Who Benefits from Fintech Innovation?

This contributed article was prepared by Jimmy Chen in a personal capacity. The opinions expressed in this article are the author’s own and do not necessarily reflect the views or position of Startup Genome.

Jimmy Chen

Jimmy Chen is the founder and CEO of Propel and the creator of the Providers app, which offers low-income Americans the ability to track their SNAP benefits (more commonly known as food stamps) and debit accounts while granting users access to job postings, discount coupons, and savings tools. Chen graduated from Stanford and worked as a Product Manager at Facebook before leaving to produce software for people experiencing poverty.

These days, many are disillusioned by Fintech — is it just another way for the wealthy to become even wealthier? America’s financial services industry has historically been known to perpetuate economic inequality. Can Fintech change that story, or will it be more of the same?

More than ever before, entrepreneurial Fintech apps, portals, and streamlined websites are helping people optimize their financial health, often from the convenience of mobile devices. The Fintech industry’s explosive growth results from factors including burgeoning cryptocurrencies, dynamic regulations, a need for more affordable financial services, and the economic impact of COVID-19.

Beneficiaries of Fintech Startup Innovation

People in tech typically set out to solve their own problems. Fintech startups frequently stem from founders aiming to optimize financial products and services after they observe an opportunistic gap as a result of their own life experiences. Individuals who have challenges that overlap with a Fintech organization’s founder — frequently coupled with other demographic similarities — are usually their best-served segment.

However, people who demographically differ from the average Fintech founder (by location, age, gender, socioeconomic status, race, etc.) have fewer innovations created on their behalf. While targeting a lookalike audience is advantageous for say, managing advertising budgets, overlooking those who are unlike existing Fintech founders leaves neglected segments within the Fintech startup space, as well as in global economies. More quality Fintech innovations targeted at a broader range of demographics would create stronger overall financial health across the board.  

This does not necessarily have to create not-for-profit ventures. Finding business models that align revenues with the positive social impact of serving an underserved community — such that you can only achieve one if you also achieve the other — is the best way to avoid finding yourself in a situation where you’re forced to trade off one at the expense of the other. It’s a more difficult business to build, but once created, can be deeply sustainable.  

Fintech Startups Can Better Support the Financially Vulnerable  

In order to utilize Fintech innovation to better support wellness among the financially vulnerable, the industry must improve how it serves specific audience segments and appropriately lift underrepresented individuals to found startups that support their communities. Unexpectedly to some, low-income households command, on the aggregate, a substantial amount of purchasing power — and there are far fewer companies competing for it. Few for-profit startups believe they can relieve financial inequality and even fewer think they can achieve high growth in doing so. While tech won’t solve poverty alone, it can play a significant role in building safety net services that restore financial health.

Fintech can better serve neglected audiences by enabling B2C companies to better define who their customer is, how to determine their key market, and what they should do to best serve their clientele. The expansion of supported segments aims to increase the representation of currently underserved audiences as well as the advantages they receive as a result. This includes thorough research and honesty on what truly benefits customers; that can’t be achieved when those innovations include a paternalistic view of what elitists deem is best for individuals with whom they don’t identify closely.

Audiences won’t use products or services that don’t solve their problems effectively, and adoption will be higher among those who feel the innovations provide sensible choices and respectful treatment along with convenience. At a time when many are financially fragile and assumptions about cash flow, savings buffers, and credit scores may actually be poor business decisions, Fintech should intentionally and empathetically promote customer specialization that prioritizes customer well-being.

Enabling Traditionally Excluded Entrepreneurs

Of course, no amount of empathy is a replacement for lived experience. The best way for Fintech to serve a wider swath of the population is to enable a diverse set of entrepreneurs to start companies that address the issues they understand best. Entrepreneurial diversity of all kinds — gender, race, age, geography, language, socioeconomic status, and more — is critical to creating a Fintech ecosystem that serves everyone, not just the well off.

As one example, the Providers app, created by Propel, offers a free checking account and debit card for managing SNAP benefits, disability benefits, child tax credits, and cash, as well as allowing users to track expected payment arrival dates. It allows users to manage earned income and government assistance alongside one another in the same app, in addition to facilitating job hunting, and allowing users to compare grocery prices. Traditionally, people receiving government assistance would often check their account balances by purchasing an inexpensive item and looking at the number displayed on the receipt. The Providers app permits users the dignity of personal financial awareness and reduces unnecessary hurdles.

While there are over 40 million Americans who receive SNAP benefits, this is merely one of many underserved segments of the population — enabling more diversity in entrepreneurship is key to unlocking Fintech’s promise of prosperity for all.