One of the most significant opportunities in fintech remains to help people better understand and manage their finances. When we look at how most people manage their money today, the process is still far too complex in exchange for far too little financial impact. As the fintech market matures, however, startups are increasingly developing more holistic solutions, getting insights into customers' hands, and helping them make better financial choices that align closer to their actual needs and their real long-term aspirations.
At the heart of this transformation is financial transaction data paired with actionable financial insights. From onboarding to daily customer engagement to iterative actions, financial data can provide personalized insights into how people spend, save, and budget, enabling startups to create products, services, and partnerships, that drive positive financial outcomes for their customers.
The many approaches create positive financial outcomes
The transactional data flows at the core of the interactions between fintech startups and their customers. Here are a few examples of the different ways startups approach using this data.
•Billshark, similar to a service from Truebill, finds and tracks subscriptions, negotiates bills, and helps customers stay on top of spending. Beyond subscription management, Truebill also offers auto savings and pay advance features, as well as budgeting tools and alerts.
Why it matters: The impact of the subscription economy (think Netflix and HBO Max, internet connectivity, and streaming music) on monthly budgets continues to increase, and this is having an impact on consumers' ability to save, invest, and manage their money longer-term. More tools to manage these expenses are necessary and now available.
• BOND.AI acts as the financial partner for the customer, helping to onboard, assess, and develop personalized insights for the end-user. The Bond Account works as an autopilot to optimize the consumers' financial wellbeing and nudge them towards positive financial behavior.
Why it matters: Financial incumbents need assistance to help their customers navigate the new world of aggregated financial insights and untap the power of financial transaction data through intelligent, focused interactions that have an impact. Startups like BOND.AI help provide significant daily engagement to help drive positive financial outcomes.
•Chime is one of the fastest-growing neobanks in the U.S. It provides fee-free overdraft and provides early access to paychecks for customers who set up direct deposits. It also features a credit builder tool that helps consumers build a credit history and an automatic savings feature to build savings.
Why it matters: The neobank trend isn't going away, and as tens of millions of customers switch from incumbent banks to startups, banking applications like Chime and Varo and others are showing the industry how to acquire and engage customers with updated interfaces and simple, transparent uses of personal data.
•Cheese is the first banking solution designed for immigrants in the United States that does not require a social security number or credit history. It provides a debit card with credit card benefits and a cashback feature that empowers consumers to support Asian-owned businesses and restaurants. Similar to Chime, Cheese also offers early access to paychecks for customers who set up direct deposits.
Why it matters: More community-focused banking applications from Cheese, Bloom, Purple, First Boulevard, and Daylight are redefining what community means, and this is a positive shift in meeting the unique needs of more communities often overlooked by the financial services industry.
•Copilot provides actionable financial insights for customers through a consolidated view of their accounts and investments. Its active monitoring helps users gain peace of mind by providing a holistic view of finances, preventing overdrafts, and detecting potential fraud.
Why it matters: As more applications provide a daily feed of transactional activity and ways to improve overall financial wellness, it will be essential to add simple to understand financial health scores (similar to what BOND.AI provides) to help customers understand their progress over time.
•Dave aims to solve specific consumer pain points by providing overdraft protection and automated budgeting. Its Side Hustle feature also helps its customers discover and apply for work, and its Build Product feature helps its customers build credit with their rent and utility payments.
Why it matters: More and more financial applications focus on income opportunities, and that's a great thing, as the future of work has rapidly become a reality during the Covid-19 pandemic. With startups like Stoovo and Steady focused on optimizing income, this trend should be something all financial applications get on board with sooner than later, with the positive, personalized economic impacts they help drive.
•Even, similar to Instant Financial, works with employers to help smooth the flow of income from paycheck to paycheck by providing on-demand access to the funds employees earn across pay cycles. This earned wage access option helps to improve employee financial wellbeing and acts as a tool to retain workers, reduce absenteeism, and improve morale. And it all starts with understanding their data.
Why it matters: Gaps in income over time create lasting impacts on consumer credit and can cause short to long-term financial hardships that are hard to recover from. Adding features to smooth income provides ways for consumers to combat the unexpected and improve their financial health.
•Wealthfront is one of the earliest robo-advisors. Its automated self-driving money feature allows customers to take a hands-off approach to saving by offering a budgeting tool that pays bills and allocates savings to different accounts according to the users' financial goals.
Why it matters: Moving money when it matters most to maximize returns and deliver just in time bill payment is at the heart of money management. Still, it is a lost art in an era where transactions disappear into yet another dataset across a sea of apps. More applications need to provide sweep account capabilities to help navigate more successful financial outcomes across all time horizons.
The connection between financial data, financial wellness, and financial inclusion
Data is useless without meaning, without context, without cadence. Data should be enhanced and transformed to become your most valuable asset to deliver data-driven experiences and positive financial outcomes for your customers. Looking at the growing financial landscape reveals more competition every month, but consistently guiding your customers to take the best next steps in their financial journey will ensure you remain pertinent to their financial lives. The key is to learn, build, and partner appropriately with the best providers to create better financial outcomes and improve the financial condition of more members of our society.
BOND.AI provides artificial intelligence for finance, powered by the world's first Empathy Engine. Embed its SDK to help your consumers and small businesses remove financial uncertainty. The Empathy Engine acts as a genuine superpower for consumer financial health. When data is run through this engine, it creates unique personas for every consumer or a small business of your bank or fintech app. A persona that connects their behaviors, strengths, potential needs to understand them holistically and creates multiple paths to boost their financial lives. Learn more about how BOND.AI combines its onboarding experience, text and voice bot, and persona clusters to drive customer engagement and improve financial wellness by visiting BOND.AI.
Unconventional Ventures helps drive innovation to improve systematic financial wellness. We connect founders to funders, provide mentorship to entrepreneurs, strategic advisory services to a broad set of corporates, and broaden opportunities for diversity within the ecosystem. Our belief is that anyone with great ideas should have a chance to succeed and every voice should be heard. We work with financial institutions, fintech startups, technology firms, and corporates working within financial services and tangential verticals. Visit unconventionalventures.com to learn more.
Theodora Lau is Co-Founder of Unconventional Ventures and One Vision podcast host. She is an advisor, a public speaker, and a writer for industry publications.
Bradley Leimer is Co-Founder of Unconventional Ventures and One Vision podcast host. He writes and speaks about banking and technology, and advises start-ups, accelerators and major corporates.