30 Oct How FinTech Companies Are Closing The Banking Gap
According to the World Bank, there are two billion people globally who currently have no access to banking services. There are many reasons for this: they may not have built up enough traditional credit history, they may have bad credit because of poor financial choices in the past, or they may live in an area where access to credit and other financial services are limited.
FinTech companies and investors are trying to find solutions to this problem so that those on the margins can become “bankable” – and it is women and people of color who are on the forefront of this movement.
For instance, Jennifer Tescher, founder and president of The Center for Financial Services Innovation (CFSI), has helped launch financial inclusion initiatives by incubating startups addressing U.S. financial health through their Financial Solutions Lab. Some of these startups include Propel, which streamlines the food stamp process; Bee, a mobile alternative to potentially predatory financial services for low-income people; and popular startups that aim to assist with savings and debt repayment including Digit, EarnUp and LendStreet.
Other startups are attempting to compile a holistic view of a person in order to bring them into the financial ecosystem, rather than solely relying on an individual’s FICO score, the main indicator used by lenders to determine an individual’s creditworthiness. Startups addressing this market are tapping into alternative data to assess risk in different ways, widening the pool of potential consumers. A mover and shaker in this space, who also happened to be incubated at CFSI’s FinLab, is Nicky Goulimis, cofounder of Nova Credit, a startup promising instant access to overseas credit reports. The idea for Nova Credit was rooted in personal experience: all three of the company’s founders are immigrants who have experienced first-hand the challenge of obtaining access to credit upon moving to the U.S. Without credit, consumers could be denied credit cards, mortgages, personal or business loans, and frequently pay higher premiums on both credit and insurance.