While attention often focuses on developed markets, the most exciting fintech innovations are emerging where mobile technology, young digital-native populations, and gaps in traditional banking converge. These regions aren’t just adopting Western models – they’re creating entirely new paradigms that may eventually reshape global finance.
Today I’m joined by Nadia Costanzo, Director of Banking for the Middle East, Africa, and Latin America at Wise. Nadia drives Wise’s expansion across these regions by building banking relationships, securing licenses, and navigating complex regulatory frameworks.
Her background is uniquely valuable – before Wise, she worked with Kiva in Nairobi facilitating microfinance across Africa, contributed to the World Bank’s Universal Financial Access agenda, and worked directly with microfinance institutions in Paraguay.
Today, we’ll explore how fintech evolves differently across emerging markets, examine key challenges, and discuss surprising innovations where traditional banking is limited. We’ll also consider what these developments mean for established financial institutions looking to engage with these dynamic markets.
Latin America is often viewed as a unified market, but Nadia breaks this perception. Each country presents unique opportunities and regulatory conditions. Wise currently operates in Brazil, Mexico, Chile, Colombia, and Costa Rica. It prioritizes depth over breadth. “Whenever we choose a market, we want to be able to ensure that we offer our whole product offering to the customers over there,” she shares.
A key driver for Wise’s regional strategy is customer demand for cross-border services. In Brazil, Wise holds approximately 25% of the market share in cross-border transactions. “That’s because we’re offering a more convenient product. It is more transparent and less costly than traditional financial services,” Nadia explains.
Regulation and Collaboration: Navigating the fintech landscape
The regulatory landscape in Latin America is actively evolving, and Wise is growing with it. Countries like Brazil and Mexico are building open regulatory frameworks. These support the growth of fintech partnerships. They also enable new entrants to offer services independently. “You see how they’re modelling their regulatory developments on each other rather than looking only to the Global North,” says Nadia.
Wise recently secured its second payment institution license in Brazil. This granted access to PIX, the country’s instant payment system. Nadia points out that this has dramatically changed consumer expectations. “Brazilians wouldn’t understand why you wouldn’t offer PIX. It’s that embedded in everyday use now.”
Fintech and Banks: From competition to cooperation
Instead of direct competition, Nadia observes increasing collaboration between banks and fintechs. Wise depends on local financial institutions for payment execution in some markets. Those institutions rely on Wise’s international infrastructure in return. “Partnership has always been part of our model,” she says. “We offer something to them, and they offer something to us.”
This approach echoes the banking-as-a-service model. It is particularly useful for SMEs and micro merchants seeking digital tools for cash flow management. Banks are also responding by creating their fintech branches or collaborating with firms like Wise. They are doing this to reach digitally native customers more effectively.
Financial inclusion and digital accessibility
While Wise currently serves mostly banked users, the broader vision involves expanding access. “Hopefully that will change,” Nadia adds. She talks about reaching unbanked populations in LATAM. This goal is becoming more achievable as smartphone access and digital literacy grow.
The trend toward small business digitization is also contributing to greater financial inclusion. “People want extreme speed—instant payments, seamless transfers. That’s driving adoption,” she says. Wise’s presence is helping local economies, especially SMEs. It helps them to gain access to transparent cross-border tools. It bypasses traditionally complex and costly banking methods.
Building local teams, strengthening local economies
Wise’s model is deeply rooted in local presence. In Brazil alone, the company has over 200 employees. “There’s no one who knows the ins and outs of how to operate in these places like local people,” Nadia emphasizes. Local hiring ensures that Wise can navigate regulatory uncertainty. It allows them to better serve communities in line with cultural expectations.
She also highlights a growing fintech ecosystem in LATAM. It is supported by fintech associations. These allow players to share challenges and regulatory concerns collectively. This collaboration is essential to ensuring long-term growth. It ensures safety and cybersecurity within the region’s digital banking systems.
There’s more work to be done (and opportunities to grab)
LATAM’s fintech ecosystem is becoming more connected and user-focused. In response, Wise is expanding its services. They’re building strong infrastructure for cross-border payments. They are focusing on digital banking as well as support for small businesses. Wise has obtained new licenses and is forming stronger partnerships. This helps them expand their services across Latin America. They can now offer both global reach and local understanding to their customers.
As Nadia notes, the work is far from over. “I’m excited to bring our global products to customers in the region,” she says. And with 2 million cards issued in Brazil alone, the appetite for better financial solutions is clear—and still growing.
The Big Ideas
Each LATAM market is a unique opportunity. “We tend to go deep in the markets that we operate in.” Wise targets specific countries rather than treating LATAM as a homogenous region.
Regulation is opening doors. “You see how they’re modelling their regulatory developments on each other.” Governments are enabling fintechs through open payment systems and licensing.
Fintechs and banks need each other.“We need partners, but increasingly, they also need Wise.” Mutual dependencies are shaping a new model of embedded finance.
Financial inclusion starts with accessibility.“You need to have access to the banking system and a smartphone.” Current users are mostly banked, but Wise is positioning itself for broader reach.
Local teams build better products. “No one knows the ins and outs like local people.” Hiring regional talent helps navigate unwritten rules and strengthens market fit.
The financial services industry is undergoing deep technological change. API-first architectures are creating new possibilities for integration. Digital platforms are democratizing access to investing. Artificial intelligence is personalizing wealth management. Digital-first brokerages are redefining what’s possible. Global investing barriers are falling. Traditional firms are navigating complex digital transformations. And infrastructure companies are scaling to meet growing demands.
To help us understand these critical trends, we’re joined by Harry Temkin, Chief Digital Officer at DriveWealth. DriveWealth is at the forefront of embedded investing technology, powering fractional trading and digital investment experiences for partners across the globe. As CDO, Harry leads the company’s technology strategy and digital innovation initiatives, bringing decades of experience in financial technology.
Temkin shares, “Our mission is to democratize investing through embedded finance. We’re powering digital wallets around the world. We’re making it seamless for users to invest in U.S. equities, even if they’re in countries where that wasn’t possible before.”
What makes DriveWealth stand out is its technology stack. It enables global retail investing at scale, powering apps from Brazil to the Philippines. “We’re not just a brokerage. We’re a technology firm that embeds investment capability into ecosystems.” Temkin notes.
He also discusses how real-time trading and fractional investing are changing expectations. “People want to make decisions quickly, and our systems make that possible in real time, not hours later.”
As digital platforms evolve, DriveWealth is preparing to integrate emerging technologies. Such as merging generative AI to further enhance user engagement. “We’re looking at how AI can personalize investment journeys, not just provide chat responses,” Temkin says.
Enabling cross-border investing with embedded technology
At the heart of DriveWealth’s strategy is cross-border investing, allowing users in Latin America, Asia, and beyond to access U.S. equities. “We’re operating in over 150 countries today,” Temkin shares. “And it’s all powered through APIs that integrate with digital wallets and fintech apps.”
The conversation dives into how DriveWealth partners with digital wallets, neobanks, and super apps to bring investment functionality directly to end-users. “What we’re doing is embedding the brokerage experience directly into those platforms,” Temkin explains.
He also highlights the regulatory complexities of operating globally. “Every market has its own KYC/AML requirements. Our job is to streamline that, to abstract complexity away from our partners.”
