Earth is closed today and though we believe there is a light ahead, we are not sure when it would reopen.
When it does, I am sure it will be a new beginning for every species on the planet. A new beginning always sheds a beautiful light on our old ways to guide us into our future. For instance, our actions from a pre-COVID world were strongly responsible for creating the situation we find ourselves in. If we reflect and change our behavior, our future will be much stronger. If we look for attributes more on an individual level, there are two aspects that this pandemic highlights about human behavior – innocent ignorance and overconfidence.
The reason I say that is because we don’t actually know who around us has been or will become affected, we still are learning how it spreads, how to treat people and also how to find a vaccine. No one is sure about anything, yet we see many skipping certain recommendations or being overconfident in thinking it may not affect us at all. Just think for yourself and say it’s not true. We should not blame ourselves for ignorance and overconfidence, but they fundamentally are a manifestation of uncertainty and a lack of knowledge about it.
We can draw parallels between our behavior during this pandemic to many other behaviors, but in particular, it is a perfect metaphor for our relationship to money in general. Nearly half of Americans are effectively poor and cannot manage basic expenses like food and rent. The statistics get worse in other parts of the world. Why is that? It is partly due to the same phenomenon. We believe we know how to navigate money but we truly may not and need help. What we need are systems that provide us with knowledge, insights, and remove the uncertainty around our financial lives.
Can fintech be our savior?
Yes, but what can fintech do better than what our traditional financial institutions could not?
Right when most were predicting that the banking industry is likely to become less relevant in the daily lives of their customers and less central in the economy, banks have come to our rescue again during this challenging time. Despite their efforts, however, it also laid bare one significant aspect. Banks have lost touch with their consumers.
Take the PPP debacle, for example, where public companies got better treatment and access to far more credit – while smaller businesses got shut out. So what about the real needs of the many small businesses – which are left without access to other forms of capital? What are banks doing for them?Perhaps that is one of the reasons why we notice apattern where credit is increasingly being originated outside banks.
From loans to mortgages to investments, more are being originated at fintechs like Kabbage, Lending Club, Robinhood, etc, and not with traditional banks. Kabbage for example now has SBA approval for 129,000 applications for nearly $4 billion, making it the fourth largest processor. And Chime, the fintech challenger bank, offered advance stimulus checks to consumers even before the government was releasing money, to help consumers during this crisis. Consumers depend on banks for a large number of needs while assuming it to be a one-to-one relationship, but most traditional banks seem to have lost that frontline connection with their consumers.
The pandemic has also shed a light on community banks in an interesting way. Many community banks have actually acted faster than the megabanks – Cross River bank’s fintech partnerships, Citizens Bank of Edmund’s fintech collaboration to roll out the PPP bank forgiveness tool and Tab Bank’s fintech initiatives to keep their small business consumers informed and fund them are some of the many encouraging examples. There cannot be any situation more significant than this pandemic that emphasizes the importance of being human-centric and fintech is definitely coming to the rescue.
What can fintech do to shape humanity’s future?
Money is not the only aspect our lives are based upon but it certainly plays a significant role in how our lives are shaped. This generation’s tech and fintech companies have a very unique opportunity to use this new beginning to re-shape our lives. If earth returns to the previous normal, we as a fintech community would have failed. So far, fintech has excelled and succeeded in creating friction-less tools but fintech 2.0 needs to really focus on,
- Re-calibrating consumer behavior
- Tools for better wealth distribution
- Help banks move at the speed of fintech
Re-calibrate consumer behavior: Behavior is dependent on knowledge. The more the knowledge, the less the uncertainty, and the probability of ignorance is far reduced. With almost everyone being impacted economically,people will look to someone for knowledge and insights on how to get back on track. In whatever vertical a fintech is operating, they will need to go beyond providing frictionless experiences to focus on imparting bite-sized knowledge contextually while engaging with the consumer. Not just provide insights just to bring them back to normal, but also proactively recalibrate their behavior to help them become financially resilient to future crises.
Tools for better wealth distribution: Not everyone will be equally impacted by the coronavirus. Those will fare worst will likely be the hourly and gig economy workers, as well as the 86 percent of Americans making less than $75,000 per year. Fintechs have excelled in alternate credit modeling and even high-risk lending, but now we need to ask how we can address the fundamental problem of income inequality. Is universal basic income(UBI) the right solution? Can we create a universal 401k like medical insurance? Can we enhance income or wages by mapping the interconnectedness between consumer behavior, strengths, and weaknesses and go beyond fintech itself to create tools to ensure equal distribution of wealth? While the great recession of the past has helped to reduce income inequality in the US, fintech needs to take it to the next level this time around.
Help banks move at the speed of fintech: Fintechs cannot do it alone. While banks have unmatched advantages of data and scale, fintech can help them move faster. As the saying goes: “The faster you move, the slower the time gets and at speed of light, time stops.” Similarly, if fintechs can help connect the dots between legacy systems, modern connectivity protocols, and frictionless applications, banks can run at the speed of fintech and the time to address consumer needs will relatively become zero.
The future is bright with fintech, but the future of fintech itself is beyond fintech. Let’s reopen a better earth for everyone, together!
Uday Akkaraju is the CEO of BOND.AI.
Editor’s Note: The opinions expressed in op-eds are those of the authors and do not necessarily reflect those of Arkansas Money & Politics or About You Media Group.