View Full Library
Perfect.
Let's kick off the after lunch session.
So we are gonna be talking today about payments, lending, financial health and inclusion.
I just wanna say a quick thank you to the MX team for hosting us here.
They've been fantastic. This is one of my favorite FinTech events every year and it's been so great to work with them.
I also am very excited about the three people sitting in my left.
If the people in these three chairs were on a GLG call together, it would be unaffordable.
So let us take advantage of all the brain power that's sitting in my left today.
I'll give a quick intro myself, but I'd love to get the panelists to introduce themselves before we dive into the topics.
So, I'm Nick Milanovich.
I write this week in FinTech, the largest FinTech publication with 130,000 subscribers.
I've been working in FinTech for about 14 years now.
Spent the first decade of that at companies, including working on financial inclusion and also invest outta a small venture fund very creatively called the FinTech Fund.
I'm sitting here today with Emily Williams from Harvard Business School, Ashley Bell, CEO of Redemption Holding, and Jen Tesser, the founder and CEO of Financial Health Network.
Ashley, would you like to give your intro?
Yeah, thank you. I really appreciate you joining us for this conversation.
You never know who, what kind of crowd shows up, but usually if you come here, you're already interested in the issue.
So we know it's kinda like preaching to the choir, but we'll make sure it's a good service today.
All right. So I'm Ashley Bell, CEO of Redemption Holder Company, which is the first acquisition of the first black owned bank here in the Rocky Mountains.
And also the, the first African American owned bank ever created outside of the black community here in Utah.
And then also I'm CEO of Ready Finance, branded as Ready Life, which is the first ever minority owned company focused on people being able to own a home without a credit score.
Basically looking at alternative financing, diving into alternative cash flow, and focusing on how we can fix that problem to create a more affordable pathway to home ownership.
Hi everybody. I'm Emily Williams.
I am an assistant professor at Harvard Business School.
So I think I'm the only academic person here at this conference.
A bit of a sticking out like a sore thumb, but I'm very, very happy to be here and honored to be sitting on the stage with this crew.
I, you know, I teach finance.
I teach financial inclusion to students.
But, the main part of my job is working on research.
I do empirical research on households in the areas of financial inclusion and also some FinTech stuff.
Excellent. And you have that fantastic accent.
So, Hi everybody. I'm Jennifer Tesser.
I'm the founder and CEO of the Financial Health Network.
We turned 20 years old this year, which is a big milestone.
We work with financial services companies of all kinds, banks, credit unions, fintechs, et cetera, to help them understand the financial health challenges of their customers and to design, help them design strategies and solutions to improve it.
So we run a membership network.
Some of the financial institutions at this conference are part of it.
We do also a lot of consumer research.
We work one-on-one with companies who want our help in product design.
And we, for a long time, 20 years, really have been an investor in early stage FinTech companies that are solving financial health challenges.
Well, I like to think of myself as maybe a little bit of an overachiever, but after hearing these three resumes, I feel a little bit less achieving, honestly.
Thank you so much for being with us today.
And what I love about this mix that we have on the panel is that we get to hear from an operator.
We get to hear from somebody working on the academic side, and we get to hear from somebody with a broad perspective of having started a non-profit focused on, FinTech and financial health.
So three very different perspectives.
So maybe just diving into it, it seems like five, seven years ago in FinTech, financial health was a big thematic element with a lot of new companies starting.
But over the last few years, it feels like a lot of other areas, banking as a service, payments infrastructure, have kind of supplanted financial inclusion.
And so I'm really happy that we have this topic at the summit today because we hear less and less about financial health and inclusion.
And so I'd be curious to hear from all three of you, what's the state of financial health and inclusion in FinTech today?
Yeah, everyone's looking at me, so I guess that means I'm going first.
Well, you know, it's, it's been FinTech winter and it's still a little chilly.
So I think, to be honest, I think FinTech has a little bit lost its way.
And I actually just published a piece earlier this week in Forbes about the need for FinTech to get its mojo back by returning to its roots.
Because if you think back, forget five or seven years, you know, 10 years, 20 years to when FinTech was in, its in infancy, the excitement and the enthusiasm was around leveraging technology to actually improve people's financial lives.
People were excited about that.
We didn't call it financial health at the time, but at the end of the day, that's what we're talking about.
'cause if you're in the financial services business and you're not really focused on the financial health outcomes for your customers, and like you're just a commodity, and I don't think anyone really wants to just be a commodity.
But I feel, I also think that through FinTech Winter and other events, a lot of people learn that it's really hard to be a B2C FinTech.
The economics are super hard.
And unfortunately, I think some people have interpreted that as, oh, we can't actually serve lower income consumers or non-traditional consumers.
I don't think that's true.
I think what's true is that it's very difficult to be a brand new startup and build the economies of scale needed to do that.
And so what I think has been really interesting is, I think in many ways the banks have eclipsed FinTech on this topic.
Mm-hmm. In a way Mm-Hmm mm-Hmm.
And I don't think this is a bank FinTech thing.
I think this is, you know, everyone's got a role to play Mm-Hmm.
And so I'm excited that FinTech is playing more in the B2B space and creating the underlying infrastructure to improve the, ultimately the efficiency, but also the customer experience.
But I do think that I really liked what what was set up here in the plenary sessions today, which is MX is a B2B company, but they are completely focused on the end user.
And they really pull that all the way through.
And I think that's what's needed for FinTech to get its mojo back.
Right. And I think, you know, we can put some sort of stats and numbers around understanding sort of, you know, how difficult it is and what the need is.
You know, we know, for example, in the United States, 5% of households are unbanked.
And you know, that that number varies wildly by race, race and ethnicity and also by income level.
But, you know, for example, 11% of, uh, black households are unbanked versus 2.7% of, of white households.
And that difference in race and ethnicity persists by, by income level.
And when you think about sort of, you know, how challenging is that for these households, it's really expensive to be poor.