The power of real-rime rrading
Real-time trading isn’t just a feature — it’s foundational to user trust and experience, says Temkin. “When someone executes a trade, they want confirmation and clarity immediately. That’s what we deliver.”
DriveWealth’s platform enables fractional, real-time execution of trades. This makes investment accessible even for users without large capital. “We don’t just support buying a share of Apple; we let you buy $5 worth of Apple, instantly,” Temkin adds.
This has opened new opportunities for fintechs offering stock back rewards, giving users fractional shares as loyalty incentives. “It’s one of the fastest-growing embedded investment use cases,” he notes.
From APIs to personalization: What’s next in Embedded Finance
Temkin shares that DriveWealth’s roadmap includes more than just APIs and execution. “We’re thinking about next-gen engagement: how do we use generative AI to guide users based on their behavior, preferences, and goals?”
He adds that personalization will be critical in making digital investment experiences feel natural, not forced. “We’re evolving from passive tools to active partners in a user’s financial life.”
Generative AI might soon play a role in surfacing insights and next steps for users. It may even create an intelligent interface for investing. “This could be a game-changer for less experienced investors,” Temkin suggests.
The Big Ideas
Embedded investment is an infrastructure play, not just a feature.“We’re not adding investing to apps. We’re powering platforms that center investment in everyday experiences.”
DriveWealth is making global retail investment seamless.“From Brazil to Indonesia, users are accessing U.S. markets without needing to know what happens behind the curtain.”
Stock back rewards are building financial engagement.“You spend money and get a piece of the companies you support. People love that. It’s simple, but powerful.”
Real-time trading is no longer optional.“It builds trust. People need to see confirmation and execution instantly. That’s become the norm.”
Generative AI could become a personalized investment guide. “AI won’t replace the interface, but it could enhance understanding and help users take smarter actions.”
Tearsheet is excited to launch 4dFI Capital Partners, an exclusive group of out-of-the-box builders and investors building a community to invest in the next wave of fintech startups around the world. If you are an accredited investor and want to learn more, sign up here
Across Latin America, we’re witnessing a massive shift as regions traditionally dominated by cash transactions begin embracing digital financial tools. This transition represents more than just technological adoption—it’s creating new economic opportunities, enhancing financial inclusion, and building resilience against growing cybersecurity threats.
The numbers tell a compelling story: a $448.4 billion digital payment opportunity exists across Latin America, the Caribbean, and the U.S. With nearly 12 million small retailers processing $362 billion in B2C sales — 43% still in cash —a nd 90% of B2B transactions between small retailers and suppliers handled through traditional methods, we’re looking at a financial transformation that’s just beginning.
Today, I’m joined by someone at the forefront of this transition. Walter Pimenta serves as Executive Vice President of Commercial and New Payment Flows for Mastercard Latin America, where he’s leading initiatives to expand SME acceptance solutions, scale enablement through strategic partnerships, and strengthen cross-border payment capabilities.
Walter’s team is also tackling another critical trend: the growing cybersecurity challenges facing SMEs, with recent research showing 46% of small businesses have experienced cyber-attacks, resulting in bankruptcy for nearly 1 in 5 affected companies.
The LATAM region is not a single, uniform market. Mastercard operates across 44 different markets in Latin America. Each country brings its challenges and opportunities. “PC and digital penetration vary widely—from high levels in Brazil and Chile to lower levels in places like Mexico,” Pimenta notes.
This means small business digitization cannot take a one-size-fits-all approach. Some SMEs need basic tools to begin accepting digital payments. Others are already looking for ways to optimize global supply chains and expand their e-commerce footprint. Mastercard addresses this spectrum by providing region-specific SME solutions. It also enables local financial institutions to better serve their markets.
Meeting SMEs where they are
Small businesses in LATAM fall into distinct categories. From individual entrepreneurs and micro merchants to more complex middle-market enterprises, each group has unique financial and operational needs.
Micro merchants often struggle with digital literacy and the cost of accepting digital payments. For them, solutions like Tap on Phone, which turns a smartphone into a payment terminal, can be a game changer. “We’ve eliminated the need for expensive hardware,” says Pimenta. “Now, any NFC-enabled phone can become a secure payment device.”
At the other end of the SME spectrum, middle-market businesses often need support for cross-border payments. It also includes ERP integration and advanced cash flow management tools. “These companies behave like large corporations. And they need systems to manage suppliers, inventory, and payments with scale,” he explains.
CPG partnerships as an on-ramp to digital
Consumer Packaged Goods (CPG) companies are becoming a vital entry point to financial inclusion. Pimenta explains how Mastercard is working with major CPG players. The aim here is to digitize their distribution and payment systems, streamlining the value chain.
Many of these CPGs sell directly to mom-and-pop stores that still rely heavily on cash. This creates inefficiencies for both parties. “The inefficiencies of cash fraud, security are costly for everyone involved,” Pimenta says.
Mastercard is digitizing order placement (through platforms like WhatsApp). It also enables digital payments via smartphones. And, it issues prepaid cards through fintech partners like Migo. “We’re digitizing both the sales and the settlement process,” he adds.
Navigating cybersecurity challenges
The move to digital opens LATAM SMEs to new threats, particularly around cybersecurity. Mastercard research shows that 46% of small businesses in the region have experienced cyber attacks. Many of them face devastating consequences.
To address this, the company is rolling out tools like My Cyber. It is a solution designed to help businesses identify and resolve vulnerabilities in their digital storefronts. “Cybersecurity cuts across all SME segments. We have a responsibility to protect them as we digitize them,” says Pimenta.
Education is also a core focus. Mastercard is building tools to help small businesses go digital. These platforms focus on keeping their operations secure.
Cross-Border Payments fueling growth
LATAM businesses are becoming more globally connected. Cross-border payments also play a crucial role. “Small businesses today want to buy from suppliers overseas. Sometimes it’s cheaper, sometimes better quality,” Pimenta says.
However, traditional international payment systems can be slow, opaque, and expensive. Mastercard’s Move platform aims to streamline this process by enabling faster, more transparent cross-border payments — through local rails, supporting transactions to over 200 markets globally. “We can now deliver transactions to almost any endpoint, account or card,” he says.
The Big Ideas
Small businesses are the economic core of LATAM. “In LAC, 99% of the businesses are small businesses… the economic engine.” Small businesses are not a niche—they are the foundation of the region’s economy.
Digitization looks different across LATAM.“It’s a very diverse region… from a cultural and financial point of view.” Each market requires tailored SME solutions based on digital readiness.
CPG companies are natural partners for driving change.“CPGs have a direct relationship with micro merchants… and share the pain of cash.” By digitizing CPG supply chains, Mastercard helps both vendors and retailers benefit.
Cybersecurity must grow with digital adoption.“We have a responsibility… and we have the technology to help them.” Tools like My Cyber are helping SMEs protect themselves as they move online.
Cross-border capabilities are essential to SME growth. “Small businesses today want to buy from suppliers overseas.” Solutions like Mastercard Move reduce friction in global transactions.
As General Manager of PayPal’s Small Business and Financial Services Group, Michelle Gill is responsible for bringing together the products and services that help small business owners run and grow their business. She is my guest for this episode of the Tearsheet Podcast.
