Last week, Theodora Lau wrote a guest post on the Finovate blog calling for “purposeful Fintech,” which argued that at this crisis moment, Fintech has to respond by creating technology that serves “the true needs of the society — beyond a shiny user interface.”
Lau began her career in tech three decades ago, spending 15 years in the telecom industry. It was five years ago, while working with AARP, that Lau entered the Fintech space. Since then, she’s become one of the leading voices in the industry, as a founder of Unconventional Ventures, as a podcaster on One Vision, and as a writer and speaker.
When we spoke, Lau outlined some of the major economic issues facing the country today: student loan debt, affording a longer retirement with less social safety net, and the reality that a birth zip code still defines one’s physical and economic health. Lau told us she wants Fintechs and banks to use tech to actually take on these society-level problems.
“That moves well beyond, ‘Oh, let’s make this all a minimalistic copy of the Apple experience and, bingo, here is an app!’ That’s BS. ‘Well, we need to reduce the number of clicks so people can open an account easier.’ Great, wonderful, and then what next? These are very superficial steps,” Lau said. “You need to figure out how to actually use the tech to do something that’s impactful — something that can serve to improve one’s financial wellbeing or long-term financial security. So, that’s what I mean when I say ‘purposeful Fintech.’”
Unifimoney: I know you’ve done a lot of work around financial stability for the over-50 population. How do you think neobanks can be tools to prepare millennials and Gen Z for their retirement years?
Theodora Lau: I don’t think that just FinTech alone can do the work. I don’t think banks by themselves can do the work. I think it needs to be a marriage between the two, at least how we have it right now. It’s really interesting looking at how things change in the last few months, and I think a lot of that comes down to human nature. When you feel like something is going down, you reach for security. As much as we like to bash big banks and say, ‘They’re evil. They’re the worst.’ In a recession, people typically go back to, ‘Okay, who are the big guys I can trust?’ So, there’s an inherent shift that needs to happen that’s gonna take a long time, but I don’t think it necessarily has to happen for the industry to actually do good for the Gen Zs and the millennials and the Gen X.
A lot of the FinTechs have interesting, different ways of thinking about servicing people. One I really like based in New York is called Pefin, which uses AI to look at decumulation. Ramya Joseph started in Wall Street and did a lot of work with the incumbents until one day her father came and asked her, ‘Can you help me figure out my retirement?’ ‘How long do I need to work and how much can I actually spend on a daily basis?’ These are very simple, fundamental questions that people need to have answered, but there’s no easy way to find an answer to that unless you have a gazillion dollars to hire someone to figure that out for you.
And so she set out on a journey to try to figure that out and she realized, ‘Holy crap, it’s really, really, really hard.’ She literally built up an Excel spreadsheet model to try to help her dad out. In the end, she realized this is such a fundamental challenge that needs to be solved that she spent six years building a company around it. She went to Columbia and did her Master’s in AI and machine learning so that she could understand how she can use technology to build a solution to figure that out and democratize for more people.
But, if you look at Pefin by itself, will people trust a startup enough to do all that? Or would a better model be for Pefin to work with financial institutions, with bigger brands, and bolt their technology on top as an extension to what they are offering to their customers? That might be a better solution because then you can leverage the agility and the innovation and the different ways of thinking and augment it with existing services that people already use.
If you’re a big bank and you have customers that have been coming to you, instead of you trying to make yourself look really hip and try to market to their children, why don’t you think of something that can actually help multiple generations? Things that mean something rather than just a cool UI. A cool UI does not help you solve problems; it doesn’t bring money on the table to try to pay next month’s mortgage.
25% of family caregivers in the U.S. are millennials. In addition to logistics (such as taking older parents to doctors), many of these caregivers also help their parents take care of their finances. Financial caregiving is an area where Fintech and big banks can help create meaningful solutions for these family caregivers. Remember: when you provide services for older adults, you normally end up with a “care circle” — the older adults and the caretakers.
Unifimoney: The original promise of tech was that it could make the world better by making things more democratized, useful and powerful. Where in Fintech have you seen these tech-empowered tools being used to improve people’s lives in these difficult times? Where do you think Fintech has fallen short so far?
