Data

The benefits of early data access for fintech startups

  • Early access to financial data can help fintechs to optimize their products and services before they reach the consumer.
  • Working with early-stage fintechs can also spark innovation and reveal new use cases for data providers.
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The benefits of early data access for fintech startups

Fintech Sandbox is a nonprofit that helps early-stage fintechs by providing them with free access to financial data feeds and APIs from over 40 data providers including Plaid, Morningstar and Equifax. It was started by a group of Boston-based fintech entrepreneurs and investors who recognized that the high cost and inaccessibility of data posed a consistent challenge to startups in the industry.

“Most fintechs require constant access to financial data from day one, so that they can test and build their products and services before they reach the consumer. This financial data can cost up to hundreds of thousands of dollars,” said Kelly Fryer, executive director of Fintech Sandbox, at a session held during Tearsheet’s DataDay Conference 2021. “These data costs can put an early-stage company out of business before it even has a chance to launch. That’s why we offer these data sets free of cost – to make the prospect of launching a fintech more economically viable.” 

One of the startups to benefit from the Fintech Sandbox network is Stardust, an up-and-coming money management platform that adds a social dimension to personal finance. By assigning a socially generated score to users’ spending and saving patterns, it lets them compare their financial strategies with those of their peers, and as a result, make better informed investment decisions.

By leveraging the network of data providers offered by Fintech Sandbox, Stardust was able to improve its user experience and the overall quality of its product at an early stage. “A massive benefit of early access to data is that it really changes the things you can do at the minimum viable product (MVP) stage, which is the very first touchpoint you have with your consumers,” said Adit Patel, co-founder and CEO of Stardust. “Thanks to this early access, we went from a product that was relatively clunky and didn’t have the best UX, to a more streamlined product that was much closer to the vision we ultimately wanted to get to.”

For the last few months, Stardust has been focused on further improving its UX design and fixing bugs to make it ready for consumers. The app is nearing the end of its test flight period, and will become publicly available on the App Store once it’s approved for release by Apple.

Startups such as Stardust are not the only ones that benefit from their relationship with data providers, according to Fryer. By working with early-stage fintechs, the data providers are exposed to new ideas and use cases that foster innovation and allow them to stay competitive. “A big reason why many data providers work with us is to see what new technologies are in the pipeline, and to discover creative and fresh use cases for their data sets,” said Fryer. “They get to engage with a bunch of already vetted startups that have good growth prospects. It’s really a kind of symbiotic relationship that can lead to unexpected innovation.”

In many cases, these early touchpoints between startups and data providers turn into long-term partnerships and investments. “There are a lot of different ways in which these relationships can continue in the long run,” said Fryer. “We’ve seen data providers partner with or make investments in our startups on several occasions. And while we don’t require the startups to keep working with their data providers or accept investments from them, it’s really wonderful to see when that does happen.”

Moving forward, Fryer hopes Fintech Sandbox can support entrepreneurs with valuable data and help build products that give consumers more agency in their financial lives. “Data is really everything when it comes to sustainable, inclusive finance,” she said. “Consistent, transparent, unbiased data is a huge overarching need for entrepreneurs, but is really challenging to come by. That’s why it’s so important for us to continue our focus in that direction and become a leader in the space.”

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