And there's, you know, work from the financial health network that shows that, you know, the most financial, financially vulnerable households in the United States are spending something like 16% of their income on financial services.
Not having a bank account is incredibly costly, you know just accessing the income that you've earned.
You have to go to a check cashier, for example.
You know, even just paying bills, it becomes like a part-time job.
And so, you know, there really is this massive need and a space to fill just to offer basic financial services to get towards financial health and to do it in a cost effective way.
And it's obviously incredibly, incredibly challenging to do that.
Like you mentioned you know, at scale and, you know, provide these low cost services.
And I think where those two sort of meet is you, you've had an era where fintechs were popping up all over the place, but banking as a service and people saying, we can reach these unbanked, the market responded not only because of the newness of some of the technology, but also the times we were in as a country.
Yeah. There was a, a response post George Floyd to where you saw people looking to invest in this space.
Yeah. And so you unfortunately saw a lot of capital meet the opportunity of what banking as a service can be.
And then you kind of look for who's the trusted person that can go to these communities and talk about these solutions?
And unfortunately, you saw a couple of big names show up.
Everybody wants to go grab their celebrity, who's the culture purveyor, and they may not know anything about banking or financial services, but they got a great TV show.
They got a great hit song, and you give them a brand and you try to run a company, but it's not really addressing any of the underlying real needs.
And so what Redemption is, what ready is and what all of us that are minority sort of founders in this space, it's like, well, how about the people in the community who actually have the problem?
Yeah. Create the solution instead of the other way around.
Because what you saw, there's a very prominent FinTech company that raised $300 million to be a African American focused FinTech banking as a service is now valued at seven.
It had an $800 million valuation, now was $7 million and had every big name in Wall Street lined up.
But fundamentally, you still have to have a service that people want to use.
It wasn't like people didn't want to do it out of, you know, Hey, this is a great thing.
It's got minorities on it's got a great message.
You still gotta have the technology to make this thing work.
You still gotta show up and have something to offer where I say, I would rather do this than what I'm doing.
And I think that's the part that got missed.
And people thought because this is an African American thing, or we can cater towards Hispanics or the L-G-B-T-Q community, they won't care.
Yeah. They will. They're gonna care. It's not gonna work.
And a lot of people lost the money.
And unfortunately that deep, the down rounds that are happening now for the companies that are still around that didn't go outta business, are making it harder for the people who actually have solutions who are from these underserved communities to raise money.
Because people are like, well, we tried that.
Yeah. And it, there's a connection also between the ease with which a FinTech can pursue a niche strategy.
True. Yeah. And the challenge with turning that niche strategy into the scale that's needed to be successful.
And we invested, for instance, in the first bank really focused on the lgbtq plus community.
Mm-Hmm. As an example, could not make the economics work.
Mm-Hmm. But do I think that means there isn't room for catering to that market or other market? Absolutely not. Right.
But to your point, like with one of our biggest raises in, in the black community after George Floyd, they raised 300 north of 300, almost $400 million you could have bought Two thirds of the black banks in America with that, not had a FinTech.
That's right. You could have literally bought six banks and rolled them up and been able to do this without some of the regulatory issues that you run into that are prevailing the market now.
Yeah.
So I'm curious, we seem to have kind of a FinTech desert when it comes to financial health and financial inclusion at the moment.
I'm sure people saw the news about a week ago that JP Morgan meanwhile is expanding with a hundred new branches in low to moderate income communities.
But it feels like there really is an opportunity, like you highlighted Ashley, for people who really understand the context of the core customer here to build a better product to serve that end customer.
And like there's a real business to be built around it.
I think there's, the misperception may be, especially after the last few years, that these are, you know, double bottom line opportunities that these are you know, non-profit making entities, but these are real customers and you can build real businesses around real customers.
And so on the one hand you have JP Morgan on the other hand you know, to put Jen on the spot a little bit, there's a fantastic program called Finnex that we participated in a couple times at Petal, where if you're in a city, I cannot recommend it more.
You go out and you just engage.
You have a task list, and you engage with check cashers with payday lenders to get a better understanding for what the only options are that face a lot of consumers who tend to fall into lower income brackets.
So those are kind of the two ends of the spectrum, but there has to be a middle ground where you can build good customer centric, proactive financial services from people who really understand the core customer.
And so this is a very, very lengthy lead up to asking the question, but maybe Ashley to put you on the spot, what don't people understand about building FinTech focused on financial inclusion that they should?
Yeah, that's a great question.
You know, I think it fundamentally starts with what are the needs of these underserved communities.
A lot of times it's, they need to circulate their dollar at the end of the day in their community as much and many times as they possibly can.
So the big missed opportunity is when you're putting tens of millions, hundreds of millions of dollars into fintechs that are going to be offering banking as a service to black and brown people.
But all those fintechs sit on top of banks, not owned by black or brown people, then you actually are sucking the money out of the community and putting it in another community and think you fixed something when you probably made it worse because that local Hispanic bank or black bank is right down the street and you just stole their customer.
And that's the place that they're going to get a loan for their church.
That's where mom and dad went to get their loan.
And now you just made them weaker.
And so you got, you have this issue to where you can do both.
But this is why we come to Utah.
This is why we came to Utah, to buy a bank that can be in a position that can have the technology to partner with fintechs in that way.
There's not one black bank in America that could have partnered with any of these fintechs.
Not one, not even close from a technological standpoint.
But there needs to be.
So when we look at the whole ecosystem of how this works, you have to have ownership at the bank level just as much as you're looking for founders in fintechs.
You need people that are black, brown, and women owning these banks that are partnering with them as well.
May I ask a question, Ashley?
UWhat do you think prevents, you know, aside from really obvious things, the scaling up of, of this throughout the country?
So when we think about how the number of minority depository institutions, it's very small relative to so from your perspective, you know, what prevents us from, you know, doing this more, Creating more MDIs Yeah.
