Today’s guest is Theodora Lau, founder of Unconventional Ventures. When you listen to her, Theo challenges the industry to do better. Instead of producing another colored metallic debit card, she’d like to see real financial innovation that helps the people hurting the most. The unemployed. The poor. The older demographic.
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We discuss the financial industry’s relationship with consumer wellbeing and where needs aren’t being met. Theo describes what would need to happen to improve financial outcomes. Lastly, we talk about AI and algorithms and the challenges they impose on us all.
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The following excerpts were edited for clarity.
Challenging the status quo
Many of the founders we run into that focus on serving the underserved typically have a story, a passion for trying to change the industry. Either because they’ve gone through episodes in their lives or because someone they’re close to went through it. It makes them more passionate about trying to change the status quo and provide better access to financial services.
It’s the same with entrepreneurs focused on helping older adults. You’d be fascinated by the people in that community. They don’t look like your typical fintech founders. They’re a little older. Many have families they’re taking care of. Many can talk about what triggered them to action — a loved one who ends up in the hospital that throws them into caregiver role. Or, they have close relatives who were taken advantage of by scammers. These are people driven by what they’ve experienced first hand about how we need to do a better job protecting people.
Focusing on the wrong things
I get outraged. I don’t know if this is the right word. Why are we not doing things that can make things right? Why are we not focusing on opportunities right in front of us? Why do we keep chasing after the shiny new toy?
When you think about fintech innovation, a lot of the original premise was around disruption of financial services. The banks aren’t serving a broader demographic. We want to challenge the status quo. And now, startups are still chasing after the shiny new toy. They are all working off the same old models, going after the same demographic of customers. Last week, I think we came across three new cards. Are you really doing something different? What are you adding more than a nice interface or smooth onboarding?
Making an impact
Look at where we are right now. We have unprecedented recession, unemployment — a lot of people need help putting food on the table. People are making trade-offs to go to work or pay rent. These are extreme circumstances. There are so many people unemployed that need help. We need to do better and we have the technology to do better.
Look at Propel. Jimmy has teamed up to put cash in the hands of the people that need it the most. It’s using technology to identify the people who actually need the help to get food. I think he was working with Project 100 to put cash in the hands of people who need it the most.
Why it isn’t being fixed
There are many facets to why the system isn’t working. If you look at Asia and Alipay and Tencent’s WeChat Pay and what they’ve been able to do, it’s phenomenal. They looked at the unbanked demographics with a lot of micro and small business owners. They were driving the economy and were the ones underserved by large financial institutions. So, they create solutions like the infamous QR code. But more so, they created a platform that allows micro and small business owners to get access to loans.
It’s more than just creating a bank account. It’s what you do with it. It’s how you leverage that access to help them get micro loans to grow their businesses, to get investment advice so they can start saving. These are all tools to help people build wealth. There was a case study that recently came out about Alipay, the platform has created jobs and economic opportunities. The number of people that have been lifted up to the middle class — it’s testament to what we can do with financial technology to move groups of people out of poverty. We’re not doing enough of that in the US.
Need to change the incentives
The banking business model is built on fees — overdraft fees, late fees, and processing fees. The NYT recently had an article on how much fees banks charge customers. A lot of that is on folks who can’t afford that fee. The industry should think about what we can do better so we’re not continuously gouging them, getting them stuck in a cycle.
Examples of doing it right
Look at Chime. It’s built on the premise of fee transparency. It’s something we always complained about. We’re big fans of Aspiration, too. I don’t think I’ve seen another company not set fees and charge whatever its customers think is right to pay them. They also tie their work to sustainability. It’s not just checking a box or planting a tree. It’s thinking about our future which should be part of our businesses no matter what industry you’re in.
I thought colored credit cards were innovation ;-). You could argue that many of the “Challenger Banks” aren’t just digital versions of banks and not “challengers” in the typical startup sense of trying to break the wheel. Obviously regulations and other factors may prevent massive changes, but we definitely need to do better. Agree with Theodora on Aspiration in terms of trying to do something “different” than the rest.