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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
What have the companies that won Best of Show awards at last year’s FinovateFall conference been up to in the months since our New York show? With our autumn event less than a month away, we thought it would be a great time to check in on the nine companies that took home top honors this time last year.
BlytzPay – Integrated its digital payments technology with Dealer Management Systems (DMS) leader ABCoA Deal Pack. Announced strategic partnership with AFS Dealers.
Cinchy – Joined the 2020 MassChallenge FinTech Program in December 2019 along with five fellow Finovate alums. The program noted that 70% of the participants in its previous cohort launched a pilot or proof of concept within a year. Earned a $500,000 cash prize as one of the winners of the 2019 VentureClash competition. Raised $10 million in funding in May.
College Aid Pro – Partnered with Horsesmouth, a company that provides educational and marketing solutions for financial advisors and their clients. Announced collaboration with the American Institute of Certified College Financial Consultants. Teamed up with online student loan refinancing marketplace Credible.
ebankIT – Forged North American partnership with fellow Finovate alum Enterprise Engineering this spring. Announced updates to its multichannel banking platform.
Glia – Won Best of Show at FinovateEurope for a second year in a row. Integrated its technology with fellow Finovate alum Alkami’sOnline Banking Platform. Inked partnerships with 20 credit unions across the U.S.
MX – Topped 50,000 direct-to-bank API agreements to major financial institutions and fintechs. Launched data connectivity API, Path by MX. Named one of Inc. Magazine’s Best Workplaces 2020.
owl.co – Named one of Canada’s Most Innovative Tech Companies by the Canadian Innovation Exchange. Delivered $1 million in revenue within six months of launching.
Pinkaloo Technologies – Raised $1.25 million in funding. Joined Goldman Sachs-owned Ayco Marketplace for financial counseling and wellness services. Partnered with Eastern Bank to power its Give for Good charitable giving program.
Zogo Finance – Teamed up with fellow Finovate alum Bankjoy. Announced partnerships with 11 community banks and credit unions across 12 states. Surpassed 1,000,000 financial literacy modules completed.
FinovateFall Digital 2020 kicks off Monday, September 14 and continues through Friday, September 18 with hours of live and on-demand content. Visit our registration page today and join us for Finovate’s biggest, digital-first event to date.
In a round led by Sorenson Ventures, identity verification innovator Socure has locked in $35 million in new funding. The investment, which takes the company’s total capital to $96 million, featured the participation of three new funders: Citi Ventures, Wells Fargo Strategic Capital, and MVB Financial Corp, as well as existing investors Commerce Ventures, Scale Venture Partners, and Flint Capital. Socure said the additional funding will support the firm’s growth objectives and enable the company to add to its platform’s machine learning capabilities.
“We are grateful to have had significant investor interest despite the current economic environment, and are proud to have taken less money than was on the table,” Socure CEO Tom Thimot said. “As we continue to build on our position as the leader in Day Zero identity, we are prioritizing investment in new verticals, talent, products, and capabilities.”
The investment reflects a growing importance on identity verification at a time when more and more individuals and businesses are relying on digital channels. Companies with identity verification solutions that can quickly – i.e., in real-time – establish that individuals are who they say they are and do so with as few mistakes as possible will become increasingly valuable partners for businesses looking to maximize engagement and commerce via digital channels.
Socure’s funding news comes just a few months after the company unveiled its latest digital identity verification solution, Intelligent KYC. The company’s technology accelerates customer acquisition and boosts auto-approval rates by leveraging advanced graph analysis and machine learning to verify identity in real-time. With partners ranging from banks and lenders to telecommunications firms and insurance companies, Socure enables its clients to achieve 85% fraud capture rates, a 90% increase in auto enrollments, and up to 10x reduction in false positives.