Lau: Green Dot is a great example within the United States, where you see what they’re trying to do with different retailers, like Walmart. That is a great example. But I would argue that such examples pale in comparison compared to what developing economies are going through. If you look at China, if you look at Southeast Asia, if you look at India, if you look at Africa — those places that have less of a banking infrastructure legacy, they’re able to leapfrog and actually build something that brings more impact to the people. Like Gojek and Grab in Southeast Asia are expanding like crazy. They both started as logistics/transportation companies for ride hailing, and then realized that a lot of the microentrepreneurs they’re serving didn’t have access to banking services. And so, they start lending, they start saving, they start extending to all of these things that actually help people who didn’t have access to the traditional banking services.
The same thing if you look at Tencent and Ant Financial and how they are able to create their own “super-app” platforms that act as gateways for multiple facets of Chinese consumers’ lives — and revolutionize the digital payments landscape in China and beyond. Think of Tencent, for example, as a combo of Facebook, Apple, Google, Amazon, and more. These two super apps have changed the behavior of an entire population (China is pretty much cashless now).
So, those are amazing, powerful examples. I don’t see anything with as big of an impact in developed economies, neither in the UK nor the US, of that extent. And I think a lot of that has to do with consumers’ view on privacy, as well as our existing financial services infrastructure.
But there is a big gap when we talk about how we service the next generation. Look at how we’re earning money. In the old days, most of us would have our W2s from a single employer and it just kept coming every two weeks: you get a check and all of your benefits and your retirement, 401k plans, all of that. It just comes as a nice, neat little package. That is not the case anymore for a large part of the population as contingency work gains prominence; and that number is going to keep going up, especially as we’re heading into a recession. What that means is, a lot of the younger generation that are coming up for work, most likely they will be part of the gig economy; and a majority of them don’t have access to health benefits nor retirement plans. They also won’t have stability from long-term employment and their incomes are uneven. So, when you look at the world they’re living in versus how we’re providing services, there’s a gap. There are startups like Joist that are providing service to the gig economy workers. But we need more than one Fintech; we need the incumbents to step up too.
Unifimoney: Next week, we’re launching a credit card made from ocean-bound plastic that automatically gives a micro-donation to The Ocean Foundation with every transaction. The problem of global warming and the health of the oceans is one of incalculable scale to the point of existential dread and inaction. In talking with the President of the Ocean Foundation, I asked how he keeps hope and he said that the only way to is by “taking steps every day to make things better.” How does the idea of “purposeful Fintech” expand beyond the response to Covid-19 in your view? What is the responsibility of the industry in the response to other big, difficult problems facing the world?
Lau: At the end of the day, we need to figure out how as an industry we can become more responsible to the society. I’ll give you an example: at the beginning of this crisis, people were saying, ‘Banks are not the bad actors this time around. Thank god. We’re gonna come swoop in and save the world.’ But the next thing you know, you hear stories about big banks prioritizing loans based on whichever ones are the largest, so that they can collect the most fees. And then you start hearing about big businesses that are doling out bonuses and retention benefits to key executives before they announce bankruptcy and before people are paid.
I think across different industry sectors, across different segments of the world, there is a sense of, ‘Things are not working for me.’ We need to acknowledge it and we need to show that we can improve and move beyond it.
Take climate crisis, for example. We cannot wait, no matter what other crises are going on. So, how can we pay more attention to it? How can we use the resources that we have to devote more to it? And it’s not just messaging; it’s actions.
And the same is true for this economic inflection point. How can we create a sense that we are not gouging our customers? Transparency is equally important during and post crisis.
Finally, we have to reflect upon ourselves: how do we actually listen? How can we actively listen outside of our circles and overcome our own biases? People like to build things they can relate to; that’s human nature. And that’s why a lot of times VCs tend to fund things that they can relate to, things that their buddies from the same school create or people that are going through the same experiences. Because those are things that they can understand, things that they can relate to. So, they feel passion about it. That’s great and wonderful, but we need to move beyond that. We need to look broader: what are the problems we need to solve beyond what our circle can see or associate with? It’s going to be a very, very long journey to understand how all the different pieces and parts work together. But it is an important journey to take — a path towards a more inclusive world and using technology for good.