And doing this more and more, and like really connecting with the communities.
And you should probably tell this audience what an MDI is.
'cause I suspect that's not a common acronym.
It's a minority depository institution, which means that, you are mission driven, serving a minority focus that majority of your board are women and minorities, and the majority of your voting shareholders are the same.
Or you're situated in a community that serves that that particular population, that special designation gets you some benefits from the federal level.
So for example, during Covid there was a bill passed called eip, which was allowed them to get really low interest help from the government to scale and expand their opportunities.
That just things like that. Anything else you wanna add?
Academics to MDI that I, that I'm missing?
Yeah.
But we know sort of from, there's some really interesting academic research done by some graduate students at the University of Chicago who have done, they've taken MDI information, they've taken loan officer race information as well as borrower race information.
And we know that MDIs that are better essentially at lending to minorities with lower default rates.
And then they try to do some really clever economics and, and tease out exactly why that is and what's the secret source.
And it has something to do with the ownership of the back and not necessarily the race of the loan offices, which might be an obvious you know, and the question is why?
Well, and I'm so fascinated to hear Yeah.
Before I started doing all this, I was a lawyer at the largest law firm in the world representing these MDIs.
I was a lawyer for MDIS before I decided to start one mm-Hmm.
The race of the loan officer may not be the biggest issue.
Yeah. But the place where race is the biggest issue is the race of the auditor from the federal government to audit their books.
That is the issue when you sit down and talk to a minority owned bank.
And I was sitting to a woman who has a bank that she's been running beautifully but she says, Ashley, when the regulators come in and they audit my books, I have businesses that are black and brown that when they audit them, and let's just say the scale is zero to 10 10 being a really good business, five or less being bad, she says they could be paying every bill, not missing one payment, but arbitrarily because of the zip code.
This regulator may say this is a six. Wow.
And they're like, what do you mean it's a six?
It's the exact same thing that's across town that's doing the exact same business.
That arbitrary number forces that regulator to say, well, we're not that for that bank to be regulated in a way that makes them keep more cash, because they say 50% of your portfolio may go default.
And so we not, we don't wanna be on the hook for this loan's gonna default.
50% is like that. So you know what, you need to keep more cash in the bank to cover that.
And if they're keeping more cash in the bank, they're not loaning it back out to make money.
So they get caught in this perilous cycle.
And when you try to look at the auditors, 97% of these auditors are white.
And so when they show up, and to your point Mm-Hmm.
You gotta know who the customer is. Mm-Hmm.
So when they see that business, they don't see the extra that that entrepreneur has to do to survive.
Yeah. They just see zip code and maybe foreclosure rate in that neighborhood.
Right. It's red lining all over again. Different way.
It's red lining all over again.
So when you talk about how do we create more MDIs, I'm gonna hit on that.
The first thing is what you kind of brought up.
We have to divorce this concept that because it's minority run, it's not gonna make any money.
People automatically see founders that show up of color and they say, wow, that's a great idea.
And because usually those founders come from places and spaces that they know need help, that they lead with that heartfelt vision and that mission to do good and is predisposed in so many people, even people of good will who are like, this feels philanthropic.
It feels like I should be just giving my money to you.
I don't care what happens. I just want you to be okay.
But I guarantee you, the check you write to somebody who you don't care, what happens is a 10th of what you'll write, if you really care what happened, you're gonna make a return.
You still may support it, but it's a different kind of support.
So if we can get to the point where we see these folks and hold them and not, not hold them more to a different standard, but to just walk into it knowing that yes, you can be profitable, but also know that you can play a role in making them profitable.
Ms. Hobson said it best.
She said, women don't already own businesses, don't have a capital problem.
They got a customer problem.
Help them expand into the markets where you are.
Give them access tol customers and clients, and you'll solve for the capital problem. Yeah.
You know, I feel like we are dancing around this topic, but I'd like to dive in.
For financial health and inclusion focused businesses policy and the regulatory environment matters so much than for the rest of FinTech.
You have a different customer set, you have different customer considerations.
That pernicious effects, like you mentioned, of bank of capital requirements and how they affect your ability to experience that multiplier effect, lending back into the community creates real impacts.
And so for people who've worked in financial inclusion, it feels like sometimes you run into limits where tech alone is not enough, and there need to be broader changes in order to create financially healthy customers.
And banks and fintechs have a big role to play.
Policy makers have a big role to play.
Cities have a big role to play.
I'm curious, how you view that intersection and what you'd like to see more of to create more financially healthy core consumers.
And Jen, I'd like to start with you.
As I am want to do, I actually, wanna answer your question, but I actually wanna reframe it slightly.
I don't think there's such a thing as financial health and inclusion businesses.
Hmm. I think the goal is every business, every company in the financial services world should be in those businesses.
Mm-Hmm. And in many cases are, whether they call it that or not.
Mm-Hmm. it doesn't mean that we shouldn't be putting extra emphasis on focus and making sure that everyone is included, or that they have an ownership stake for that matter.
But this idea that somehow there's a niche of fintechs out there, uh, that are fin health fintechs, like, then it makes it seem like financial health is just a widget.
Like, if we just created this great app, right.
Everyone's financial health would be better.
But it's not that simple.
And so for me, financial health is really about focusing on the outcome.
That's what financial, that's just what we decided to call the outcome.
We could call it 10, 20 other things.
And it's unusual in financial services for folks to care about the outcome.
Because in particular, banks and credit unions, even though they all say that they're customer centric, they're generally organized around products and product p and Ls.
And it's very different when you reorganize your p and L and you are thinking about this from a customer perspective.
And that's why, again, they didn't pay me to say this, but like, the reason why I am excited to be here and to have a long standing relationship with MX is because it's really back to what Ashley was saying earlier, it's really about deeply understanding your customer or your potential customer, and using data to do that.
