WORKWEEK

On Monday, I published a piece in Forbes to address the topic of business to consumer, aka B2C, fintech. 

Let me be clear: Consumer fintech is NOT dead. 

It just still needs to solve the fundamental financial demands of most Americans. 

Sure, our industry faces various challenges this year, including banking turmoil, increasing interest rates, and a shift in investor preference towards B2B fintech. (Of the $15 billion venture capital funding for fintech in Q1 this year, 44% went to B2B SaaS and 34% went to B2C fintech).

To remain motivated by the potential of consumer fintech, we have to separate pessimism for capital markets from the ability of fintech companies to bridge wealth gaps and provide financial tools and services to those who need them most. 

Because we still have a ton or work to do… 

Did you know that 38% of working-age adults around the world, roughly 2 billion people, do not have access to formal financial services? 

And this issue of financial exclusion is not limited to individuals as it also affects businesses.

In developing economies, over 200 million micro, small, and medium businesses need access to traditional financial services, both formal and informal. This is a significant problem as it limits their ability to save, prepare for unexpected expenses, and access other essential services necessary for a stable life. 

Fortunately, progress can be made when banks and fintech companies work together to serve vulnerable people. Over the last ten years, 700 million people have opened bank accounts, which has decreased the number of people excluded from financial services by 20%. 

When I talked to Stash CEO Liza Landsman about the topic, she made her stance very clear:

“As long as we believe consumers will want to buy and sell stuff to have money later in their lives–no matter what the capital markets are doing–this criticism will remain a fallacy,” she told me in an episode of Humans of Fintech.

 “There are billions of underserved people who don’t have access to financial services–the power of fintech is its ability to bridge this gap,” she said. 

Case closed. 

So what does consumer fintech need to do?

Are there too many investment options and extra features in consumer fintech? Yes, unfortunately. The focus of consumer fintech solely on investing and wealth management has resulted in neglect of the needs of many people in the mass market.

Despite the availability of multiple investing platforms, a significant proportion of people require assistance even for a $400 emergency expense. While 59% of adults in the United States have access to a bank or mobile account, this number reduces to 45% for those in poverty. 

Therefore, consumer fintech companies should prioritize financial basics instead of only offering investing app features that are already abundant.

And consumers are increasingly demanding that their fintech applications help them learn more about: 

1. Building an emergency fund, 
2. checking and improving their credit score, 
3. and starting a savings habit, according to Plaid’s 2022 Fintech Report. 

One of the keys to success is creating better financial habits. 

Instead of just adding more products, fintech companies should focus on helping people break through barriers and develop healthier financial behaviors. 

This requires effort and dedication, but as long-term habits are formed, customers can see compounding benefits such as increased retirement savings and improved financial health.

This also means a cognitive shift for fintech operators to realize we are in the business of creating experiences, not just services. 

Fintech companies must maximize micro-moments and raise anticipation in building financial stability. 

Build for long-term impacts… 

Tech is so ubiquitous, and now tech is pervasive everywhere, that sometimes we can become unaware of its impact on us and our behavior. 

One way consumers can take control of their finances and create generational wealth is by improving their financial literacy education and budgeting tools. 

Subtle tweaks lead to dramatic changes in behavior.

Look at Netflix: The “just keep watching” button after you’ve finished a show has increased viewing time by 70%. 

And the average viewer isn’t even aware of having made a choice. Instead, they’re just whisked off to that next episode of Love Is Blind. 

This happens in fintech – for good and evil. Just look at what Robinhood’s nudging notifications have done to influence retail investing. 

So one of the things that we have to do at the industry level is to make sure that our tech is built in a behaviorally informed and thoughtful way. 

Let’s take a PFM application, for example. Consumers tend to mentally bucket their finances into multiple divisions: Safety net, savings, retirement, spending, etc. 

So a simple solution is to add features that subdivide these accounts for users does a lot for their mental stability. And naming one of those accounts something aspiration can 2.5x a user’s likelihood of saving. 

Most healthy behavior comes along with a reasonably straightforward process and a personal touch. It makes all the difference.

So, despite market uncertainty, consumer fintech will always live on as technology plays an increasingly important role in enabling financial transactions for those with unmet financial needs.