Michelle brings deep financial expertise and experience building platforms and tools that help customers manage their finances to her role on PayPal’s Senior Leadership Team. Michelle was previously Senior Vice President of Intuit’s business money management, payment, and banking service, QuickBooks Money Platform. Prior to Intuit, Michelle successfully integrated and expanded SoFi’s lending business as General Manager and Executive Vice President of Consumer Lending and Capital Markets.
Drawing on her early career experience as a Managing Director and Partner at Goldman Sachs, Michelle also served as SoFi’s Chief Financial Officer before moving into the product leadership role. Before that, Michelle spent a decade leading the U.S. Assets business for global investment firm Sixth Street Partners.
Given her career and experiences, Michelle brings a broad view of fintech innovation. She focuses on user-centered solutions. At PayPal, she leads efforts to help entrepreneurs navigate the complicated web of financial tools they often depend on.
“The preponderance of [small businesses] use greater than 15 tools to run their business,” she shares. “What they got into business for is the passion… and yet they end up spending more time on things that are not what they love.”
Our conversation explores how PayPal is actively trying to reduce that complexity. It does so not by offering more tools, but by making the ones they already use work better together. Gill outlines the strategy behind PayPal’s cash flow-based lending model and how it fits within their open ecosystem, whether it’s digital lending, embedded finance, or leveraging open banking.
How PayPal for Small Business solutions addresses complexity
For many small business owners, managing finances often means juggling over a dozen platforms. PayPal is stepping into this chaos with the goal of integration. “It’s not the adoption of the new tool in and of itself that’s the problem. It’s how it feeds back into your broader ecosystem,” says Gill. PayPal’s strategy focuses on streamlining tools through a single integration. It aims to reduce friction and give entrepreneurs more time to focus on their craft.
How PayPal cash flow lending works
PayPal’s approach to cash flow-based lending matches repayments with earnings.It is unlike traditional fixed-schedule lending. “Repayment is predicated on the receipt of those earnings,” says Gill. She describes the flexibility of the PayPal Working Capital product. This flexibility makes the loan more manageable for merchants with fluctuating revenue.
But, until recently, merchants couldn’t access more funds until fully repaid the loan. That’s changing. “We are changing our product to allow for the ability to redraw,” she notes. She signals towards an update that will help entrepreneurs recycle capital more efficiently.
Leveraging Open Banking for better lending models
Previously, PayPal could only lend based on what it processed. But open banking now enables them to assess a holistic view of merchant cash flow. “We now can have visibility into the entire merchant account, both on and off PayPal,” says Gill. This broader perspective supports more accurate underwriting. It offers larger loan sizes without expanding the credit risk.
PayPal is embedding finance into merchant workflows
PayPal isn’t just offering loans—they’re embedding them into the workflows merchants already use. Through the PayPal dashboard, users are notified of pre-approved loan amounts as they manage daily tasks. These are like refunds and chargebacks. “We are planning to add the amount that merchants have been pre-approved for, so they know going in,” Gill shares. PayPal is also collaborating with vertical SaaS providers, as well as with marketplaces, to bring financing directly into partner platforms.
Growing with merchants in the Open PayPal ecosystem
Through its open ecosystem, PayPal aims to grow alongside its customers. “We do things from point of sale to lending to online payments for e-commerce… we’ve tried to grow with our customers as they’ve grown,” says Gill. That includes helping businesses navigate newer challenges, like Generative AI and complex commerce models. “We do that through education, tools, and end-to-end services,” she adds.
The Big Ideas
Small Businesses Face Tool Overload.“The preponderance of them use more than 15 tools to run their business.” This overload creates inefficiencies—PayPal’s integrated platform is intended to reduce that friction.
Cash Flow Lending Matches Business Realities. “Repayment is predicated on the receipt of those earnings.” This model reflects how small businesses operate, especially in unpredictable markets.
Access to Capital Expands with Open Banking.“We now have visibility into the entire merchant account… not only borrow against your PayPal receivables, but also your off-US receivables.” This broader access supports more accurate and inclusive lending.
Embedded Finance Increases Accessibility. “Merchants who use PayPal come into their dashboard generally at least once a week… We let them know they have access to capital.” In-app lending notifications simplify the financing journey.
Loyalty Grows with Product Adoption.“If you borrow once from us, you tend to borrow five or six times.” This repeated usage signals that the lending tools are resonating with merchants.
In today’s financial landscape, innovation is more than just a buzzword—it’s a driving force separating industry leaders from those left behind. Finding, nurturing, and scaling the right technologies has become a specialized skill set all its own.
Joining us today is Ryan Falvey, Co-Founder and Managing Partner of Restive. Ryan has spent the last 15 years at the forefront of identifying and championing market-changing innovations in financial technology. His track record speaks for itself—since 2015, he’s invested in 40 early-stage fintech firms that have collectively grown to represent approximately $3 billion in aggregate equity value.
Before founding Restive, Ryan led the development of the Financial Solutions Lab, a groundbreaking partnership between JPMorgan Chase and the Financial Health Network. His experience also includes developing payment solutions with leading tech companies at Silicon Valley Bank and serving as Strategy Group Lead at Enclude Solutions, where he oversaw global strategy consulting for mobile-enabled financial products.
“We’re not investing in fintech apps — we’re investing in infrastructure,” Falvey explains early on. That distinction underscores a larger trend he sees in the market: a move away from flashy consumer-based apps toward foundational financial APIs. It also focuses on backend tooling and embedded finance capabilities.
Falvey’s insights aren’t theoretical — they’re rooted in his day-to-day decisions as an investor. At Restive, he’s helping startups through early product development. He emphasizes practical scalability and regulation-ready business models. “You don’t build a consumer business by launching an app anymore,” he says. “It’s not about the app — it’s about access, context, and integration.”
From fintech regulation to platform economics, Falvey shares grounded wisdom. He focuses on how successful startups are navigating today’s uncertain investment landscape. What’s emerging is a more nuanced strategy for funding — one that prioritizes durability over disruption.
According to Falvey, the biggest shift in fintech is where the value is being created. “The last wave of fintech was all about building shiny apps for consumers,” he says. “Now, it’s about making the systems that power those apps smarter, more scalable, and more secure.”
He points to the importance of financial APIs. He focuses on other backend solutions that serve as the connective tissue of modern financial services. These are often invisible to consumers. But they are essential for delivering the kind of embedded finance experiences users now expect. “The infrastructure layer is where the real innovation is happening. That’s where we’re seeing the biggest opportunities for venture capital.”
Reframing embedded finance as context, not channel
Falvey is careful to clarify what embedded finance means in practice. “It’s not just about plugging in a payment widget,” he notes. “It’s about being in the right place at the right time, with the right financial product — whether that’s credit, payments, or insurance.”
For him, embedded finance is less about technology and more about use cases. When startups can identify the consumer-based need and deliver financial functionality at the moment of need, that’s when embedded finance makes sense. Otherwise, it risks being just another buzzword.
The new venture capital playbook
“Startups are now being built in a different economic climate,” Falvey says. Gone are the days of massive burn rates and growth-at-all-costs thinking. In their place: a greater emphasis on operational discipline, regulatory readiness, and long-term scalability.
He explains how venture capital firms like Restive Ventures are adapting. “We spend more time with teams on product development than ever before. It’s not about speed to launch — it’s about building something that works, that scales, and that fits into the regulatory environment.”
