Fintech for Good

Fintech for Good

Fintech for Good: Startups Making Social Change in Finance

Charles Keenan

Charles Keenan

Charles Keenan has written about payments since joining the American Banker as a staff reporter in 1997, a time when automated teller machines were appearing just about everywhere but people's living rooms thanks to the relaxation of surcharging rules.

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The technology sector has come up with all sorts of solutions for daily life, whether it’s shopping, banking, video streaming, shazaming, snapchatting, tweeting, networking, and, of course, dating. But by and large, fintech has come up short in terms of helping people with real social needs in payments and finance.

That could be changing. A new class of tech entrepreneurs has emerged to help make payments easier for consumers with real pain points. Whether it's food stamps, child support or cash-flow solutions, these entrepreneurs are looking not just to make a profit but also a social impact.

"We know the need is great," says Sarah Gordon, a vice president at the Center for Financial Services Innovation (CFSI), a nonprofit based in Chicago. "The good news is that America is really rich in technology, innovation and talent, and we are seeing a whole host of new entrants to develop tech-driven solutions and help consumers better manage their finances day to day."

It's hard to pin down the actual number of startups making social change in finance, but supporters such as CFSI have helped nurture new business models that aim to do so. We spoke with three companies that are making a difference.

Child support made easier

SupportPay aims to help divorced and separated parents manage finances and handle child support for their children. With its platform – via a website or an app – parents manage, track and pay child support directly to each other, giving them transparency to help reduce arguments over finances. SupportPay goes well beyond state calculators for child support – it helps parents see miscellaneous expenses, such as baseball gloves, ballet slippers and piano lessons.

"A lot of money is being exchanged between parents who don't live together," says Sheri Atwood, founder and chief executive officer of Ittavi Inc., the holding company for SupportPay. "The world has changed. Families have changed. Money doesn’t sit in one household."

Atwood saw the need for a better way to handle child support after her own divorce. Atwood, who previously worked as a marketing executive at Symantec, is using software by salesforce.com for the platform. Parents decide for themselves how to make payments to each other – either virtually or using cash.

SupportPay earns revenues by charging $120 to users for advanced functionality, but the service is free for tracking expenses, making payments and storing documents for up to six months. SupportPay now has nearly 50,000 parents, and in 60 percent of those cases, both parents participate. Atwood next looks to help manage funds for groups of siblings who take care of their parents. "It's all around how you manage finances between family members when it spans households," she says. "Technology has made it possible."

Streamlining food stamp applications

Easyfoodstamps.com is a mobile-friendly website that simplifies the food-stamp application process by reorganizing the initial enrollment form and eliminating the need to submit paper documents.

When it comes to food stamps, applications are too onerous, and wait times at offices are too long, says Jimmy Chen, chief executive of Propel, the company behind Easy Food Stamps. "It is really a frustrating, discouraging and really opaque process, and it keeps people from getting the benefits they need," he says.

To make money, Propel is looking to partner with grocers and generate fees when Propel's users make purchases in participating stores. The potential is there: food stamps are a $70 billion program that reaches 45 million Americans, Chen estimates. "We are pretty confident there is a big business opportunity that is not being tapped. This is a lever for growth for us."

Improving consumers' cash flows

Prism is an app that looks to alleviate the cash-flow problems of the majority of Americans by making bill pay easy, free and transparent. One goal is to save customers from overdraft fees, which nationwide totaled about $34.3 billion in 2017 at banks and credit unions, according to Moebs Services, a research firm based in Lake Forest, Ill.

"Unfortunately those fees tend to fall on the people least able to pay them," says Tyler Griffen, chief executive officer and cofounder of Prism.

It's not just low-income people getting into trouble, Griffen notes, as many people with higher incomes have higher expenses and are also living paycheck to paycheck. Griffen and his team found that the pain point is consumer cash-flow cycles – specifically with bills. Typically people can receive 11 to 15 bills a month at odd times, he notes.

"[Bill due dates are] generally very overwhelming and very hard to keep track of," Griffen says. "This is a constant background source of stress. People don't quite know what the situation is. They just know that it’s bad."

Prism is winning over consumers. The service had 40,000 users in July, generating $14 million in payments volume. One way it plans to make money is by offering short-term credit to bridge users' funding gaps. However, Griffen isn't out to replace banks. "User-friendly, consumer-focused companies like ours will provide this elegant layer on top of the banking system, so we are really on the consumer side."

Overall, fintech can make a difference in everyday lives – and big profits, according to CFSI's Gordon. "Consumers spend billions of dollars annually on financial services," she says. "There is definitely money to be made. It is really about creating a product that adds value, has demand and is sustainable."

The statements and opinions of the writer do not necessarily reflect those of TSYS.

Other Articles by Charles

Charles Keenan

Charles Keenan has written about payments since joining the American Banker as a staff reporter in 1997, a time when automated teller machines were appearing just about everywhere but people’s living rooms thanks to the relaxation of surcharging rules.

His work at the American Banker included writing about credit and debit cards, merchant processing, and bank stocks. He later freelanced for the Banker and industry publications such as Banking Strategies, Bank Director, Community Banker, and U.S. Banker. He also writes about investing, insurance and health care, and is based in Los Angeles.

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