Accelerating FinTech Innovation via the Financial Solutions Lab
This year the Center for Financial Service Innovation (CFSI) launched the Financial Solutions Lab, an incubator for emerging fintech innovators. The Lab is a five-year, $30 million joint venture with JPMorgan Chase & Co. to find, test, and improve products and companies aiming to solve the financial challenges faced by Americans. The Lab is structured around a series of Innovation Challenges – the first of which is the challenge of managing household finances on a tight budget.
With roughly a third of the U.S. population considered to be unbanked or underbanked and 57% struggling with their financial health, it is clear that current financial solutions are not meeting the needs of all U.S. households. Many unbanked or underbanked individuals rely on services outside of traditional financial institutions, such as check cashing services or payday loans, which can be very costly. Financial technology innovation has the potential to enable new solutions that offer affordable and accessible financial services to underserved consumers and businesses.
Industry-backed incubators like the Financial Solutions Lab are uniquely equipped to help solve some of the traditional barriers to financial services innovation. In addition to patient investment capital, industry incubators provide access to knowledge centers and industry contacts which can help startups to refine their solutions and establish partnerships with incumbents. The Financial Solutions Lab provides its participants with access to a group of professional services firms including IDEO, ideas42, Paul Hastings LLP, Bryan Cave LLP, Promontory Financial – and First Annapolis.
The following nine companies were winners of the FinLab’s first Innovation Challenge:
- Ascend Consumer Finance (ascendloan.com) – Ascend is an online lender providing fair loans to borrowers with low credit scores. Ascend believes traditional, mainstream credit scores do not reflect the true risk profile of the 110 million non-prime borrowers in the U.S. To better serve these underbanked individuals, Ascend uses a proprietary technology, Adaptive Risk Pricing, which predicts the borrower’s credit risk profile over the life of the loan rather than just at time of application. Ascend also rewards responsible financial behavior through interest rate rebates.
- Digit (digit.co) – Digit is an automated savings tool that uses sophisticated algorithms to determine when and how much a customer can safely save based on their spending and income. Digit is not an app – it relies on an SMS-based natural language interface to dialogue with users. Funds are stored in FDIC-insured accounts at Wells Fargo, BofI Federal, or Opus Bank. Digit customers can earn rewards on their savings through the company’s Digit Plus program.
- Even (even.me) – Even helps users manage cash flow problems that result from inconsistent income by providing automated savings and interest-free credit. When workers earn more than their average income, Even transfers excess funds into a savings account; when they earn less, Even deposits money from their savings or extends free short-term credit to fill the gap. Even also provides budgeting tools to improve users’ financial health. In essence, for a fee of about $3 per week, Even provides a sort of “insurance for your paycheck.”
- LendStreet (lendstreet.com) – LendStreet is a marketplace lending platform focused on restructuring distressed consumer debt. LendStreet works with debt counselors to negotiate debt settlements that can reduce payments to affordable levels for borrowers in trouble. LendStreet’s investor partners fund a loan to immediately pay off existing debts and consolidate payments. LendStreet also provides financial education to help consumers avoid repeating past mistakes. Through the Lab, LendStreet has established a partnership with one of the biggest debt counselors in America.
- PayGoal (neighborhoodtrust.org) – PayGoal, from nonprofit Neighborhood Trust Financial Partners, provides consumers with a personalized, goal-based digital financial advisor. PayGoal automatically splits its users’ funds into several allocation “pockets” or “buckets” for clear and easy budgeting. As users spend via their PayGoal prepaid card, the service tracks spending and delivers natural language feedback in real time. PayGoal helps users to engage with their goals and learn about personal finance on an ongoing basis.
- Prism Money (prismmoney.com) – Prism is a mobile bill payment app designed for millennials. Prism offers a simplistic, transparent, and comprehensive way to instantly track and pay bills. Prism connects to billers to monitor for new bills and then, with all bills consolidated in one place, users know exactly what they have to pay and when, creating a map of monthly expenses to prevent late fees. The Prism app is available for iOS, Android, Kindle, Windows Phone, and Windows 8.
- Propel (joinpropel.com) – Propel seeks to make government services more user-friendly. Their initial service, Easy Food Stamps, offers a simple and streamlined mobile process to sign up for food stamps. In three guided steps anyone eligible for SNAP benefits can complete their application. Propel has been profiled in Forbes, Fast Company, The Huffington Post, and other major press. Easy Food Stamps is a free service.
- Puddle (puddle.com) – Puddle is a social lending platform that gives consumers access to small lines of credit based on their social network and reputation – no credit score or application required. With an investment as small as $10 and a connection to Facebook, users can join Puddle and start borrowing up to 5x their investment. Users select who they would like to pool capital with; the larger your pool, the more all can borrow. Loans are repaid over 3- or 6-month terms.
- SupportPay (supportpay.com) – SupportPay is a child support payment management service that provides secure, automated, and transparent payments between parents. SupportPay estimates that child support payments total $990 billion between 298 million people worldwide each year; its platform hopes to reduce conflicts and help parents save time and money. SupportPay is available online or as a mobile app for Android and iOS.
These nine companies are approaching financial services innovation in a variety of creative ways. First Annapolis is proud to partner with CFSI to advise participants in the Financial Solutions Lab and is continually looking for ways to support growing financial services organizations.
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