Navigating fintech regulation and compliance
Compliance isn’t just a checkbox — it’s a design constraint. Falvey emphasizes that startups must build with fintech regulation in mind from the outset. “If you’re in fintech, you are in a regulated business. You can’t build first and figure it out later.”
He sees a growing appetite for products that are “compliance-first,” and that build regulatory considerations directly into their infrastructure.
The Big Ideas
Infrastructure Is the New Frontier.“We’re not investing in fintech apps — we’re investing in infrastructure.”
Apps Are No Longer the Centerpiece. “You don’t build a consumer business by launching an app anymore.”
Embedded Finance Depends on Context. “It’s about being in the right place at the right time, with the right financial product.”
Venture Capital Is Recalibrating. “We spend more time with teams on product development than ever before.”
Compliance Must Be Baked In. “If you’re in fintech, you are in a regulated business.”
Read the transcript (TS Pro susbscribers)
The evolution of fintech since 2021
Well, thanks for having me excited to be back. Maybe that’s a great way to start. I mean, that’s interesting, because we probably spoke at the absolute kind of high water mark of, you know, FinTech 2021, I was kind of the year. I remember, you know, you talked to other investors, and we’d like, man, we just should have done all the deals in the last like, shoot your fish in the barrel. Yeah. Any, any discrimination in selection was, was, was a, was a negative bias. And then, you know, things obviously changed really dramatically, starting in, starting kind of in 2022 and I think to a degree, continuing, kind of to the present day, really certainly been a shift in sentiment of fintech. More broadly. And then I think also, you know, kind of a shift in sentiment kind of increased a little bit away from tech too. So it definitely kind of feels more like kind of back to basics in what we’re investing in and how we’re working with the founders. But at the same time, I’ll say a lot of that. You know, we are investors in companies, and so the main thing we’re looking at is like, what’s the only performance of the companies? What are these businesses doing, and are they making money? And how much money are they making? And how fast is, how quickly are they growing? And what’s interesting and surprising is at the company level and at the portfolio level, it’s literally never been better. I mean, we already have companies that are growing much faster and making more money earlier in the life cycle than really ever in my investing career, going back into over a decade. Now,
Performance of recent investments
Yeah, do you mean honestly? I can tell you, I can tell you the date that things change, and it’s January 1, 2023 really? It’s really looking and I think it’s really the impact you had of a lot of these new kind of LLM models, AI driven tools, especially on the coding side, it’s just dramatically accelerated how quickly technical startups can develop product and iterate, try new things and kind of push, push their vision out in the world. And the faster you can move in a startup, the more things you can try, and the more, the more kind of shots on goal you have, and the more ways you can improve on a product once it starts working. And just to give you a snapshot, the investments we made since the beginning of 2023 now make more money into aggregate than everything we did in COVID combined. And there’s probably half the companies there, and the ones that are the ones that are the ones that are driving the revenue in that kind of COVID cohort are the most technical founders, like the strongest, you know, technology solution. And there we’re seeing a similar dynamic. There’s, they’re raising, you know, very little follow on capital. They’re running really lean teams, getting a profitability much earlier. And so it’s actually a really exciting time to be investing at the early stages, because we are, we are really seeing of COVID, the total phase shift in technology, and how these businesses are being built, and how big they can get.
Impact on exits
Yes, yeah. I mean, I think we’re already seeing, you know, it’s, yeah, I know when you’re going to air, air these this session, but, you know, it’s, it’s early April right now, and we’re seeing, you know, there’s a number of kind of FinTech companies that expect to go public here and in the next, you know, them kind of listed so far this year, yeah, the public fintechs have generally done, done relatively well over the last, you know, year and a half or so. So, I think there’s definitely a shift, kind of an appetite there in a late stage, and probably see more come. You know, the stuff that we’re investing in now. I mean this, many of these businesses are probably still five years away from from going public and you know you, we meet you, you tend to see mergers at this stage more and more frequent acquisitions. And I say that what we’ve seen on the acquisition front has been, has been pretty robust. But I think the best companies are probably not gonna be acquired. They’re gonna continue to try to grow. And I would, I would expect them to be, expect us to be seeing some, really significant businesses being built, kind of in this current era.
Thematic shifts in investment focus
I mean, we’re seeing a number of things. I mean, the big thing would be tech like, I can’t, like, you know, we’re investing in technology companies, okay? And that that is, and I think to a degree, you know, we, you know, we raise money ourselves, we explain to our investors, you know, we’re investing in technology companies who just happen to be in the financial services industry and and I think that that’s, that’s a real shift from 21 where, you know, people are like, Oh, we just needed digital. Stuff is going to take over, you know, so if it’s online, it’s going to be better than being offline. And you had just incredible growth of a lot of the businesses that existed and were doing which were strong, but it wasn’t like, hey, there’s a completely new technology here. And I think now we are seeing some truly new kind of technology innovations that are allowing founders to build entirely new, new approaches to financial services. And I’d say there’s kind of, there’s kind of, like six, kind of big categories where we’re seeing a lot of activity.
One is obviously generative, AI tools. The biggest impact there is actually probably within the startup, I’d say that, like, the best, best use case of AI is creating a company. Because, you know, if you have to create a bunch of stuff, you know, tools like, you know, chat, GPT and Claude and coding assistance like cursor, are incredibly helpful to create that stuff more quickly.
A lot of the crypto infrastructure that kind of got laid down over the last couple of cycles is now pretty useful, um, you know, there’s you there are there stuff out there that’s allowing for kind of agentic payments and ways of, kind of just automating kind of, you know, background, kind of purchase and inventory management systems that’s going to come directly out of, out of crypto. You have a company in a political Crossman that basically does that allows, you know, it was originally a lot of infrastructure for nfts, and is now being used to basically just kind of automate, you can automate payments, and, you know, just kind of set these kind of agentic payments to kind of run the background.
We’re seeing, I think the service industry, particularly around like consulting law firms, anyone who is making a lot of money by creating paper tax prep. I mean, those industries are under serious threat. And so we’re seeing startups there that are just, I growing at unbelievable rates, in large part because they’re just, they’re able to create advice layer. So, like in finance, about financial services, to say, like, you know that you have, you have services, and then you get a license from the government to do the finance part. And a lot of those services. You know, you’re you’re doing something that has an audience of one or an audience, maybe nobody. You’re just creating paperwork that sits on a shelf in case someone wants to see it in the future. I see you’re thinking about Iron Mountain. There’s a mountain just full of paperwork that somebody paper. Yeah, yeah. How much did all that paperwork has to get created? Like it was a lot. And if I can spin up it, like, you know, an AI engine that goes and generates that paper, and it takes five minutes instead of five months, that’s a huge cost savings. And there. A lot of parts of the financial service industry that just create paper. It might be you might might be support you need for a credit decision that you’re already going to do, but you need to go collect all that if you ever got apply for a mortgage. Great example, there was, like, tons and tons of paper associated with that. It’s all there for a reason. It’s all important in certain circumstances. It’s not necessarily all important to be done every single time by a human being. And so if you can find ways to kind of create, make, make that process automated, it’s really valuable.