Most recently demonstrating its technology at FinovateFall in 2017, Socure was founded five years earlier by Sunil Madhu and Johnny Ayers (SVP). Named one of Forbes’ Top 25 Machine Learning Startups to Watch, and recognized by Gartner as a Cool Vendor in AI for Banking and Investment Services this spring, the company added a document verification module, DocV, to its Socure ID+ platform earlier this month.
Socure is headquartered in New York, and maintains offices in San Diego, San Jose, and Chennai, India.
Customer engagement specialist Digital Onboardingannounced its Series A round today. The amount of funding was undisclosed and adds to the company’s existing $4.3 million in seed funds. Contributors include Detroit Venture Partners and other institutional and individual investors.
Along with today’s investment, FINTOP Capital Partner John Philpott, Jack Henry Senior Managing Director Shawn Ward, and a founding member of S1 Corporation joined the Board of Directors.
The company plans to use the funds, along with the fresh influx of expertise on its board, to begin “accelerating the execution of [its] product roadmap, scaling account management, and expanding sales.”
Digital Onboarding’s SaaS offering helps banks deliver compelling services that keep customers around for the long-term. The company is especially effective in helping motivate accountholders to take action because it aggregates data across banks with similar business objectives.
“Banks have myopically focused on getting new accounts opened to meet aggressive sales targets and are now being forced to contend with the reality that new accounts are worthless if they’re not converted into engaged relationships,” said Digital Onboarding CEO Ted Brown. “The Digital Onboarding platform has been proven to drive the adoption of additional products and services like digital banking, direct deposit, and automatic payments which drive long-term profitability.”
The funding comes at a time of increased demand for digital services of all kinds. Since many non-digital native customers are now needing to conduct much of their banking activities remotely, maintaining connection with them through digital channels is more essential than ever.
Digital Onboarding was founded in 2015 and is partnered with 40+ financial institutions that together represent $160+ billion in assets. The company most recently demoed at FinovateFall 2018. You can catch an all-new round of demos at FinovateFall Digital next month. Stream the event from anywhere on the globe September 14 through September 18.
The following is sponsored content from LendingFront.
With Covid-19 on the minds of businesses and lenders alike, conversations about the capital needs of small businesses have revolved—with obvious justification—around the Paycheck Protection Program (PPP) and other forms of relief provided under the CARES Act.
Yet the capital needs of many small businesses don’t begin and end with the PPP.
Let’s start with a few facts
According to the U.S. Federal Reserve’s 2019 Small Business Credit Survey:
43% of small businesses sought external funding for their businesses in 2018
And more than half experienced a funding shortfall.
These funds—when small businesses can obtain them—are often used to purchase inventory, replace equipment, finance expansion, and hire new workers.
These needs will persist long after PPP lending has come to an end, yet even in a strong economy, up to 80% of bank-originated small business loan applications are rejected.
In the post Covid-19 environment, we can expect that percentage to be even higher
That’s because the conventional underwriting criteria for small business loans will no longer work. Traditionally, both bank- and non-bank lenders have relied on four criteria for underwriting small business loans:
Tax/Financial Statements
Credit Scores
Collateral
Owner Wealth
In a normal economy, these criteria are fine, but they’ll do little to show the true state of a business in the post Covid-19 environment. 2019’s tax/financial statements will be all but irrelevant. Credit scores will be damaged as a result of the inability to make payments during a forced closure. Collateral will have questionable value if bankruptcies spike. And owner wealth will have been tapped in an effort to keep many businesses afloat.
Are we headed towards a capital drought?
With traditional underwriting criteria no longer useful, are we headed toward a capital drought? We certainly don’t need to, but the answer largely hinges upon lenders doing two things:
Adopting new criteria that are more appropriate for the post Covid-19 environment
Adopting new product structures that enable the lender to manage risk
New credit criteria include information such as:
Real-time Cash Flow Cash flow helps you gauge how quickly the business is recovering from Covid-19. Is it in irreversible decline? Is it struggling but stable? Has it gotten back to normal? Insight into real-time cash flow helps lenders make better decisions about who to lend to along with the terms of any offers.