And not just using data, but getting past the averages and disaggregating the data by race and ethnicity, by gender, by, you know, you name it.
Because averages really skew, what's really going on for different people.
And I would suggest that particularly for existing banks and credit unions, these are your customers we're talking about.
So certainly there are people who aren't included.
Either they don't have a bank account or they can't get credit.
Right. But the vast, vast, vast majority of people in this country are engaging with one of you Mm-Hmm.
And they're not getting everything they need. Sure.
And so it's really about what, what do I need to better understand about their lives so that I can design not just products, but experiences and engage with them at the right moments in time to intervene when I can make a difference in someone's ultimate financial health outcome.
That's how I think about it.
May I ask a question here as well, Jen?
It's a business proposition and the Financial health Network has been successful in, you know, making this proposition and having companies onboard, you know, with this.
And what do you think makes some companies interested and how do, and some, and do you, how do you see the sort of landscape changing, with this, you know, big organizations you've got lots of those working with you, and how about the smaller ones As well? Yeah, so I'll go back to something that Nick said earlier.
I have a lot of folks on my staff who are really fixated on the business case and business case matters, don't get me wrong.
But I, after doing this for 20 years, I really believe that it's really about the it's about the leader and it's about a leader who has empathy and Mm-Hmm.
Because if you have empathy, you know, you'll find a business case you're willing to go do the work to find it.
Right. And if you don't, and someone makes a business case and it convinces you, but it's off in some way, there's no ability to learn.
It's always like, oh, we, yeah, we tried that.
It didn't work. Right.
As opposed to, well, we're gonna keep trying it until we make it work.
So I actually think this Fin X experience that Nick described is really an empathy building experience.
Ultimately, it's putting yourself in the shoes of your customer or some of your customers.
And it is, no matter who has gone through it and what their role is in their company or organization, it is just incredibly eye-opening.
Oh, eye-opening. It's a little bit like Undercover Boss.
It's the same idea, right?
You, when you walk in someone's shoes and you really understand it from their perspective, you start to, you start to think differently.
And so, while we as an organization, I think are really focused on changing norms..
So that this is just the way business gets done I'd be lying if I said that was sufficient, right?
Like empathy matters a lot. Mm-Hmm.
Yeah. Actually, I'm curious to hear your experience buying a bank.
A Utah based bank is a very differentiated decision in the world of FinTech, but you have so much experience and expertise in this space.
Clearly you saw an opportunity there that a lot of other founders haven't seen.
I'm curious what drove that decision what you see as being the core benefits of the model that you've taken on.
And if you're comfortable sharing with us, to Jen's point, you're not building a financial inclusion business.
You're building a bank that should be a generational bank, that should be a legacy bank.
Right? Where's redemption gonna be in 10 years based off of this advantage?
You know we get asked that a lot of times, like, why Utah?
When, for those that don't know, my co-founder, uh, and both my FinTech and this bank acquisition as Dr.
Bernice King, the youngest daughter of Martin Luther King Jr.
And so, when Dr. King and I set out to think, where is the future of banking for African Americans, where can we find a home?
Utah made all the sense in the world.
And I know that doesn't, on its surface, seem like it makes sense, but let me break it down for you at the end of the day.
In order for us to think about the future of banking, especially in the black community, every other black owned bank was in the LMIA low to modern income area.
We needed to flip the economics on its head.
Brookings Institute said it best when they read about redemption.
And us starting this, what redemption does is challenge to face of who can own what and where in America, why not have an African American owned bank in Salt Lake City.
Why is that so strange to think about?
What is the fear of something like that?
But what is the opportunity is the better question for us?
Utah's the number one state to do business straight.
Any way you look at it every year, it comes up number one.
So the regulatory environment is right.
That's why everybody wants to buy a bank here.
So why wouldn't we wanna buy a bank here?
Two, the people, Dr. King, did not break the back of Jim Crow and create us way for me to sit here on this stage by doing it by himself.
There was no civil rights movement without a lot of people from a lot of different backgrounds wouldn't have happened.
If we're going to create a different type of bank that can stand the test of time and do all the things we hope it can do, African Americans cannot do it alone.
So we had to find a place where allyship was in practice.
And the people in the community who are very unique set, I can't think of any other place I can go in America that has a base of people.
Many of them come from the LDS church.
Many of them don't look like me, but they spent two years living somewhere else with people that don't look like them in language.
Many times they didn't speak.
And then some of them came back here with a different worldview, with an understanding of otherness.
And with that baseline of understanding that commonality, we can build something special.
And you add to that a great philanthropic community, this would be the first bank created where over 25% of our cap table is from program related investments from nonprofits.
Think about that. People who are leaning into the mission.
But at the end of the day, we also wanna create value for our investors.
And by buying a bank that has zero delinquencies, day one, we start off as the most financially sound African American bank in the country, day one, we can build it strategically and methodically in a way where we can both hit our mission, but also be able to create extreme value.
Because we have customer base that is not just in the black community, but all the names that you see on most of the buildings, driving around downtown Salt Lake, all the way to entrepreneurs in the African American community that you may see on your timelines doing amazing things to actors, to entertainers, to athletes.
There's a special opportunity to create a bank that's not just a community bank, but a bank of a community.
I gotta ask you, Ashley. Yeah.
So clearly you've made that pitch before.
And I buy it completely, but when I think about bank or no bank I get the ownership argument completely.
Mm-Hmm. But leaving that one aside, just purely from an operational perspective now, right?
Think about the choice that Green dot or Varo made versus the choice that chime made.
Mm-Hmm. Pros and cons on both sides.
And it's not clear to me that we know which path wins the day, aside from the ownership, important ownership benefits.
And I'm curious, how do you think About that. Yeah.
I think you, it's sort of like what you the question, the answer you gave about the owner have to have the empathy, right?
It's hard to divorce the ownership question, but here's the pathway for us.