You know, think about really expensive law firms that are reviewing a law firm might be reviewing multiple 100 page long documents associated with an extension of credit to a company, or the COVID signal back and forth. You know, a lot of that’s, you know, rope, boiler plate. It’s there for regulatory and legal reasons, and you’re still, every time you do all these deals, you’re spent, you might be paying millions of dollars to a fancy law firm to review all that we’re seeing that those types of the business can get start getting kind of get commoditized down very, very aggressively and very quickly.
Yeah, we’re seeing new technologies, like, kind of Horizon technologies are going a lot faster than you’ll be given credit for. Like, you know, there’s a lot of advances in quantum the first kind of uses of that will be in financial services, increasingly personalized and really intelligent ways of thinking about commerce. So we have a company a portfolio called aisle. Really interesting. They essentially connect brands directly to consumers. So instead of like you see an ad right now for, for, you know, Red Bull or something on online, online, and then maybe, maybe you go buy a Red Bull. And then, like, Red Bull kind of has to figure out, well, did the ad? Did it work, right? What happened here, attribution, models, all that stuff. Well, now this company allows Red Bull just, hey, go buy a Red Bull today, and we’ll just pay you back. And in exchange, like, the consumer gets a free Red Bull. That Red Bull gets to know exactly who the customer is, where they live, they shop. It’s like, acquiring a customer, post purchase in a way. And you know who they are. And very cool. That. So that’s, that’s a really good example of, you know, going to, kind of the future of commerce, where it becomes a lot more personalized, a lot more specific, and I think a lot a lot better, you know, kind of across the board.
The social impact of fintech
Certainly. I mean, I think you know when. So I, you know, I started my career. I started an accelerator that was backed by JPMorgan Chase in partnership with a nonprofit. And so we’re very focused on kind of, very consumer friendly financial services innovations. So we were investors in a company called dave.com which eventually has gotten now gone public and to help consumers avoid overdraft fees. You know, that’s probably on the podcast a few times. Yeah, that’s a really good example. I mean, I think we’re, you know that, like, as a public company, he had a, he had a little bit of a roller coaster ride. And, you know, over the last, I think last year was, like, the best performing stock, and like the net, like the Russell built a real business, yeah, and, and I think that that goes to show that, you know, if you dollar advances, right, yeah, yeah. If you have a, really, if you have an, if you have a, if you have a solution that really helps people, there’s, there’s a lot of, there’s a lot in that.
I mean, I think, I think it’s been, you haven’t heard as much about them, because I think the investor, investment community has gotten more concerned about, you know, kind of consumer businesses, large, I will tell you, as an investor in a number of these, because almost all these businesses are going to consumer facing, right, like you’re helping low income people or more moderate income people do something like, You need to acquire those people. You serve those people. There’s, there’s, there’s regulatory. Historically, there was regulatory kind of issues associated with, with, we’re serving those people. And so that was one category that was really kind of hit hard, kind of in that kind of post COVID, kind of, you know, FinTech, no crash again. Underlying company performance has been extremely strong. And, you know, Dave is a public company, and so anyone can see that, you know, that company grew throughout the last couple of years, it became profitable. As you said, you know, you kind of create a real business and that, and we’re seeing that kind of across the board. So I think investor sent them will probably catch up, and they’ll probably start hearing more about those types of solutions.
I’ll tell you that is one area where, where all of these generative AI. Tools are actually going to have a real big impact, I think, on customers. How so positive well we have so we have a company in the portfolio, small, small firm called charge back and basically look at your subscriptions that you rocket money has a similar solution with this too. They kind of look at your subscriptions, look for things that you can cancel, and kind of proactively go out there and try to save you money, cancels permission you might not be be using, and really just kind of low out there go looking for how to, how to, how to save, how to save consumers money. Well, they’re the ability to that, that that service, and I’m sure that with the team at at rocket has also made just dramatic improvements in what’s possible there, because I’m no longer just looking for, you know, Netflix to show up for, you know, 1399 every month. And these tools can go through and say, Okay, what? What it like, what are you actually using? Like, right? Like, I can connect your, you know, your browser history. Like, maybe you are getting a lot of value out of Netflix. Maybe there’s a service you signed up for that you really should cancel. Or maybe there’s a you bought something and you should have got a refund because they violated the terms of service and you didn’t know. And that is just that is a level of sophistication beyond where you saw before I saw I read something.
This is kind of off, you know, not, not really fintech. But I read something somewhere, some, some, you know, business, it was basically taking advantage of these individual arbitration clauses like forced arbitration. And everybody has been forced into, like, whenever you sign up or something, you basically agree to just binding arbitration. And the reason the companies do that is because, like, the most you’re gonna win is, like, $100 and I think this company was going, I basically, basically just doing this at like, mass scale. So like, instead of, like, you know, Disney video getting to fight you over $100 and you stop being worth it to you, like, they’re fighting 1000 fights for $100 across the country. And it’s just like, it’s more expensive than a loss it would have been. And so, like, that kind of stuff either requires a huge amount of technology to do that. But I think, I think you’re kind of going to see, see more of that in the coming years.
About Restive’s investment approach
Yeah, yeah. So we’re early stage technology investors. Our goal is to really be the first money into the companies and founders we back. So we like to say, you know, nothing’s too early for us. And you know, we are probably the first capital in the mains companies, and probably about a quarter to 30% of the time, and then, you know, the majority of the time, we’re going to be kind of pre seed investors. And so that might be a founder that’s raising, you know, let’s say one to $3 million probably, you know, pre might, might be pre product might be, you know, a couple months after rolling out a product. So probably, probably earlier than you assume, for kind of product market fit. But typically, we can get a sense of what they’re doing, understand what their vision is. And you might be a team of, you know, four, four or five people is kind of on average, and our strategy is to write relatively small initial checks. So our first check is about a half a million dollars into most these companies.
And then we work really closely with the founders to really help them to kind of to connect them to the broader financial services industry. So like I said, we’re looking for technology businesses just happen to touch the financial service ecosystem. So they might want to sell into them. They might want to manage, handle payments. They might want to, you know, access financial, financial data. And so we can bring a lot of expertise to the companies, and what we find is that can really be transformative to the best teams. And then we’ll look to really kind of dramatically build on our positions in these companies very quickly and grow and scale with them as they grow their businesses. So we’re pretty high frequency investors where, you know, we’re investing about once a month, we’ll find it. We’ll find a deal we like to do. And you know, like we at the outset, you think we were actually probably close to about 80 portfolio companies at this point. We’re now investing out of our third fund. And you know, we’re all, you know, former FinTech, you know, founders and operators, and so we really pride ourselves on being able to really try to become an extension of the management team and hopefully open up doors and kind of take things off the plate of the founders we’re working with, so that they can just move, move faster and grow more quickly.
Collaboration with founders
I think, I think most founders want help that’s helpful, right, right, like resistant against help that’s not helpful. We do try to be that help you with this podcast. You’re, like, probably not. You can sit there and like, you know, have a quiet room you can sit in. That would be the most helpful thing. Like, y’all need you with the dials and so.