Consumer Sentiment Customers who vote with their reviews also vote with their wallets. Examine reviews from Google, Yelp, and other sources to answer, Is this a business that customers love? Businesses that are well-regarded by customers stand a much better chance of recovering than those that had problems before the pandemic shut them down.
New product structures also enable lenders to deliver capital efficiently while managing risk
Here’s how:
Shorter Terms First, lenders should emphasize shorter payback periods in the range of 6-12 months. Shorter terms get the lender paid back faster while enabling the business owner to show that he/she is creditworthy before seeking a larger amount of capital.
Daily ACH Payments Second, lenders should collect payments from the borrower on a daily—rather than monthly—basis. Monthly payments introduce unnecessary operational risk. Daily payments are smaller, consistent, and more predictable from the standpoint of the business’ cash flow.
Tie Payments to Performance Lastly, lenders should tie payment terms to current cash flow performance—and with visibility into cash flow, this is very easy to do.
A new economy needs new rules for lending
If the Great Recession taught us anything, it’s that opportunities exist for lenders to increase their assets, gain market share and, of course, to meet the capital needs of their borrowers. In the post Covid-19 environment, lending is only as risky as the information used to make decisions. With better underwriting criteria and more appropriate product structures, the most forward-thinking lenders will position themselves for success and reap the rewards.
A recent analysis by Brookings looked how technology, platform regulation, and China policy may be impacted by the policies of a future Joe Biden/Kamala Harris administration should President Trump fail to be re-elected. As might be expected, the review pointed to greater regulation – including anti-bias and worker rights advocacy – as one likely outcome if a new administration takes office next year.
Also interesting are the ways that the Brookings analysts – and others – see a Biden/Harris administration as an enabler of technological advancement and innovation, especially in the area of technology infrastructure. This is also one of the ways where a Biden/Harris administration could be most constructive for fintech.
As the Brookings analysts point out, the fact that the Democratic vice presidential nominee is a Senator from California (who represents Silicon Valley) suggests that there might be greater insight into the issues and challenges of the 21st century technology industry than exists in the current administration.
This likely cuts both ways. A Democratic administration would likely be more supportive of immigration policies that would enable tech firms to keep and attract more talent – as well as for international talent to decide to innovate and build in the U.S. rather than in Europe or Asia. This would benefit fintechs across the board as much as it would benefit technology companies generally.
At the same, there’s no doubt that regulation – especially financial regulation – would likely see a resurgence. While many are wondering about the prospects of an Obamacare 2.0 in a Biden/Harris administration, fewer are discussing the possibility of a CPFB 2.0 and the likelihood of a renewed attention on fintech’s lenders in particular. I think that the CPFB’s creator, Massachusetts Senator Elizabeth Warren, would probably not be headed to Treasury in the event the American people put Joe Biden in the White House, but her influence on the resurrection of the agency would be powerful.
At the same time, it is worth remembering that Joe Biden has a far different historical relationship to the world of finance, if not fintech, compared to Senator Warren. As a multi-decade senator of Delaware, Biden has been criticized – including by Senator Warren – for his “energetic work on behalf of the credit card companies.” A 19th century Delaware law allows any American company to incorporate in the state and not a few firms over the years have taken advantage of this to “place their profits in Delaware-based holding companies to avoid paying taxes in the places where they actually operate” as Tim Murphy described in Mother Jones last year.
It may be too much to suggest that the First 100 Days of a Biden Administration would feature a tug-of-war between the new president and Warren over the appropriate attitude toward consumer lending and credit. But the presence of both does suggest that any policy that emerges could be more moderate than might otherwise seem.
Tandem Bank announced its latest acquisition this week. The U.K.-based bank has purchased Allium Money, an alternative lender that offers consumers financing to improve the energy efficiency of their homes.
Specific terms of the deal were not disclosed, but it is made possible by Tandem’s $78 million (£60 million) funding round that was led by Qatar Investment Authority and closed last week.
