Originally published on Medium
We are feeling the daily effects of a growing wealth divide caused by dramatically increasing costs of living and fewer wage increases. We are hearing shouts for socialism from the steps of the Capitol, and the largest philanthropists the world has ever known, Bill & Melinda Gates, are debating the future existence of billionaires. It is clear that we as a society are not doing a good job of helping people grow in financial stature, and the American Dream is on the precipice of being dead.
In situations like these my brain kicks into gear, how do we find solutions? As such, I’ve been looking at emerging categories in consumer finance that are using modern technology, data analysis, and leveraging evolved federal regulation to create products that are more approachable for the everyday consumer who may not have the strength of financial access as the super wealthy.
I write this as a person who was raised by a working student single mom, in a humble upbringing where we had limited access to financial education and traditional financial services. As I have grown up and seen what financial instruments are available to those with more financial stability, or less credit risk as defined by an antiquated FICO system, I’m excited to see a new generation of products starting to emerge that will redefine financial services and hopefully capitalism itself.
First, access to financial education, smart credit, and diversified investment products are the cornerstones to enabling people to become more financially stable. Technology advances like mobile user interfaces, big data, machine learning, API-based banking, and a loosened regulatory environment spurred by the JOBS Act out of the 2008 financial crisis, are enabling a much broader set of people to access smart credit and better investment opportunities.
Secondly, I’m observing a generational divide between people who grew up before the 2008 financial crisis and those in its aftermath. I grew up before it, technically I’m a millennial (on the very early end of the spectrum) and the economic sentiment of the late 90s and early 2000s was one of prosperity and opportunity, this shaped my view of work, life and opportunity in the US. I contrast this with people who are also millennials or early Gen Z who grew up in the middle of the financial crisis, or in the recovery after, who are shaped more by student debt, less trust in institutions generally, Occupy Wall Street, and a more egalitarian view of society’s purpose in life. These people tend to have a more inclusive perspective on the role of capital and the responsibility of companies, institutions and government.
In tech, if the tech majors forged over the last fifteen years are currently mired in debates over data ownership and extortive individual data practices, I’m encouraged that the entrepreneurs creating the tech major companies over the next 15 years are already taking a more inclusive approach. Financial equality is also one of the primary reasons that principles of distributed computing, blockchain, and tokenization of assets continues to gain steam over the past decade, no matter the boom or bust cycle we are in today.
To provide examples, here are a few companies that I’m encouraged by:
Titan — https://www.titanvest.com/ — Titan is the self-professed hedge fund for millennials inside of a mobile application. Beyond the active long-only “hedge fund” style management, I am most impressed by the incredible stream of video, blog and long form style content the company produces. On days of large market moves, or unusual activity, they are quick to post a short vertical-video whiteboard session, or written deep dive as to why. I feel smarter about the market, and it’s building trust for me in the company and its management practices.
Compound — https://getcompound.com/ — Compound is creating a new real estate fund structure (think REIT, but not) based around geographically specific residential portfolios. Their fund products provide access to individuals to take advantage of the growth of real estate value (one of the most stable and accretive investment classes out there) without needing to purchase a primary property. With the growing sets of millennial & Gen Z’ers trending towards less ownership this is an attractive value proposition.
Cadre — https://cadre.com/ — Cadre is fractionalizing investment opportunities into institutional grade real estate, for the individual consumer. Their Blackstone-experienced team identifies and analyses commercial real estate opportunities with institutional rigor, which are then offered to private individuals to invest, who normally would not have access to great opportunities in this $7 Trillion asset class and highly profitable investment opportunity.
Alto IRA — https://www.altoira.com/ — Alto IRA is a productized “self-directed” retirement account product providing access to alternative investment opportunities (startups, growth companies, real estate, loans, digital assets) with your IRA funds. They provide a simple mobile user interface to evaluate and manage investments across a number of dedicated partner platforms.
AngelList — https://angel.co/ — The OG of democratized investing in startups, Naval and team helped shape the formation of the JOBS Act in 2012. AngelList and it’s spin off, CoinList for digital token-based investments, enables individuals to access high risk / high performance investments in assets like VC-backed startups and ICOs.
Affirm — https://www.affirm.com/ — Affirm is reinventing installment loans and layaway for small to medium sized consumer purchases ranging from mattresses to Pelotons. They do not use traditional FICO credit scoring metrics, rather build their own credit risk profile of the purchaser, and there are $0 fees to the customer. Affirm charges the product vendor the fee because it increases purchase conversion at point of sale. Expect Affirm to grow in size and product offering over time. It’s a really great experience.
Tally — https://www.meettally.com/ — Tally (a Shasta company!) is helping Americans overcome credit card debt. Consumer credit debt is at all time highs surpassing over $1T in 2017, where 43% of people who have a balance have been carrying it for over 2 years. Tally is a mobile app enabling easy refinancing of credit card debt to enable the consumer to get debt free.
Petal — https://www.petalcard.com/ — Petal is a next generation credit card using personal bank data history to determine credit worthiness and credit limit — in other words, no FICO. They have an elegant consumer mobile app interface to help the user manage their bank accounts and spending, and there are no fees for access, with normal APR on credit balances held.
Brigit — https://hellobrigit.com/ — Brigit saves Americans from $34B in overdraft fees every year. Through a simple mobile app which pulls applicant’s bank history data and builds a proprietary credit worthiness score, it provides access to a “bridge line” of up to $250 every month to ensure consumers can pay all their bills and not get hit with predatory overdraft fees. No APR, just a $10 fee per month.
Possible Finance — https://www.possiblefinance.com/ — Last year the Federal Reserve Board presented a study which showed that 40% of Americans could be financially devastated by an unexpected $400 expense. Possible Finance is keeping these users out of the predatory Pay Day Loan cycle. Through a simple mobile app interface, PF pulls user bank history to build a proprietary risk score and approve a loan to the user within 60 seconds of applying. While there is an APR based fee, users repay over time and because it is an “installment loan,” repayment history is reported back to credit bureaus to help increase the user’s FICO credit standing.
These are just a few companies of the many out there that are changing the way that financial services is practiced, making it better for the consumer and more inclusive as a whole.
These companies are signs of what is to come. Financially inclusive products are critical to the health of our global society collectively, and each individual personally. Capitalism is in the most precarious position it’s faced since its emergence two centuries ago. It needs to change, and access to capital is the tip of the spear. I’m excited by its evolution on the horizon, and to meet the entrepreneurs who are redefining it for the benefit of everyone around the world. If you are, or you know of, an entrepreneur redefining capitalism, financial services and financial inclusion I would love to meet you and talk about how we can do this together.