All of the African American owned banks right now are less than a billion dollars.
Yeah. Not one black bank has over a billion dollars in assets.
So that alone is an issue.
Two, none of us can name the ticker of a black founder company on Wall Street.
One of my biggest investors, one of the wealthiest African Americans in this country, told me, Ashley, we have to have a ticker that people can look to on CNBC and know that they're, are the hopes and aspirations of the people reflected on the big board.
We've been locked outta the system for too long.
People give us so many other opportunities saying, look, why don't you do something else?
We just now figuring out how to make capitalism work.
I'm a capitalist, but we have very few receipts to show that we can make capitalism work.
It's real hard to have a system that says, capitalism is where we were day one, when 12% of your population had to work for free.
It's real hard to say that capitalism works when over a hundred years, women couldn't own property.
And that's the way that you created wealth.
Well, we're just now, because of so many advancements of so many people that, that gave their life for me to be here and a lot of other people to vote in this room, to finally get to the point where we got enough education, we're pulling enough wealth to crack the code on this capitalism code to tell us that banking might not be for us.
We're a little late to the party, but we're showing up with some friends who believe in what we're doing, who know that we can do this together and create something special.
So we're right there. And I think history will look back at this and look at redemption and say what they did was not conventional who they did it with, or friends that were nor not normally from the same country clubs, the same alumni associations, but what they put together created a capital base, a foundation that our community had never seen before, to give us a platform to be maybe the bank that these fintechs can sit on top of one day to make sure that the next time you have a FinTech that wants to go into a community and offer their services, that that money actually comes back to a bank that's mission driven and owned by people who you're marketing to.
Novel idea. Everybody else has been doing it, but I think it's time for us to get in that game.
Thanks. So, full disclosure, I've actually been a terrible moderator today.
We had these five lovely canned questions and we didn't get to any of them.
But I feel like we ended up having, ultimately I think it very, very interesting conversation.
I'm really glad with the way it flowed.
We are going to open it up for audience questions in about a minute.
So we can do 10 minutes of questions while we have three brilliant minds on this stage with us.
But maybe we can just end with one question.
I'd love to hear from our canned questions list.
What innovations in payments and lending, or in FinTech more broadly, have you seen recently that really excited you focus on financial inclusion, or not focus on financial inclusion, but to Jen's point, with the impact of helping financial inclusion?
What's an innovation or a product you've seen recently that you've been really excited about?
I'm happy to go. I'm a little bit different to sort of Jen's perspective on you know, most people are banked.
There are a lot of, you know, I think my natural focus and my research is on people who spend a lot of money on financial services.
So payments, innovations I think are, are really exciting.
But I don't really think that in the United States, we've really got there with sort of with some of those things.
And I think part of that is sort of, for example you know, verification or know your customer type verification.
And you can look to developing countries like India with biometrics.
So anything related to sort of that stuff and how that might help payments, and is super exciting to me.
But yeah, So I think I'm most excited about cashflow underwriting.
Mm-Hmm. And underwriting leveraging non-traditional credit bureau data.
Mm-Hmm. We have been focused on this issue for literally 20 years when I started, if you talk to a credit officer, loan officer, you know, well, if it's not Fico, it's crap.
You know, it's nothing. And we've come so far.
I was just at a conference a couple of weeks ago.
The entire topic of the conference was cashflow underwriting.
Mm-Hmm. Like, and one of the companies that we invested in Nova.
And there's other lots of other companies prism, petal there, prisms also.
Here we are investor in them.
Like, there's just a lot going on there.
So I was excited to hear about mm-Hmm.
Your work in that space. On the mortgage front, I think the mortgage front will be tougher, but it, but also with FHFA, uh, you know, pushing the GSEs to pilot. Like there's movement there. There's movement.
So I'm really excited about that because I do think that some of the innovation, innovation that we've seen in lending, um, I say that because some of these vendors don't see themselves as lenders.
They're cute.
But they're not attacking the underlying problem.
And in fact, while there are some interesting things that may come out of buy now pay later, or earned wage access, or they really are a bandaid in many ways.
And so I'm really excited about tackling the underlying sort of fundamental challenge.
And just to piggyback off that, I was here at MX last year when I had that same sort of conversation around how do we rethink cashflow based underwriting.
And so on. The tech company, Dr. King and I have that focuses on that, we created our own model.
It was like, let's just sit down with people that have the problem and create the solution.
And so we're bringing to the marketplace.
We just piloted in Cleveland, Ohio.
We're rolling out the first in a long time credit scoreless mortgages.
And how do you do that? You gotta have a lot of people that believe that this is a direction that the marketplace eventually will go.
And so we're underwriting it off of cash flow, primarily based off of your rent payment.
Nobody gets some mortgage that costs them more than what they were paying in rent.
Just makes sense to us that if you can pay it in rent, why would you not pay the exact same amount if it's a mortgage?
And when you look at that and you try to tackle what the mortgage can look like, then, you know, let all like good ideas come to the table.
When you step outside of the regulatory environment of banks lending for mortgages, you got a little bit of space to get creative.
So we look at what the UK was doing and we said, well, why do mortgages have to be 30 years?
If I'm trying to get a new home buyer in there, why not go to 40 if I can get that payment to a position where they own it, and then yeah, they can refinance later, but at least I get them in the door to own the home with a 40 year mortgage.
'cause the monthly payment is lower. And at the same time, that asset is appreciating in value while time goes on.
Now, hopefully you don't pay it off for 40 years when most of us refinance.
Nobody takes the same mortgage for 40 years. Right.
But if you look at all these innovative ideas of longer mortgages, hard money lending, cashflow underwriting, there's a way to get people access.
The question is, can you create enough inertia in the marketplace where people feel like this is a risk tolerable way to make money?
That's at the end of the day. So I have to be able to show that these mortgages that I'm creating, all of which are CRA eligible.