Tandem Bank will use Allium to enhance its existing in-house lending suite, tapping into Allium’s green lending solutions that help homeowners finance everything from insulation to efficient windows to solar panels.
“This is great news for our customers and the team that have worked tirelessly to develop the business focussing on financing improvements for our environment,” said Allium CEO Paul Noble. “The combination of Allium and Tandem will create the ability to rapidly scale a green banking proposition and help more customers access green finance products.” Noble will join Tandem’s executive team.
The partnership comes at a good time. With an increased focus on climate change and awareness of their impact on the environment, consumers have shown heightened interest in green initiatives. Along with home improvements, ESG (environmental, social, and governance) investing is also gaining interest.
Tandem Bank has raised $175 million (£134.3 million) since it was founded in 2013. The challenger bank’s 700,000 customers have access to Tandem’s accounts that include Autosavings technology, credit card, and, coming soon, cashback rewards.
Digital receipts platform ReceiptHero will join Mastercard’s Lighthouse Development Program in September. The Helsinki, Finland-based company made its Finovate debut earlier this year at our Berlin conference, demonstrating how its digital receipts technology makes accounting easier for banks and PSPs while giving customers greater transparency into their spending.
ReceiptHero is one of 15 companies from the Nordic and Baltic countries to be included in the program’s fall cohort. Participating startups will work with program partners such as Swedbank, SEB, and OP Bank, and receive guidance on topics such as communications and marketing, as well as strategic development. The startups also will explore potential collaboration opportunities with program partners. In the final stage of the program, the companies will have the ability to make digital pitches to investors.
“By joining the latest Lighthouse batch, we hope to work closely with Mastercard and its partnering banks on making digital receipts the new normal,” ReceiptHero CEO Joel Ojala said.
Also participating in the fall program are five companies from Sweden: Gimi, Charge, Youcal, Ponture, and FossID; and five companies from Lithuania: Kevin, ConnectPay, Regvolution, Spell, and Savings Pands. In addition to ReceiptHero, there are another four companies from Finland: Voima Gold, XMLdation, Arctic Security, and InvestSuit.
“In every edition of the Lighthouse Program, we can see that the Nordics and Baltics are genuinely leading in payments innovation,” Head of Digital Development and Fintech Engagement for Mastercard in the Nordics and Baltics Mats Taraldsson said. “This proves the importance of strengthening the ecosystem through open innovation platforms such as Lighthouse.”
Founded in 2018, ReceiptHero teamed up with Verifone last fall, enabling digital receipts to be linked to customers’ payment cards. Verifone has a major presence in the Nordic region, and the partnership allowed ReceiptHero to access not only a larger part of the Finland market, but also to expand to other Baltic countries where Verifone “already has a large footprint,” Ojala said. Later that same month, ReceiptHero announced a collaboration with Nordea, which added the company’s digital receipts to its Nordea Wallet app.
ReceiptHero began 2020 with a pledge to plant one million trees by 2025 by donating $1 to conservation charity One Tree Planted for every new merchant that joins its digital receipt platform.
Starting this week, NatWest is making it easier for clients to get the help they need to make their banking experience easier. The initiative is called Banking My Way and provides a single place for customers of the U.K.-based bank to input their preferences so that they are addressed across all channels.
The preferences are divided into two sections, About me, which addresses vulnerabilities or disabilities such as being visually or hearing impaired, and Support me, which focuses on how the bank can support the user, such as speaking slowly and clearly or not assuming a gender when addressing them.
“Banking My Way will allow you to tell us more about your current circumstances and the difficulties that you are facing with your banking,” NatWest explained on its website. “This will allow you to also tell us about the support you require, and we will ensure that this information is shared with our teams to support any further interactions that you have with us.”
Clients can input or change preferences online, in a branch, or via phone. In order to ensure information is up-to-date, users will be asked to review their preferences on an annual basis.