We are, we are helpful in a really specific ways. We’re helpful in helping connect you the financial services you’re helping if you need to figure out, like a complex issue around your legal or regulatory dynamics, or you need expand your network to sell it or do more partnerships, if you’ve got a business that’s going to raise a lot of money, you know, our model is to connect our founders to downstream investors, and we spend a lot of time helping them build those relationships. And so if you know, for say, You got to bring it back to Jason today, if you know we’re one of the first investors in that company, help connect them to a series B investors, and we continue to be investors in that company now. And so we really see this as a really long term relationship. And, you know, try to be, try to be helpful in a way that’s, you know, going to be constructive to the relationship, and are going to get out of the way, or we’re not.
So we generally to that set. We generally aren’t taking board seats. As our view is, we’re really good at kind of pre seed and seed not super good at, like, series D, and like the decisions around going public, like, I don’t have great advice on who to your 18th engineering hire should be that, but there are investors who are really good at that, and those people should be on your board and and that. And you should the business should where it’s at in this life cycle. And so we are very focused on the part of the market we sit in. And I think we’re probably some of it, hopefully the most, most helpful investors to our founders at that category. And I what we found is, is most founders are quite appreciative of that, support. And, you know, they’re trying to build big businesses. And there’s a lot of talk of the Billion Dollar Startup of one person. I haven’t seen it yet. Yeah, we certainly have a number of billion dollar startups that have many people in them, and managing other people is hard and requires, you know, requires a lot of people helping, helping out to get there.
Geographic focus
Pretty heavy focus on the US. We have companies outside of the US market. But, you know, this is the market we know well, and you know, going to your earlier point. I mean, we stick to, we can what we know and where we think we can have a big impact. From an investment standpoint, this is also, like, the US financial services industry is maybe, maybe outside of, like, you know, big tech, the largest pool of revenue and profits in the global economy. And it’s a pretty dynamic one, where, you know, you have an interesting idea, you can very quickly get a lot of them. And so we think it’s a pretty good place to practice venture.
Evolution of partnerships with financial institutions
It’s gotten, I think, a lot more constructive for startups? Okay, great. I think it kind of to kind of two, two ways. One, there’s a, you know, I first started investing in 2014 2015 I was working, we very close to JP Morgan and very small startups. And I’d say it was a pretty common view that, well, we’re gonna, this will help us to partner with JP Morgan, and we’d have to be like, No, it’s not there. And that’s not the case anymore. I think there’s. There’s a lot of smaller financial institutions and banks in this country, across the board, and and also large FinTech companies that which has totally changed the dynamic of partnership. So if you’re just starting out, and maybe you’ve got it, maybe you’re a priest, you know, seed stage company, you’ve got a product in market, you can go and find like, stage appropriate partnerships, whether that’s an issue and maybe, maybe through handling payments. There’s, there’s banks that will do that if you’re looking to kind of, you know, sell into larger incumbents, or there’s kind of smaller, larger incumbents that will, that will buy the product and test it out.
And I think that the kind of that, let’s say that mid market category of financial services businesses that might do, you know, 50 to a couple 100 million dollars in revenue is they’re. Actually very smart now on technology. And there’s a whole more than I could that I know that would, that would be able, that would be excited to partner with startups, almost any stage, in any category. And then I think the larger financial institutions have also gotten very sophisticated, and for the most part, and how they engage with, kind of with startups, you know many of them, you know, many of the the venture capital programs, internal ones that they started, you know, maybe a decade ago now, are actually very sophisticated, really well run organizations that behave, you know, quite similar to VC funds. And so they’re looking for, they’re looking for investments that are going to make money for their companies, and also where there’s a strategic element.
But they’re, they’re, they’re much smarter. I don’t say that’s most that’s not the right way to any they’re, they’re just, they’ve come a lot more realistic on like, how this partnership can work, and like, with the constraints that that they like, the limits of how much a startup can affect their business, and how their own business could affect this. Affect a startup. And so I think it’s actually, again, going back to this has actually been a great couple of years in FinTech, because it’s a much more constructive environment for those partnerships, you know, like, or I can remember horror stories, you know, a decade ago where a startup would start working with a big financial institution and just get the Death Valley of meetings and pilots and all those kind of stuff, you just don’t see that as much anymore.
Joe Heck, CEO of Zip, joins me on the Tearsheet Podcast to discuss the evolution of alternative payment solutions in the US. Zip is a leading Buy Now, Pay Later (BNPL) company. Joe shares lessons from his 20 years of experience in consumer lending and fintech payment solutions. Heck brings insights from his previous leadership roles at Happy Money and TrueStage.
Heck’s background plays a role in his approach to financial services. Growing up in Flint, Michigan, he understands the challenges of paycheck-to-paycheck living. “There’s a consumer base largely ignored by traditional financial systems,” Heck explains. “FICO doesn’t serve them well, but they have a great ability to pay.”
Zip focuses on providing financial flexibility to these consumers. It offers structured repayment plans that don’t push them into revolving debt. According to Heck, “We win when the consumer wins. If they can’t pay us back, our model doesn’t work either.”
BNPL’s Growth, Competition, and Distribution Partnerships
The BNPL industry is still in its early days in the US. Heck notes that BNPL accounts for only about 2% of total payments and 5% of e-commerce transactions in the US. These numbers are significantly higher in markets like Australia and Europe. “There’s a lot of upside left,” he says.
Zip is growing both its customer base and engagement. “We’ve added over 400,000 new customers in the first half of our fiscal year and saw a 40% year-over-year increase in the US,” Heck shares. Engagement is also rising, with more frequent and higher transaction amounts.
With more entrants into the BNPL space, competition is increasing. Heck argues that Zip’s focus on the underserved consumer sets it apart. “Our customers often fall outside traditional FICO lending. We provide access and flexibility that other BNPL providers might not.”
To expand its reach, Zip is forming strategic partnerships with companies like Stripe and major retailers, including GameStop. “Our partnership with Stripe allows us to integrate seamlessly into thousands of merchants, making BNPL more accessible,” Heck explains.
Exclusive retail partnerships are becoming less common as merchants prioritize offering multiple payment options. “Optionality for the consumer is what matters. Retailers want to optimize checkout by giving customers payment methods that work for them,” Heck notes.
The Future of Buy Now, Pay Later & Cash Flow Management
Looking ahead, Heck sees BNPL continuing to evolve with better cash flow management tools. Zip is working on “Pay in Z,” a more flexible model that adjusts repayment terms based on a consumer’s unique financial situation. “We’re striving for personalization at scale,” he says.
Moreover, Heck believes increased familiarity with BNPL will drive further adoption. “Younger generations are hesitant about traditional credit cards. They prefer straightforward payment options that don’t come with complex APR structures.”
The Big Ideas
BNPL’s Growth Potential in the US – With only 2% of payments currently in BNPL, there is significant room for expansion compared to markets like Europe and Australia.
Financial Inclusion for Underserved Consumers – Zip is focusing on consumers who don’t fit traditional credit models but have strong repayment potential. “We provide access when and where they need it,” says Heck.
Strategic Partnerships Drive Accessibility – Integrations with Stripe and retailers like GameStop are making BNPL more available to consumers.
A More Transparent Alternative to Credit Cards – Unlike credit cards that encourage revolving debt, BNPL provides structured, predictable payments. “We’re not built in a way that traps consumers in debt,” Heck emphasizes.
The Role of Cash Flow Management in BNPL’s Future – Zip is investing in tools that help consumers manage unpredictable income streams, ensuring more repayment flexibility.
