanwhile, a new wave of digital companies are fiercely competing to reduce the cost of sending money across borders to the benefit of immigrant communities in the US and their families in Latin America who rely on them for basic needs. In some countries, these remittances represent more than 20% of their GDP and have been a lifeline during the economic downturn caused by the pandemic.
While traditionally, you would have to pay a $10 fee to send $100 through a storefront with cash, new digital no-fee bank accounts enable consumers to send money digitally and save as much as $500 a year in fees. Services like Limón‘s money transfer comparison tool empowers consumers with real-time information to identify the most affordable option.
Fintechs are tangibly lowering the cost of financial services. This has a huge positive impact on consumers, especially those at the bottom of the economic pyramid, who have been massively underserved by the traditional system.
Limon provides underbanked communities who work abroad the means to find the best way to send money home to help their families survive.
Ensuring marginalized families can pay their bills and stay in their homes.
Dear Dr. Schmegegge,
Your painting of Fintech is done with an awfully broad brush. I’m one of the Founders of BillFixers, a Fintech company that helps consumers and small businesses save money on their bills. We negotiate on their behalf and save them hundreds of dollars every year, not to mention the time and stress that comes from dealing with bills. Yes, we’re a for-profit company. But our model is that we split the savings we negotiate. If your monthly bills go down, you get half, and we get half, and we both come out ahead. The profit we make ultimately comes out of the bottom line of companies like Comcast and AT&T. For many of our users, the savings we negotiate is the difference between deciding between paying bills or paying for groceries. And the service we provide isn’t something that was or is offered by non-profits — who are busy doing other extraordinary work — or by traditional financial firms, who are busy comfortably cashing checks. And yet, we’ve been able to partner with some incredible non-profits to bring our work to the people they serve. And we’ve been able to partner with other Fintechs, to bring those same savings to their users. It would be wonderful if there were enough resources for not-for-profit organizations to build all the fantastic technology and ideas I’ve seen come out of Fintechs. And we should all support those non-profit organizations that are helping people survive and thrive financially. But in the meantime, we’ve saved people millions of dollars on their bills, and I like to think that’s doing some good for them and their families.
Co-Founder of BillFixers
Billfixers helps underrepresented communities negotiate with creditors so they can get out of debt.
Providing minority, immigrant, and low-to-moderate income, and women-owned businesses access affordable capital.
Dear Dr. Schmegegge,
As you may know, small businesses—primarily minority, immigrant, low-to-moderate income, and women-
owned, face significant challenges in accessing responsible and affordable capital. According to Federal Reserve data from a 2019 study, only 23% of black-owned employer firms had previously received bank financing, compared with 46% of white-owned firms. In place of lending directly to small businesses, banks prefer to lend to Community Development Financial Institutions (CDFIs) under the Community Reinvestment Act (CRA) who do the lending.
Accion Opportunity Fund is a technology-enabled CDFI dedicated to delivering responsible, affordable lending and technical assistance to help low-income, low-wealth, and other underfunded people and communities join the economic mainstream. The non-profit provides affordable capital, educational resources, coaching, and networks to small business owners to advance racial, gender, and economic justice. To help support its mission, AOF has forged groundbreaking partnerships with responsible fintech companies, marketplaces, and online lending platforms that are critical to helping them reach under-serviced small business owners. Partnerships with LendingClub, Funding Circle, and Lendio ensured that underfunded and minority small business owners could turn to AOF for tailored financing solutions with a single application.
By continuously innovating and collaborating with responsible fintech companies in the private sector, AOF has substantially increased small business owners’ access to transparent, affordable, and responsible credit across the United States. With the help of such fintech partnerships, CDFIs are poised to support small and minority-owned businesses with limited access to funding and capital.
CEO Accion Opportunity Fund
Since 1961, Accion Opportunity Fund has revolutionized financial services for people who are left out.
Empowering children to achieve financial freedom before they become adults.
Dear Dr. Schmegegge,
We have a serious economic issue that needs to be addressed if we want the next generation to achieve financial wellness and freedom. Today, there are 50 million pre-banked and unbanked kids in the US who are underprepared to face the realities of today’s economy. While the incumbent narrative is teaching kids to save up their dollars and cents in a piggy bank, the fact is that we’re operating in an increasingly cashless spending economy. That is where Till comes in.
Till is an app and debit card combo that empowers kids to develop healthy relationships with money. With the Till app, kids and parents can work together to set goals around spending and saving. Supported by these discussions, parents can feel more comfortable with kids making spending decisions and learning-by-doing with the Till debit card (virtual or physical).
There’s a lot of talk about financial literacy. While some school systems are working to incorporate it into the
curriculum, we know that without hands-on experience, kids won’t be fully prepared for what they’ll face once they are out on their own. Developing dexterity with making financial trade-offs, understanding the mechanics of fixed versus variable expenses, and really distilling the difference between wants and needs are keys to providing the financial footing kids need to be successful.