This is an amazingly simple idea, but because it is a pull, rather than a push approach, it may be lost on some consumers. That said, NatWest will have the best response rates with this system if it is implemented as part of the onboarding process, instead of being structured as a separate item customers need to register for.
The West won the Cold War, says conventional thinking, not via open confrontation, but by making the cost of competition prohibitively high for its adversary. Some of the brightest minds in the digital identity business believe that a similar approach is key to undermining the ability of criminals to profit from cyberfraud.
“Eliminating all fraudulent accounts is an admirable goal, but perhaps unattainable,” wrote Cameron D’Ambrosi, Principal, One World Identity, and an upcoming participant in our FinovateFall DigitalFuture Financial Crime roundtable. “Making it more expensive to create a fraudulent account than the profit generated by a fraudulent account is … achievable. It will go the farthest towards meeting the goals of trust and growth teams alike.”
In a blog post earlier this year, D’Ambrosi put the case for digital identity in the context of the current global health crisis, seeing COVID-19 – and the social and economic response to it – as an accelerant of trends that had been in place before the onset of the coronavirus.
As D’Amborsi explains, in a world in which individuals are increasingly accessing an ever-growing array of digital platforms – on their own or under the influence of algorithms – distinguishing authentic users from digital-created fakes and imposters – is critical to a 21st century online experience that can be trusted. This challenge will be all the more intense because of the incentive brands and businesses will have to “go viral” and spread their content as widely as possible. Ensuring that customers are not conned by brands that are scams and that merchants are not fooled by customer-impersonating bots is a key task for digital identity companies today.
On the issue of digital identity and financial crime, Jas Randhawa, Chief Compliance Officer for Stripe has underscored the rise and challenge of “newer fraud typologies” and opportunities for fraud in the current, COVID-19 environment. He has also observed that the renewed volatility of the stock market during the global pandemic unfortunately has also provided fertile ground for fraudsters. Add to this the powerful incentive for merchants and other businesses to “go digital” in response to lockdowns and work-from-home, and the result is additional pressure on the ability of the identity management infrastructure – for institutions and individuals alike- to determine real, legitimate actors from fake or malevolent ones.
Randhawa will also join our FinovateFall Digital conversation on Future Financial Crime this September. A 14-year veteran of financial crimes and compliance management – including six years with PwC – and a certified anti-money laundering specialist, Randhawa has emphasized three general themes from his experience in compliance: de-siloing decision-making, embracing technology, and understanding the cyclic nature of identifying problems, developing solutions, innovating as new challenges arise – and then starting the whole process over again.
Randhawa’s example of Stripe is interesting, given that the company is a digital-first entity. While that shielded the firm from having to digitize in the middle of a pandemic, the company was faced with the task of securely onboarding a surge of businesses who had suddenly made the decision to pursue digitalization. Moreover, the company needed to thread the needle of keeping bad actors off the platform while not being so restrictive as to undermine its own goal of “growing the GDP of the Internet.”
For Randhawa the current circumstance likely represents a New Normal as far as the innovation cycle in compliance is concerned. “We’ll have to keep whacking away at this problem,” he said during an online panel earlier this year, Real Identity Validation in a Digital World, sponsored by One World Identity. He emphasized that creativity will be required in order to achieve an experience that is simultaneously the most seamless and the most secure.
Among the companies helping businesses and individuals cope with the new requirements of the New Normal are firms like Jumio and SheerID. Both companies are innovators in the digital identity management space, both Finovate alums, and both portfolio companies of venture capital firm Centana Growth Partners. Founded in 2015, Centana considers authentication and identity technology companies among its core competencies and the firm’s co-founder Eric Byunn will also join our conversation on Future Financial Crime next month.
“Authentication is of critical importance to a broad range of online and mobile applications across industries such as financial services, e-commerce, travel, and the entire sharing economy,” Byunn said four years ago when Centana acquired Jumio, making a statement that is all the more true today. He called identity “top-of-mind for companies” last fall when SheerID was named to the Deloitte Technology Fast 500.