If you don't know what that is, that's something that banks need.
And like, how can I get these CRA eligible mortgages off my balance sheet back into the system to where banks wanna buy them for CRA market for CRA needs.
But also at the same time, when you get a mortgage from US Financial Literacy, this is the glue that we talked about.
if you're gonna really help someone financial literacy, we give it to the borrower, but we also offer it to their kids.
It's for the whole family.
You wanna break cycles of poverty.
You either figure out how to talk to mom to dad when mom's making sacrifices.
Let the son and daughter know why mom's changing, how she's moving, why she may not be doing what she was doing before.
'cause she's one that set a good example for you, but you're also getting an education on that.
Equip the whole family with what they need, equip the whole family with options and make sure that the entry point is one that they can start with, but they also have what they need to be successful.
We're just not trying to put people in a mortgage just to have it, but to have one that can create wealth for their families, but also education that can span generations.
Thank you so much. We have five minutes left so we can answer one, maybe two questions if we're efficient.
This is for Ashley. So many of the minority community, Dave Wilkes, this is Ashley.
I'm curious, so many of the minority community uses these alternative products, whether it's Cash App or Chime or other products.
How do you see the vision at the bank, especially in this ecosystem, mx to open up what you're doing to the financial services community to help drive innovation for the minority community?
Yeah, that's a great question, David.
At the end of the day, we have to solve for that.
'cause again, I'm just looking at from living in this space, literally living in it.
If I am getting my hair cut and Castle Berry Hills in Atlanta, which is a historic part, African American part of town, my barber's gonna tell me I need 50 bucks Or cash app. He's literally right next door to a black owned bank.
That money just went from my bank account at a black owned bank to cash app to sitting at a not black owned bank with really no diversity on their, in their leadership on the bank that it sits on top of, not Cash app, but Sutton under it.
And I just, we just lost that money completely.
So for us to be able to create the velocity banks, and I think this is, this is what Jennifer brought up.
Banks have to start functioning like fintechs at the end of the day.
Yeah. I have to be able to be in a position to where I can, I can go to that gig economy worker, that point of sale person who's like, I got a service or a product I wanna sell wherever I am, where whenever I'm there and be able to do that transaction with ease.
But he also get the security of knowing who he's banking with, not missing that relationship point.
And so the future has to be meeting them where they are, but also understanding that they need a banking relationship because he as well as a cash based business, the value that we need to attack from a banking perspective.
There are so many African Americans and people of color who have great businesses that are all cash based.
'cause they don't trust banks. How do you get that person to now go get a loan so that he can expand his barbershop, hire more people, because otherwise it'll take three times as long to do it on cash when he needs to get credit.
But there's a trust gap that we got to bridge.
I just love that vision, Ashley.
And I think the hardest part of it is the customer, the consumer education.
And what I mean by that is like the fact that you and others in the room know that cash apps, it's, you know, is powered by a bank and that bank is, you know, to understand the broader, the circular economy that you're trying to create in a way to, I mean, that just takes, it takes educating people about that.
Yeah. Getting them off of cash is one thing. Yeah.
But having them understand that when you send them the money, right.
So that gonna be the hard part.
And to them, a lot of people they don't even know that's Cash app's not their bank. Exactly.
They're Like Right. Bank of Cash App. Mm-Hmm. That's right.
And that education and it came to a head in, in a little bit of a way and you had the FinTech Greenwood come up that was Yeah.
A FinTech, but Greenwood had to stop saying it was a bank because people were like, oh, this is a bank.
No, it's not. Right. It's a FinTech, it's sitting on top of a bank.
But look at what just happens with that dichotomy.
Black owned FinTech sitting on top of a non-minority owned bank.
People here, to your point, I want to bank there, but they really just put their money over here.
Yeah. And the bank that actually is doing the loan to your church is on the verge of going under that is what we have.
That deceptiveness is just not for the customer. Yeah.
We gotta take responsibility as the investor class is making sure that we're investing in things that don't perpetuate that misconception.
Okay. I think I saw one more hand go up over here and we have a little bit of time left.
Was there something you had a question over on this side now what?
That question's expired. Okay.
We have a new question over here.
First of all, I'm Brent from Form free, and this is, I love this topic and I love this panel and it's so good to see you speaking about something that I've been passionate about for 17 years.
The mission is love.
The mission Ashley speaks so eloquently about is serving and the environment, to your point, needs that something a critical juncture needs to be like broken through an impasse change has to occur at the highest levels of government agencies all the way down to those, those banks.
So how do we, how does MX play a role here, which has such a broad reach?
What are, what is MX thinking about in terms of, you know, the cash flow calculation, residual income, looking at alternative ways other than just the three digit score?
Thank you.
I appreciate you brother for bringing that up because we've had this conversation you and I have and others in this room.
You got a lot of heart-centered people like you who truly believe it, have lived a life that understands, some of these challenges have been adjacent to them yourself.
You know, in everything you do, if you're trying to create a solution for anybody, the people with a problem have to be involved.
Look at your advisors, look at your boards, look at the people you're surrounding yourself with.
All these ideas are great in a vacuum, but if you actually put people who are close enough to the problem, you might take a great idea and make it amazing by inspiring it with the inspiration from people who actually need the help.
And if all of us went back and looked at our boards and say, who can I add to my board?
Who can I add to my advisory team that may have a little bit of a different perspective and proximal view of what I'm trying to solve for?
Then a lot of the things we're talking about will have a better chance of making it to market Here. Here.
That is a good note to end on. Yeah.
Ashley, Emily, Jennifer, thank you so much for being with us here today.
I'd love to get a big round of pause for our great time.
Payments, Lending, Financial Health, and Inclusion
Real-time payments. Cash flow underwriting. Earned wage access. Buy Now, Pay Later. New innovations across the payments and lending ecosystem bring new opportunities to broaden access to financial products and services. But, they also bring new and different challenges to solve. This session will unpack what’s on the horizon for payments and lending, why these innovations matter for financial inclusion, and what to watch out for.