Financial inclusion remains one of the most pressing challenges in today’s economy. Millions of Americans struggle to access basic financial services simply because they lack a credit history or have damaged credit. This gap in our financial system doesn’t just create inconvenience – it perpetuates cycles of financial inequity that can last generations.
In my latest episode of Tearsheet, I sat down with Julie Szudarek, CEO of Self Financial, a company working at the forefront of this challenge. Julie took the helm at Self just over a year ago, bringing over 20 years of leadership experience from companies like Groupon and Atida. Though fintech is a new arena for her, Julie’s expertise in building customer-focused businesses is exactly what’s needed to tackle financial inclusion at scale.
“I’ve never done fintech before,” Julie told me candidly. “But what I bring to the table is a deep understanding of how to build customer-focused businesses that are sustainable over time.” Her mission at Self aligns well with the broader movement toward more accessible financial services: “We are only here to make outcomes for our customers better than before they started working with Self.”
Expanding Access to Credit: Why Decoupling Secured Credit Cards Matters
For many, the road to improving their credit scores starts with tools that are often out of reach. One of Self’s flagship products, the secured credit card, used to require customers to open a credit builder account, but that has changed.
“We saw so much demand from customers who maybe didn’t want this credit builder experience but wanted a secured card,” Julie explains. “So we found a way to make that available directly.”
Now, Self’s secured credit cards are accessible without a prior credit builder account, requiring only a $100 deposit and no hard credit check. “As far as we can tell, our deposit is the lowest in the industry,” she adds. This move aims to make credit builder apps more flexible and financial inclusion more achievable.
Customer Journey: Meeting People Where They Are
Julie emphasizes that building credit is not a one-size-fits-all process. “Our customers are on a journey,” she says. Julie explains how many arrive at Self through word of mouth, traditional marketing, and partnerships.
“More than 25% of our customers say they came to us from word of mouth,” she shares. She highlights how real customer success stories drive organic growth. Self also collaborates with affiliate partners. Such as lenders who redirect applicants denied for an auto loan due to poor credit scores, offering them a way to rebuild credit.
Beyond products, education plays a key role. “Sixty-five percent of our customers say they had no financial education growing up,” Julie notes. Self responds with resources aimed at demystifying credit, interest rates, and savings strategies.
Building a Fintech Product Suite for Long-Term Customer Needs
Since becoming CEO, Julie has focused on broadening Self’s product offerings. Especially beyond secured credit cards and credit builder accounts. “One of the things I noticed when I started was that we were limited in the number of products we had,” she says.
Customers who completed their credit-building journey had nowhere else to go. “We were just saying goodbye to customers,” Julie reflects. Now, Self is working on graduation products, like unsecured credit cards. The aim is to serve customers as they move forward financially.
“We should be keeping customers on our platform forever,” Julie states. This approach also aligns with fintech solutions focused on lifetime customer value.
Partnerships and Fintech Collaboration for Broader Access
The collaboration with traditional banks and organizations is essential to expanding Self’s reach. “We have partnerships with banks like Regions Bank, which offers our rent reporting solution to their customers,” she says.
Julie says that organizations like Pathway Homes found a connection between homeownership success and Self’s products. Customers who succeeded in homeownership often had Self’s products on their credit reports. This demonstrates the positive impact of Self’s products on financial outcomes. “They reached out to us because they kept seeing Self show up in their customers’ credit files,” Julie recounts.
These partnerships extend Self’s mission of financial inclusion. They do so by embedding credit-building tools into larger ecosystems.
The Big Ideas
Decoupling Secured Credit Cards for Easier Access. “We decoupled the secured card so customers don’t need a credit builder account first. It’s about reducing barriers.”
The Power of Low Deposit and No Credit Check. “Our deposit is $100, and for many, there’s no hard credit check. That makes it much less intimidating for people facing rejection.”
Customer Education as a Core Focus. “About 65% of our customers say they had no financial education. So we focus on teaching them about interest, compounding, and managing credit.”
Expanding Product Offerings to Keep Customers Engaged. “We were limited in what we offered. Now we’re focusing on products that meet customers where they are and help them keep growing financially.”
Partnerships to Reach More Communities. “Regions Bank and Pathway Homes are some of our key partners — together, we’re helping more people build credit who might otherwise be left out.”
Student debt is a major financial challenge, with U.S. borrowers owing over $1.8 trillion in total. This ongoing debt burden affects millions of individuals. Traditional financial institutions are looking for ways to solve this issue. Meanwhile, fintech innovations are providing solutions. These new technologies are helping to address the problem.
Michelle Tran is the head of commercial at Summer and founder of NYC Fintech Women. She joins the Tearsheet podcast to discuss how fintech is streamlining student loan repayment. The conversation focuses on the improvements fintech brings to the process, highlighting how fintech is powering a new generation of financial wellness programs.
“For many borrowers, navigating student loan repayment is like filing taxes on their own,” Tran explains. “The process is complicated. And a simple mistake can lead to missed opportunities for debt relief.”
Tran highlights how fintech platforms like Summer act as a “TurboTax for student loans,” helping borrowers complete complex federal student loan relief applications accurately. There is a growing demand for employer-sponsored loan repayment benefits. Fintech solutions are helping connect employees with the right programs. These solutions play an essential role in meeting that demand.
Employers and Student Loan Benefits: A Growing Trend
Employers are increasingly incorporating student loan repayment programs into their benefits packages. According to Tran, over 50% of employees are asking for loan assistance. Yet, less than 10% of employers currently offer such benefits. “The trend is shifting,” Tran notes. “We’re seeing companies of all sizes. Whether a private practice with 20 employees or a large tech firm. They start offering student debt relief as a retention tool.” With fintech solutions, companies can integrate loan repayment into payroll systems. This makes it easier for employees to access benefits. Some employers now match student loan payments with contributions to retirement plans.
Role of Federal Student Loan Relief Programs
Federal programs like Public Service Loan Forgiveness (PSLF) offer relief to borrowers. These programs are specifically for those working in public service sectors. They provide significant financial help to ease the burden. But, the application process remains complex, leading to high rejection rates. “Over 92% of people who apply for PSLF on their own make errors,” Tran states. “That’s where fintech comes in—we automate the process and ensure accuracy.” Fintech platforms streamline federal student loan relief applications. They help borrowers maximize their eligibility for help. This reduces their long-term financial burden.
Fintech’s Approach to Debt Management
Beyond student loans, fintech companies are addressing broader debt management challenges. Credit card debt, for example, often accumulates due to promotional offers. These later turn into high-interest balances. “Debt is easy to accrue but hard to manage,” Tran points out. “Fintech solutions can provide tools that help borrowers track payments. They can optimize repayment strategies, and avoid unnecessary interest.” Fintech companies offer financial wellness programs to users. These programs teach effective budgeting, credit management, and long-term planning. They help users improve their financial skills.
The Big Ideas
Employers Are Becoming Key Players in Student Debt Relief.“Graduates are considering job offers carefully. They are looking for companies that offer student loan repayment assistance. This benefit is becoming a key factor in their decision-making.”
Federal Loan Forgiveness Programs Are Underutilized. “Many borrowers don’t realize they qualify for loan forgiveness. Fintech is helping them access these benefits more efficiently.”
Technology Reduces Errors in Loan Applications.“Automation ensures borrowers submit accurate applications, increasing approval rates for federal programs.”