In addition to being a solution for every family, Till is supporting many of the kid entrepreneurs out there. During the pandemic, we saw an increase in the number of kids taking their ideas into their own hands and starting businesses as a result of having more downtime. Till helped these kids by organizing their spending and saving and providing them with a debit card to support cashless transactions, which are more critical now than ever. We’re not just talking about just lunch money with today’s kids.
At Till, it’s not our intention to be a kid’s forever bank but to be their first bank. We aim to introduce kids to the financial world and set them up for success long term. Till’s platform gives kids the opportunity to demonstrate financial acumen and proficiency before they can officially build credit. This experience will position them well for one of our partner financial institutions to offer them better-than-average products when they turn 18. By starting when they’re young with family support, kids can learn the behaviors that will set them up to be better informed financial decision-makers as adults.
Co-founder at Till Financial
Till provides tools and resources to help kids develop the trust and confidence needed to make better money decisions
Creating a debt-free future by proving the tools that enable people to live within their means.
Dear Dr. Schmegegge,
As a society, we have been led to believe that the only way to achieve our goals is to go into debt. The financial system is incredibly predatory, from credit cards to buy now pay later, it seems it’s all built to drive us into a vicious cycle of unnecessary debt. I myself struggled with credit card debt for years. The U.S. has $14.3 trillion in consumer debt. I founded Reel to debunk the myth that credit is the only way to achieve our goals. We believe in making aspirations available to all without going into debt. Showing people that they can buy the things they want with their own cash flow is the first step towards achieving a better financial future. Whatever it is, a new computer, a pair of shoes, a comfy couch, at Reel we give the power to the consumer to achieve their aspirations, debt-free. We have taken a different approach to saving, by connecting it with shopping so we can ease people into feeling more comfortable with their cash flow. Think of it as mindful spending or a responsible splurge. As a result, we have helped thousands of people save millions of dollars to buy the things that matter to them, debt-free, but more importantly, we are giving them a more positive and healthier relationship with their own money.
CEO and Co-Founder of Reel
Reel makes personal financial management more accessible
Moving beyond stereotypes and helping everyone have access to fair and clear credit.
Dear Dr. Schmegegge,
We live in a society where low-income Americans are often blamed for their financial problems. This group, commonly coined the “underbanked,” has been historically avoided by most financial institutions. At Mission Lane, we’ve built our business around having empathy for low-income consumers and recognizing who they really are – conscientious people who typically live within their means but may have hit a bump in the road.
For example, maybe a customer wants to pay their bills, but their computer broke so they are unable to pay them online. Companies can engage with customers to see what’s wrong and work with them to fix it – a win-win for all. Mission Lane is a fintech that looks beyond the stereotypes to meet customers’ individual financial needs. We believe that people shouldn’t be defined by their mistakes. Rather, they should be empowered with tools, products, and guidance that can help them get on a better path and achieve their financial goals – without the hidden fees and confusing terms that many customers in this segment are forced to deal with.
Lisa Ann Fischer
Chief Growth and Lending Officer at Mission Lane
Mission Lane is dedicated to helping everyone have access to fair and clear credit.
Creating self-sufficient entrepreneurs in developing economies.
Dear Dr. Schmegegge,
Did you know that more than a billion people have limited or no access to vehicle financing in Africa, resulting in the lowest per capita car ownership in the world? That’s why Moove, an African mobility fintech,
is on a mission to democratize vehicle ownership, using its technology to provide revenue-based vehicle financing to mobility entrepreneurs across Africa.
Africa’s roads are filled with old, unsafe vehicles imported from the US and Europe where they would fail roadworthiness and emissions tests. Africa also has the world’s highest road traffic fatality rates with 246,000 deaths occurring annually—a number projected to rise to 514,000 in 2030 (WHO).
As a mission-led company, Moove is focused on delivering impact across three key commitments:
- Financial Inclusion: Moove aims to give mobility entrepreneurs 100% access to affordable credit while creating job opportunities and empowering a new generation of mobility entrepreneurs.
- Environment & Safety: Moove is committed to ensuring that at least 60% of the vehicles it finances are EVs or hybrid vehicles, and is dedicated to improving safety standards through training and ongoing vehicle maintenance and servicing.
- Gender Equality: Moove is empowering more women to access financing and become mobility entrepreneurs, and is committed to ensuring that 50% of its customers are female.
As Uber’s exclusive vehicle financing and vehicle supply partner in sub-Saharan Africa, more than 850,000 Uber trips have been completed in Moove-financed cars across the continent. Moove has launched in three cities in less than 12 months and has seen 60% month-over-month sign-up growth since its launch.
Co-founder at Moove
Moove helps people in sub-Saharan Africa start small businesses
Using technology to enable financial institutions to know the human being they serve.
Dear Dr. Schmegegge,
Segmint, an industry-leading transaction cleansing, and analytics company for financial institutions thrives on a company mission that surrounds empowering organizations to make better decisions, deepen customer relationships, and drive growth.