Explore MX Products
Learn More About MX
Watch Next
Dr. Leda Glyptis, PhD
The Digital Transformation of Financial Services
TTV Capital, Fintech Takes, Ent Credit Union, FS Vector
What Should the U.S. Banking System Look Like?
MX, State of Utah, Moov, Spring Labs, Aliya
Using AI in Banking Today
Transcript
Let's kick off the after lunch session.
So we are gonna be talking today about payments, lending, financial health and inclusion.
I just wanna say a quick thank you to the MX team for hosting us here.
They've been fantastic. This is one of my favorite FinTech events every year and it's been so great to work with them.
I also am very excited about the three people sitting in my left.
If the people in these three chairs were on a GLG call together, it would be unaffordable.
So let us take advantage of all the brain power that's sitting in my left today.
I'll give a quick intro myself, but I'd love to get the panelists to introduce themselves before we dive into the topics.
So, I'm Nick Milanovich.
I write this week in FinTech, the largest FinTech publication with 130,000 subscribers.
I've been working in FinTech for about 14 years now.
Spent the first decade of that at companies, including working on financial inclusion and also invest outta a small venture fund very creatively called the FinTech Fund.
I'm sitting here today with Emily Williams from Harvard Business School, Ashley Bell, CEO of Redemption Holding, and Jen Tesser, the founder and CEO of Financial Health Network.
Ashley, would you like to give your intro?
Yeah, thank you. I really appreciate you joining us for this conversation.
You never know who, what kind of crowd shows up, but usually if you come here, you're already interested in the issue.
So we know it's kinda like preaching to the choir, but we'll make sure it's a good service today.
All right. So I'm Ashley Bell, CEO of Redemption Holder Company, which is the first acquisition of the first black owned bank here in the Rocky Mountains.
And also the, the first African American owned bank ever created outside of the black community here in Utah.
And then also I'm CEO of Ready Finance, branded as Ready Life, which is the first ever minority owned company focused on people being able to own a home without a credit score.
Basically looking at alternative financing, diving into alternative cash flow, and focusing on how we can fix that problem to create a more affordable pathway to home ownership.
Hi everybody. I'm Emily Williams.
I am an assistant professor at Harvard Business School.
So I think I'm the only academic person here at this conference.
A bit of a sticking out like a sore thumb, but I'm very, very happy to be here and honored to be sitting on the stage with this crew.
I, you know, I teach finance.
I teach financial inclusion to students.
But, the main part of my job is working on research.
I do empirical research on households in the areas of financial inclusion and also some FinTech stuff.
Excellent. And you have that fantastic accent.
So, Hi everybody. I'm Jennifer Tesser.
I'm the founder and CEO of the Financial Health Network.
We turned 20 years old this year, which is a big milestone.
We work with financial services companies of all kinds, banks, credit unions, fintechs, et cetera, to help them understand the financial health challenges of their customers and to design, help them design strategies and solutions to improve it.
So we run a membership network.
Some of the financial institutions at this conference are part of it.
We do also a lot of consumer research.
We work one-on-one with companies who want our help in product design.
And we, for a long time, 20 years, really have been an investor in early stage FinTech companies that are solving financial health challenges.
Well, I like to think of myself as maybe a little bit of an overachiever, but after hearing these three resumes, I feel a little bit less achieving, honestly.
Thank you so much for being with us today.
And what I love about this mix that we have on the panel is that we get to hear from an operator.
We get to hear from somebody working on the academic side, and we get to hear from somebody with a broad perspective of having started a non-profit focused on, FinTech and financial health.
So three very different perspectives.
So maybe just diving into it, it seems like five, seven years ago in FinTech, financial health was a big thematic element with a lot of new companies starting.
But over the last few years, it feels like a lot of other areas, banking as a service, payments infrastructure, have kind of supplanted financial inclusion.
And so I'm really happy that we have this topic at the summit today because we hear less and less about financial health and inclusion.
And so I'd be curious to hear from all three of you, what's the state of financial health and inclusion in FinTech today?
Yeah, everyone's looking at me, so I guess that means I'm going first.
Well, you know, it's, it's been FinTech winter and it's still a little chilly.
So I think, to be honest, I think FinTech has a little bit lost its way.
And I actually just published a piece earlier this week in Forbes about the need for FinTech to get its mojo back by returning to its roots.
Because if you think back, forget five or seven years, you know, 10 years, 20 years to when FinTech was in, its in infancy, the excitement and the enthusiasm was around leveraging technology to actually improve people's financial lives.
People were excited about that.
We didn't call it financial health at the time, but at the end of the day, that's what we're talking about.
'cause if you're in the financial services business and you're not really focused on the financial health outcomes for your customers, and like you're just a commodity, and I don't think anyone really wants to just be a commodity.
But I feel, I also think that through FinTech Winter and other events, a lot of people learn that it's really hard to be a B2C FinTech.
The economics are super hard.
And unfortunately, I think some people have interpreted that as, oh, we can't actually serve lower income consumers or non-traditional consumers.
I don't think that's true.
I think what's true is that it's very difficult to be a brand new startup and build the economies of scale needed to do that.
And so what I think has been really interesting is, I think in many ways the banks have eclipsed FinTech on this topic.
Mm-hmm. In a way Mm-Hmm mm-Hmm.
And I don't think this is a bank FinTech thing.
I think this is, you know, everyone's got a role to play Mm-Hmm.
And so I'm excited that FinTech is playing more in the B2B space and creating the underlying infrastructure to improve the, ultimately the efficiency, but also the customer experience.
But I do think that I really liked what what was set up here in the plenary sessions today, which is MX is a B2B company, but they are completely focused on the end user.
And they really pull that all the way through.