Centana also has a more direct commitment to financial crime fighting than just its investments in digital identity innovators. The VC firm is also a backer of SpyCloud, a Finovate Best of Show winning startup that specializes combating account takeover (ATO) fraud and recovering stolen credentials from the online criminal underworld or “dark web.” SpyCloud raised $30 million in funding earlier this week in a round led by Centana and featuring the participation of Microsoft’s venture capital fund, M12, as well as Altos Ventures, Silverton Partners, and March Capital Partners.
“SpyCloud’s approach to fraud prevention is helping businesses protect themselves and their customers at a time when threats are more pervasive than we’ve ever seen,” Byunn said when the funding was announced. “We heard from major financial institutions and a wide range of enterprises that SpyCloud’s solutions are critically important to their anti-fraud efforts.”
The fact that VC firms continue to plow money into companies that fight cybercrime – either directly like SpyCloud or indirectly by enhancing the identity management infrastructures we rely on – is a positive sign in and of itself. But in the context of winning the arms race against technology-savvy criminal adversaries, it’s a welcome indication that the money is flowing in an area where the challenge appears never-ending.
Crypto asset-backed lender BlockFI just landed $50 million in funding, marking the company’s third investment in just 12 months.
The round was led by Morgan Creek Digital with participation from Valar Ventures, CMT Digital, Castle Island Ventures, Winklevoss Capital, SCB 10X, Avon Ventures, Purple Arch Ventures, Kenetic Capital, HashKey, and others.
BlockFI will use the cash to hire more employees and boost its business offerings. Specifically, BlockFI plans to add support for additional assets and currencies and is working on the launch of a bitcoin rewards-based credit card.
Flori Marquez, SVP of Operations and Co-Founder of BlockFi, described the company as “a driving force in bringing cryptocurrencies mainstream.” And that summarizes BlockFI’s goal with this new growth round. Not only does the company hope to improve the customer experience, it also wants to broaden the appeal of crypto-based investment.
Founded in 2017, BlockFI offers some of the same services customers are used to seeing at their traditional bank, only for cryptocurrencies. In addition to providing trading and institutional services, the company allows users to earn compound interest in a range of different cryptocurrencies. BlockFI also helps clients leverage their cryptocurrency as collateral towards a loan, paid in U.S. dollars, and receive their cryptocurrency back after the loan is paid off.
“With the support from our partners, we’re creating a platform for investors where they aren’t investing in just digital assets anymore—they’re investing in the future, greater financial empowerment and accessibility,” said Zac Prince, CEO and Founder of BlockFi.
BlockFi, which currently has $1.5 billion in assets on its platform, has seen impressive growth in recent months. The company ballooned its revenue 10x over the past year, with plans to reach $100 million in revenue over the next 12 months.
Alternative credit scoring innovator CredoLab announced a new $7 million investment today. The Series A round was led by identity data specialist GBG, a company that entered a technology partnership with CredoLab back in June and is now taking a minority stake in the Singapore-based firm. CredoLab plans to use the additional capital to fuel expansion in markets in Asia, Latin America, Europe, and Africa.
Founded in 2016, CredoLab made its Finovate debut at our Asian conference in 2018. At the event, the company demonstrated its proprietary CredoScore which converts digital footprints into highly predictive scores that can be used by banks and lenders to guide credit decisioning. The company’s technology examines mobile device data – collected after securing the user’s permission – and leverages AI-based algorithms to analyze 50,000+ data points to, as the company puts it, “connect the dots that traditional credit scoring methods can’t.”
GBG Group uses Credo’s technology to bolster its own antifraud platform’s ability to determine creditworthiness during the onboarding process. GBG Chief Executive Chris Clark praised the way Credo’s risk scoring will help it better serve “good customers who are financially excluded” – especially by lowering false positives.