Segmint created a free custom report on “How Financial Institutions Can Use Data to Proactively Help Consumers During the covid-19 Crisis.” This report was distributed to all clients to help support them during the pandemic. The data examined the changes associated with payment inflows and outflows, correlated by our proprietary Key Lifestyle Indicator data from the Segmint platform. The data provided insights into customers who have “held away” products, identified customers where proactive outreach may be necessary due to financial distress and offered insights into additional products and services that would be a good fit for consumers in need.
Additionally, several use cases below demonstrate success achieved by clients through the support of Segmint’s products:
- Attrition model helped target customers with a propensity to leave
- Client used data to find Home Depot shoppers to target for a credit card
- Client used competitive KLIs to offer customers of a competing institution a Linen of Credit in response to discontinuation
- A bank client delivered a competitive campaign on auto loans and mortgages that drove $3.2million in 1st-year economic value
- A bank client was holding a golf outing and used Segmint KLIs to find golfers for their charity tournament
- Client used Open Internet to achieve a 66% lift across all campaigns
CEO and President at Segmint
Segmint lets financial data analytics tell a customer’s story
Helping local, community-based financial institutions to thrive.
Dear Dr. Schmegegge,
The last year and a half confirmed that the fintech revolution is upon us, and not just because of lofty
funding rounds and massive valuations. Fintech companies played a meaningful role in helping banks, businesses and consumers successfully navigate the COVID-19 pandemic. However, the need for modernization has remained a macrotrend in the banking industry for decades as financial institutions attempt to keep pace with innovation. The strategic deployment of technology will define the competitive
banking landscape for decades to come and thankfully, there is a new wave of fintechs helping community banks and credit unions close the technology gap. MANTL is a fintech company committed to the long-term preservation of community banks and credit unions and I’m proud to say that we are helping community institutions – some of which are over 100 years old – digitally transform to compete online with moneycenter and digital-only offerings.
Community banks and credit unions make up 95% of all banking institutions and I believe that they are critical to maintaining competition and equity in our financial system, as well as serving their local communities. However, the infrastructure powering these banks is in urgent need of innovation. This is highlighted by the fact that less than half of community banks have the ability to open an account online today. At MANTL, our mission is to expand access to financial services and we’re taking on the legacy infrastructure that hinders access to digital banking. In the process we are transforming cost structures for small institutions, opening the door to modernization and making it viable for them to compete with larger pools of customers in different geographics because the cost of servicing those accounts is not as high.
Our white-labeled platform allows consumers to open accounts at their local community bank or credit union from anywhere, on any device, at any time – in roughly 2 minutes and 37 seconds, which is up to 10x more cost-effective than building a brick-and-mortar branch. We’re helping these banks develop a completely new mindset and approach to technology so that they can digitize quickly, grow core deposits online and future-proof their institution in our modern banking era. The end result will have widespread positive implications for the U.S. financial system as a whole.
co-founder and CEO of MANTL
MANTL provides local banks and credit unions the flexibility to innovate using modern technology
Addressing the SME funding gap, and driving inclusion and equality in financial services
Dear Dr. Schmegegge,
You’re not the first skeptic we’ve encountered. That’s part of the reason that we are dedicated to redefining finance for good. At Finastra, we’ve seen firsthand the power fintechs have to empower better financial outcomes for society as a whole and build a better, more equitable world. Through technology and collaboration, Finastra and its customers are set to positively impact over nine million lives around the world, with key areas of focus including the SME funding gap, financial inclusion, and equality in financial services,
to name but a few. For example, in Kenya, we are piloting a revolutionary microfinance initiative, Trust Machine. Together with partners in data, financial literacy, blockchain, and scenario modeling, the resulting loan and balance sheet optimization solution aims to reduce the $19bn funding gap by 1% in the country, which could potentially create 50,000 new jobs to encourage sustainable economic growth. And in the U.S. we are exploring how to spot and eliminate potential bias in credit decisions. Between 2009 and 2015 in the US, it was estimated that up to 1.3 million purchase and refinance loans were rejected for African American and Latinx applicants. Technology can play a powerful role in overcoming that bias.”
Executive Vice President, Americas at Finastra
Finastra believes a community’s strength relies on the health of its people and its businesses.
This is just the start…
First, from all of us at the Fintech Times, we’d like to offer a huge thank you to all the founders and innovators who took the time to submit to this story. It’s clear that even though people earn money through Fintech that the category is a force for good in the world and will be responsible for real change. While Dr. Schmegegge may disagree, it should not be a deterrent. Elitists are always against anything that will change, the elitist system we will use as many big words as possible to defend the status quo. Thankfully there are people like Rob, Ben, Antonio, Rob, Chris, Luz, Daniela, Lisa, Ladi, Nathaniel, and Kyle wearing blinders and making a positive impact on the world. Stay tuned to the Fintech Times this month for more stories about the innovators delivering change in a world Dr. Schmegegge insists will stay the same.