Fintech Solutions Are Expanding Beyond Student Loans. “Managing debt holistically creates a more secure financial future. The debt includes credit cards and retirement savings.”
Personal Finance Education is a Critical Component.“Helping borrowers understand their financial options leads to better decision-making and long-term stability.”
I recently sat down with Dan Snyder, CEO and co-founder of Lower, to discuss the evolving landscape of mortgage lending. Lower was founded in 2014 and has grown into one of the largest venture-backed home lenders in the United States. Dan is driven by a commitment to simplifying the home financing process through technology.
“We’re not just building a mortgage company,” says Snyder. “We’re creating a comprehensive platform. It will make homeownership more accessible, especially for younger buyers.” Fresh off its acquisition of NeatLabs, Lower’s new proprietary platform, LowerOS, promises to reduce the cost and complexity of mortgage origination. Snyder bootstrapped his startup and went on to raise Ohio’s largest Series A, showcasing resilience and vision. His journey offers valuable lessons in leadership and innovation. It also highlights how to navigate the challenges of a volatile housing market. The conversation explores key topics like the role of venture capital in professionalizing a business, the strategic importance of owning a full tech stack, and the opportunities presented by serving next-generation home buyers.
Lower’s Journey: From Bootstrapping to Venture-Backed Growth
Dan Snyder and his co-founder, Mike, launched Lower in 2014 with a focus on profitability and reinvesting earnings. But, by 2020, they recognized the need for external funding to scale their vision. “If you’re going to raise money, it’s about fueling growth and getting on the radar of other investors,” explains Snyder. Their $100 million Series A from Accel provided crucial resources and strategic guidance. The partnership fueled their growth and strengthened their vision.
The NeatLabs Acquisition: Building a Tech-Driven Future
A pivotal moment for Lower came with their acquisition of NeatLabs, a technology company specializing in mortgage solutions. “We needed a complete tech stack to control our destiny,” says Snyder. This move brought experienced engineers and a robust technology infrastructure into the company. It helped in setting the stage for the launch of LowerOS. The platform simplifies tasks like digital pre-approvals, document management, and loan pricing. Its goal is to make these processes more efficient and user-friendly.
LowerOS: Streamlining the Home Loan Process
LowerOS is designed to address the inefficiencies in the traditional mortgage process. Snyder says, “Owning our tech stack reduces costs and eliminates reliance on third-party software.” LowerOS sets Lower apart from competitors like Rocket Mortgage with their proprietary systems. It gives Lower an edge in the market.
Supporting First-Time Home Buyers
The average first-time home buyer is now 38 years old and facing affordability issues. Lower is focused on addressing these challenges. Their goal is to make homeownership more accessible to these buyers. “We think about incubating our next-gen customers,” Snyder shares. Lower uses financial education and digital tools to prepare younger buyers for homeownership by making the buying process easier and more accessible.
Balancing Technology with Human Connection
While Lower leverages technology, it also emphasizes the importance of a human touch. “It’s technology with a handshake,” says Snyder. The company’s local loan officers work closely with customers. They combine digital convenience with personalized service to create an end-to-end home loan experience.
The Big Ideas
Venture Capital as a Catalyst for Growth.“Raising money allowed us to professionalize the business and access top talent,” says Snyder. He highlights the impact of Accel’s investment.
The Strategic Importance of Owning Technology. “We didn’t want to rely on third-party software that didn’t align with our goals,” Snyder notes. LowerOS is the result of this strategic decision.
Challenges in Serving Next-Gen Buyers. “The average income for first-time buyers is over $200,000. We’re working to bring that down by improving affordability,” Snyder explains.
Adapting to Market Volatility. Snyder highlights that inventory and interest rates are major challenges. But, technology can help reduce costs and improve efficiency.
Combining Tech with Human Expertise.“Even with digital tools, a 15-minute conversation can save hours of back-and-forth,” says Snyder. He emphasizes the value of human interaction.
In this episode of the Tearsheet Podcast, I sit down with Frank Chaparro, the host of The Scoop and Director of Special Products at The Block. He has years of experience at the intersection of digital assets and Wall Street. Frank offers a unique perspective on blockchain technology and tokenization, highlighting their early impact on financial markets and projecting out where Web3 may lead for financial services.
“When you’re managing trillions of dollars, offering new, innovative products isn’t just risky. It’s a massive operational challenge,” says Chaparro. His insights explain why tokenization, stablecoins, and blockchain technology are growing in popularity. These innovations overcome challenges faced by traditional financial institutions, offering new solutions and efficiencies in the financial sector. Frank explores how stablecoins bridge decentralized finance and traditional systems. For example, he explores the challenges of institutional investment in crypto ETFs. His analysis covers the complexities of this fast-evolving space.
Frank emphasizes that tokenization is more than a buzzword: it’s a potential game-changer for financial systems. “At its core, tokenization offers efficiencies. Especially, in processes like property transactions and trading real-world assets,” he notes. But, he warns that significant hurdles remain. These include the lack of robust infrastructure and regulatory clarity.
Stablecoins as a Catalyst
Stablecoins, Frank explains, are a“lightning in a bottle” moment for crypto. “They’re effectively tokenized representations of dollars. And their ease of use has driven market growth to over $200 billion,” he says. Institutions and individuals alike are increasingly adopting stablecoins for payments and payroll. Major players like Tether and Circle are leading the way.
Institutional Adoption of Crypto ETFs
Crypto ETFs are making waves with record-breaking launches. But, Frank argues that institutional adoption of crypto is still in its early stages. He believes there’s much more progress to come. “Advisors are still figuring out how Bitcoin fits into the classic 60-40 portfolio model,” he says. Firms like Fidelity and BlackRock are exploring crypto allocations. This highlights the undeniable potential for growth.
The Role of Regulation
Frank notes that banks are often held back by internal policies, not regulatory restrictions. These policies prevent them from fully engaging with crypto. “The demand for ETF products has been phenomenal. But banks are navigating a complex regulatory landscape,” he explains. He believes regulatory clarity on stablecoins and digital assets could be a tipping point for wider adoption.
Sizzle vs. Steak: Deciphering Crypto’s Value
When asked how to separate hype from substance in crypto, Frank shares a pragmatic approach. He says, “It’s about looking beyond the present hype and assessing long-term potential. Technologies like NFTs and meme coins might seem frivolous now. But their underlying concepts, like financializing culture, hold promise.”
The Big Ideas
Tokenization could revolutionize industries by making processes more efficient. Frank highlights its application in property transactions. He says, “Tokenizing deeds could bring unprecedented efficiency to a traditionally slow process.”
Stablecoins are enabling seamless transactions between traditional and decentralized finance.“It’s just so damn easy to send stablecoins compared to alternatives like PayPal,” says Frank.
Despite regulatory and operational hurdles, major banks are inching closer to crypto adoption. Frank predicts, “By 2025, we’ll see wealth management portals opening up to these assets.”
Regulatory clarity remains a double-edged sword. Frank explains, “Banks fear the potential repercussions of engaging with digital assets. Even when there’s no explicit rule against it.”
Meme coins and NFTs hint at a future where culture and finance intersect. Frank calls it “extracting value out of humor,” a concept that could reshape how we view digital assets.
