Photo Credit: Mark Wagner

Tech of the Town: FinTech Gets Personal

We explore the next wave of companies reshaping our financial future.

Erin Shipley

Each month, Tech of the Town takes a deep dive into the technology trends we are most excited about through the specific lens of our monthly theme. For this month’s theme, Women, Money & Power, we’re exploring the future of financial technology (FinTech) – and more specifically, the companies and innovations that are enabling the next wave of consumer financial services.

If you’re reading this, odds are that you are interacting with and benefiting from “FinTech” every day, maybe without even realizing it. If you’re a small business owner, it may be the Square plugin that lets you take credit card payment or the software that helps you track and manage your business spending. If you’ve ever used a mobile banking app, had part of your investment portfolio managed by an automated investing service like Betterment, or used Venmo to pay your roommate for utilities, you’re using FinTech software. The very fact that a new generation now uses “Venmo” as a verb speaks to the increasingly mainstream, if not the ubiquitous use of FinTech solutions to traditional financial problems today.

The financial innovations of the past decade have made our interactions with money—and the financial system more broadly—faster, cheaper, and easier than ever before, but for many people, FinTech has only scratched the surface of its long-term potential. This is because some of the most significant financial challenges that people face are personal, individual, and their solutions are much harder to scale. What does it mean to retire well? How can I afford to start a family? What kind of insurance do I need? How do we define what it means to be creditworthy?

Americans have over $1.4 trillion in student loan debt, with the average debt burden on graduating students increasing steadily each year. Interest rates on this debt are still largely determined by congressional decree and student creditworthiness by outmoded systems of risk assessment. Financial security is another critical challenge: an estimated 63% of Americans don’t have enough savings to cover a $500 emergency expense. Yet another obstacle: access to modern banking services. The percentage of the population that is totally unbanked—not served in any capacity by a financial institution—is close to 8%, and the percentage that is underbanked is close to a staggering 20%. Take a moment to consider that, at a time when more and more people pay for their morning coffee with a seamless iPhone-POS interface, nearly one in five Americans still do not have consistent access to a bank account.

These problems are big and enduring, and they do not have one-size-fits-all solutions. The most exciting FinTech companies are building products that recognize that people’s financial lives, and challenges, are dynamic. Here are a few of the companies we see reshaping our financial future.

At a time when more and more people pay for their morning coffee with a seamless iPhone-POS interface, nearly one in five Americans still do not have consistent access to a bank account.

Companies Building for the New Normal

Despite enormous demographic shifts, consumers are still largely limited to financial products that are rooted in old paradigms. In 2016, 61% of households were dual income vs. only 25% in 1960. Women are having children later, and in 2016, for the first time in history, women in their 30s were giving birth at a higher rate than women in their 20s. There is also an increasing shift in the kind of financial security individuals can expect from their jobs. More companies are shifting to contract labor positions that leave individuals responsible for their own insurance and retirement planning, and Americans are continuing to live longer, which will have a significant financial impact not only on retirees but on their children as well.

Carrot Fertility – Carrot is expanding traditional company benefits packages by creating an offering for fertility treatments like egg freezing and IVF. Founded by Tammy Sun, Carrot also offers employees a support platform to help them select the right fertility service package.

Why it’s a game changer: As women continue to have children later in life, fertility-related challenges represent an increasingly prevalent—and significant—expense. Egg freezing can cost an estimated $10,000 – $12,000 per cycle (separate from the cost of storing frozen eggs, which can be upwards of $800/year), while the cost of IVF can be close to $20,000 per cycle, with the average course running 2-3 cycles. Currently, only about 25% of employers with 500+ employees offer some form of fertility benefit, which can mean as little as a consultation with a doctor—only 4% of that same group offers egg freezing.

Kindur – There are close to 80 million Baby Boomers in the US who are either retired or set to retire in the coming years. Kindur, founded by Rhian Horgan, is reimagining retirement planning with a digital-first solution that takes into account the changing realities of the Baby Boomer generation. Rooted in a comprehensive picture of the financial considerations retirees are facing, including savings, lifestyle, goals, and eventual health care needs, Kindur’s solution offers customized, predictable income from retirement until death.

Why it’s a game changer: It is estimated that close to 10,000 Baby Boomers retire each day in the United States, and monthly Social Security benefits average only $1,300. The statistics around savings are harrowing: it’s estimated that there will be a retirement savings shortage in the US between $6.8 trillion – $14 trillion, and the median family near retirement age has only $12,000 in retirement savings. Retirement planning is not straightforward, and there is an enormous need for sophisticated tools to guide families through the process.