In addition to its partnership with GBG, CredoLab teamed up with GoBear and fellow Finovate alum Mambu in June to help the financial platform expand to the Philippines. The previous month, CredoLab was highlighted by Fintechnews Singapore in its look at fintechs in SE Asia that are making a difference when it comes to financial inclusion. The company this year has also worked with LenDenClub, among the fastest-growing P2P lending platforms in India, and collaborated with Salary Dost – also based in India – to help the lending platform enhance its underwriting process.
A winner in the ASEAN Open category of the SFF x SWITCH Fintech Awards last year, CredoLab was recognized in January as Indonesia’s first credit scoring company. Since inception, CredoLab has powered more than $2 billion in loans issued, analyzing more than one trillion data points across 21 countries. Peter Barcak is co-founder and CEO.
This is a guest post written by Philippa Ushio and Hal Bienstock of Prosek Partners.
In an extremely uncertain business environment, there are two things that almost every expert agrees to be true:
The most innovative companies are likely to come out ahead when the COVID-19 crisis comes to an end
Diverse leadership teams are more innovative and generate better business results
So, why is it that venture capitalists – the very people tasked with funding innovation – are so monolithic? According to a report from Richard Kerby of Equal Ventures, just three percent of VC employees in 2018 were Black and only one percent were Hispanic. Eighteen percent are women.
The numbers for fintechs tell a similar story. According to research from Oliver Wyman, women represent just 14% of fintech boards, compared with 23% in the banking sector. The consulting firm found that 39% of fintechs it studied had no women on their board at all.
Now consider that McKinsey’s Delivering Through Diversity Report found that companies in the top-quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability. And research from Boston Consulting Group found that companies with more diverse management teams have 19% higher revenues due to innovation. Clearly, there’s a disconnect.
That said, we can agree that not all talk about diversity and serving underserved populations is just lip service; many fintechs are in fact delivering on their missions. Facilitating access to PPP is a good example, with loan marketplaces like Lendio, Fundera and Nav having all been credited with reacting quickly to help small businesses during the first round of government support. And many neo-banks and earned wage access providers are helping low-income workers achieve financial wellness during a period of great economic uncertainty. Pandemic aside, there is no doubt that it is easier today than it was 10 years ago for businesses and individuals to get reasonably priced short-term credit, specialized financial advice, and avoid high percentage loans, among other things. Yet, for all the good fintechs are doing, it’s impossible not to think about the problems that founders haven’t begun to even consider – let alone solve – because they don’t have people on their teams who are actually living with these issues.
In addition to the disturbing lack of ethnic and gender diversity at VC firms, Richard Kerby found that 40% of VC employees went to one of just two schools – Stanford or Harvard. How many of them grew up unable to afford an unexpected $400 expense, like 40% of Americans? Or with parents running small businesses that lived or died based on what was in the cash register at the end of the day?
Over the past decade, fintechs have done a lot to help small and medium businesses. But there’s an opportunity to do so much more and there has never been a more important time than now as so many face the reality of shutting their doors in the wake of the pandemic.
If founders and VC firms continue to ignore the benefits that diversity in leadership bring, it won’t be long before the disruptors find themselves disrupted by those who are more innovative, more thoughtful about the problems they are trying to solve, and more able to reach a customer base that consists of far more than just Harvard and Stanford grads.
The good news is that things are changing. Many fintechs and VC firms put out strong statements of support following recent racial justice protests and committed themselves to taking measurable action to diversify. Only by living up to these ideals can the current fintech wave continue to build. Let’s watch this space.
Philippa Ushio is SVP at Prosek Partners where she leads teams in developing communications strategies and mounting multi-disciplinary campaigns to protect and enhance business value. Throughout her career, she has provided strategic counsel to clients facing a wide variety of complex issues, focusing particularly on their communications challenges.
Hal Bienstock is a Managing Director at Prosek Partners. A fintech specialist, he has spent more than 20 years working as a brand strategist and corporate communications executive. He has extensive experience counseling C-suite leaders and developing integrated campaigns that change perceptions internally and externally.
