On March 19, over 200 leaders in financial services and fintech gathered at the Federal Reserve Bank of Boston (Boston Fed) for a panel discussing the role of financial technology (fintech) in creating positive social impact. Commonwealth and Fintech Sandbox joined with the Boston Fed to host a discussion on how fintech could make true impact in the lives of financially vulnerable people.

Nick Maynard, Senior Vice President at Commonwealth and moderator of the panel, opened the discussion with a charge to “think beyond the assumption that fintech or blockchain will solve financial inclusion and instead, have a deeper conversation about what the current obstacles and accompanying solutions are to making that a reality.” Panelists from Neighborhood Trust, Flourish Savings, and Fintech Sandbox shared their experiences leveraging fintech for social impact and discussed the role of data, funding, and partnerships in moving this important work forward. We identified five key takeaways from the robust conversation:

1. Fintechs can address social issues while still making a profit. Aparna Ramesh, Senior Vice President and Chief Financial Officer at the Boston Fed, opened the event by noting that income inequality and financial inclusion are top global problems. Entrepreneurs can meld fintech and financial inclusion to create products that are low-cost, scalable, and that expand who is well-served by our financial system.
2. More data can lead to better products. Sarah Sable, Chief Program Officer at Neighborhood Trust, described their long history of serving low-income populations which has generated years of qualitative and quantitative data on what works to help people achieve financial security. They plan to harness technology to mine that data to improve their offerings and inform the field. Jean Donnelly, Executive Director of Fintech Sandbox, noted that underserved people have been historically absent from existing data sources. She argued that this is the perfect time to tackle this issue as artificial intelligence makes new sources of data more accessible and digestible. Partnerships between fintechs and nonprofits fill in the gaps for population that have not been accounted for by financial institutions.
3. Current funding opportunities don’t address the unique needs of fintech for social impact. “Nonprofits are usually known for hustling and making it work, but you can’t do that with client data privacy,” Sarah shared. Neighborhood Trust has to compete in the same marketplace for technology talent as leading tech firms, which means higher salaries than nonprofit funders are used to. Pedro Moura, co-founder of Flourish Savings, discussed his own barriers to raising funding and the challenges of describing the true impact of $400 in emergency savings to potential funders. Many have a different perspective on what it takes to achieve financial security. While many in upper incomes may see thousands of dollars as a buffer, for lower-income people or people outside the financial system, a few hundred dollars can make all the difference. To address these gaps, philanthropy must be willing to make significant technology investments in nonprofits. Traditional VCs need to see value in investing in social impact focused fintechs or consider philanthropic commitments to nonprofits. Generally, the lines between for-profit and nonprofit fintech approaches to social challenges are blurring, which will require more creative forms of funding and a new focus on the value of investing in solutions for financially vulnerable people.
4. Trusted partnerships can help reach the underserved. Pedro shared his hopes for creative partnerships between fintechs and other partners to reach people who aren’t part of financial institutions. “We have to think about where the consumer has trust. It may be the corner store down the street that they are using to access financial services, even if it’s predatory. With the tech we have now, we can bring services to where they trust and in a responsible matter.” Neighborhood Trust uses a “business to business to customer” model by working with employers who have established trust with their employees. These partnerships can open up new possibilities to meet consumers where they are.
5. Fintech is about making things easier. Brian Clarke, Sr Business Strategy Manager at the Boston Fed, offered closing reflections on the panel by sharing a recent experience of trying to explain fintech to his dad when describing this event. Ultimately, his dad understood fintech through the example of an ATM – a tool that made it easier to access cash. Brian urged attendees to focus on how fintech can make financial security easier for more people to achieve. “They don’t care if your app is the coolest. If you can make it easier for them to access $400 in an emergency and they trust you, then they won’t walk into a payday lender.”

{image2}The standing-room only turnout and enthusiasm at this event reflect the growing recognition among leading institutions of the social impact and business value importance of addressing issues of financial insecurity. The fintech sector continues to grow and has the potential to transform our financial system and shape the next generation’s financial lives. Entrepreneurs, investors, financial institutions, and regulators have an unprecedented opportunity to come together to address the financial challenges facing millions of people domestically and globally by thinking creatively about their products, partnerships, and funding approach to make financial security and wealth possible for all people. To explore how your organization could make straightforward changes to your fintech offerings or to work with us to continue the conversation, contact Nick Maynard at info@buildcommonwealth.org.