Companies Putting the “Service” Back in Financial Services

As an industry, traditional financial services companies have endemic customer satisfaction problems. On an industry-wide basis, Net Promoter Scores (NPS), which measure customer loyalty, are consistently low, with the average (on a scale from -100 to 100) for banks at around 32. The average NPS for the health insurance industry is even lower, hovering between 12 – 18. So what does this mean? Quite simply, customers are unhappy. America’s three largest banks made an estimated $6.4 billion in 2016 from ATM and overdraft fees alone. It’s still not out of the realm of possibility that, in 2018, your insurance company could ask you to fax them a document. The result? Large incumbent players have been losing market share to new companies that can prioritize transparency, convenience, and service, and we are still in the early innings of this trend.

Joany – Formerly Impact Health, Joany is a customer-centric platform that helps people navigate the process of finding and managing their health insurance needs. The company was co-founded by Christine Carillo and Helen Lee, who recognized the need to create a solution for customers facing an increasingly complex and volatile healthcare system. Joany not only lets people search for policies, it offers an online healthcare concierge service that can help with everything from filling out applications to finding in-network doctors and support on billing issues.

Why it’s a game changer: Selecting the right health insurance plan is an incredibly confusing process, made even more so by the politicization of healthcare in recent years. Insurance is a service that you pay for, and yet it is perhaps one of the worst consumer experiences that exist. Leveraging technology to increase transparency and streamline efficiency can create better coverage outcomes for consumers, saving them money in the process.

NextGenVest – NextGenVest, founded by Kelly Peeler, is a financial tool that is reaching Gen Z at scale with a text-first “money mentor” service that helps to demystify the student loan application process. Machine learning powers personalized, human-powered support and advice through text messaging that has already helped over 50,000 students receive close to $40 million in financial aid.

Why it’s a game changer: Student loan debt is one of the greatest financial burdens facing Americans today, with the average student graduating with over $37,000 in loans in 2016. And yet, an estimated $2.9 billion in unclaimed financial aid in the form of Pell grants was available to qualified students in 2015, in large part because the application process is so complicated. NextGenVest represents the ways in which technology can be leveraged to reduce waste in inefficient systems and influence more positive financial outcomes for students.

It is estimated that there are now more mobile money accounts in Sub Saharan Africa than there are traditional accounts.

Companies Rewriting Credit

Historically, an individual’s creditworthiness has been determined by their credit score, standardized by FICO in the late 80s and tied to a limited set of data points. But think about the dynamic data points we as individuals – through our actions, our networks, our homes, and our devices – are creating most hours of every day. How are companies continuing to push beyond the limitations of the traditional credit score, so that more individuals can access capital to start businesses and buy homes? Smarter data utilization has already changed who can lend and how we think about creditworthiness, and we are continuing to see more sophisticated underwriting and novel applications of data create new business opportunities.

Tala – Tala, led by CEO Shivani Siroya, is changing the way credit scoring and financial services work for the under-banked around the world.  Tala’s mobile app aggregates thousands of different, often non-traditional, data points on a customer’s device that allows them to create a customized credit score, and facilitate an instant decision on credit applications. They further customize the size and terms of the product for each individual based on their perceived risk and repayment capacity, and have delivered over 1 million loans.

Why is it a game changer: It is estimated that there are now more mobile money accounts in Sub Saharan Africa than there are traditional accounts. Rather than trying to drive adoption of legacy financial service systems, there is a huge opportunity to leverage the wealth of data made possible by the ubiquity of mobile phones to think differently about financial products and underwriting.

Loftium – Loftium, started in Seattle by CEO Yifan Zhang and her co-founder, Adam Steele, was built around the idea that homes are assets that can generate revenue through peer-to-peer platforms like Airbnb. Armed with data on the likely potential Airbnb earnings of a particular home, Loftium is able to offer a portion of the house down payment in exchange for an agreed revenue share on future Airbnb rental earnings.

Why is it a game changer: Experimental models like Loftium’s help pave the way for new consumer credit structures. By focusing on revenue-generation opportunities for an underlying asset, Loftium is creating increased access to credit, becoming a third option for young buyers who are looking for an alternative to parental gifts or full savings for a down payment.

So often, new startups prioritize consumer convenience over need. But at The Helm, we believe that it is that rare but magical intersection of true consumer need with novel technology that will ultimately drive the scale and enduring value of the next wave of financial services. The future of FinTech is personal.

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