And I think that's what's needed for FinTech to get its mojo back.
Right. And I think, you know, we can put some sort of stats and numbers around understanding sort of, you know, how difficult it is and what the need is.
You know, we know, for example, in the United States, 5% of households are unbanked.
And you know, that that number varies wildly by race, race and ethnicity and also by income level.
But, you know, for example, 11% of, uh, black households are unbanked versus 2.7% of, of white households.
And that difference in race and ethnicity persists by, by income level.
And when you think about sort of, you know, how challenging is that for these households, it's really expensive to be poor.
And there's, you know, work from the financial health network that shows that, you know, the most financial, financially vulnerable households in the United States are spending something like 16% of their income on financial services.
Not having a bank account is incredibly costly, you know just accessing the income that you've earned.
You have to go to a check cashier, for example.
You know, even just paying bills, it becomes like a part-time job.
And so, you know, there really is this massive need and a space to fill just to offer basic financial services to get towards financial health and to do it in a cost effective way.
And it's obviously incredibly, incredibly challenging to do that.
Like you mentioned you know, at scale and, you know, provide these low cost services.
And I think where those two sort of meet is you, you've had an era where fintechs were popping up all over the place, but banking as a service and people saying, we can reach these unbanked, the market responded not only because of the newness of some of the technology, but also the times we were in as a country.
Yeah. There was a, a response post George Floyd to where you saw people looking to invest in this space.
Yeah. And so you unfortunately saw a lot of capital meet the opportunity of what banking as a service can be.
And then you kind of look for who's the trusted person that can go to these communities and talk about these solutions?
And unfortunately, you saw a couple of big names show up.
Everybody wants to go grab their celebrity, who's the culture purveyor, and they may not know anything about banking or financial services, but they got a great TV show.
They got a great hit song, and you give them a brand and you try to run a company, but it's not really addressing any of the underlying real needs.
And so what Redemption is, what ready is and what all of us that are minority sort of founders in this space, it's like, well, how about the people in the community who actually have the problem?
Yeah. Create the solution instead of the other way around.
Because what you saw, there's a very prominent FinTech company that raised $300 million to be a African American focused FinTech banking as a service is now valued at seven.
It had an $800 million valuation, now was $7 million and had every big name in Wall Street lined up.
But fundamentally, you still have to have a service that people want to use.
It wasn't like people didn't want to do it out of, you know, Hey, this is a great thing.
It's got minorities on it's got a great message.
You still gotta have the technology to make this thing work.
You still gotta show up and have something to offer where I say, I would rather do this than what I'm doing.
And I think that's the part that got missed.
And people thought because this is an African American thing, or we can cater towards Hispanics or the L-G-B-T-Q community, they won't care.
Yeah. They will. They're gonna care. It's not gonna work.
And a lot of people lost the money.
And unfortunately that deep, the down rounds that are happening now for the companies that are still around that didn't go outta business, are making it harder for the people who actually have solutions who are from these underserved communities to raise money.
Because people are like, well, we tried that.
Yeah. And it, there's a connection also between the ease with which a FinTech can pursue a niche strategy.
True. Yeah. And the challenge with turning that niche strategy into the scale that's needed to be successful.
And we invested, for instance, in the first bank really focused on the lgbtq plus community.
Mm-Hmm. As an example, could not make the economics work.
Mm-Hmm. But do I think that means there isn't room for catering to that market or other market? Absolutely not. Right.
But to your point, like with one of our biggest raises in, in the black community after George Floyd, they raised 300 north of 300, almost $400 million you could have bought Two thirds of the black banks in America with that, not had a FinTech.
That's right. You could have literally bought six banks and rolled them up and been able to do this without some of the regulatory issues that you run into that are prevailing the market now.
Yeah.
So I'm curious, we seem to have kind of a FinTech desert when it comes to financial health and financial inclusion at the moment.
I'm sure people saw the news about a week ago that JP Morgan meanwhile is expanding with a hundred new branches in low to moderate income communities.
But it feels like there really is an opportunity, like you highlighted Ashley, for people who really understand the context of the core customer here to build a better product to serve that end customer.
And like there's a real business to be built around it.
I think there's, the misperception may be, especially after the last few years, that these are, you know, double bottom line opportunities that these are you know, non-profit making entities, but these are real customers and you can build real businesses around real customers.
And so on the one hand you have JP Morgan on the other hand you know, to put Jen on the spot a little bit, there's a fantastic program called Finnex that we participated in a couple times at Petal, where if you're in a city, I cannot recommend it more.
You go out and you just engage.
You have a task list, and you engage with check cashers with payday lenders to get a better understanding for what the only options are that face a lot of consumers who tend to fall into lower income brackets.
So those are kind of the two ends of the spectrum, but there has to be a middle ground where you can build good customer centric, proactive financial services from people who really understand the core customer.
And so this is a very, very lengthy lead up to asking the question, but maybe Ashley to put you on the spot, what don't people understand about building FinTech focused on financial inclusion that they should?
Yeah, that's a great question.
You know, I think it fundamentally starts with what are the needs of these underserved communities.
A lot of times it's, they need to circulate their dollar at the end of the day in their community as much and many times as they possibly can.
So the big missed opportunity is when you're putting tens of millions, hundreds of millions of dollars into fintechs that are going to be offering banking as a service to black and brown people.
But all those fintechs sit on top of banks, not owned by black or brown people, then you actually are sucking the money out of the community and putting it in another community and think you fixed something when you probably made it worse because that local Hispanic bank or black bank is right down the street and you just stole their customer.
And that's the place that they're going to get a loan for their church.
That's where mom and dad went to get their loan.
And now you just made them weaker.
And so you got, you have this issue to where you can do both.
But this is why we come to Utah.
This is why we came to Utah, to buy a bank that can be in a position that can have the technology to partner with fintechs in that way.
There's not one black bank in America that could have partnered with any of these fintechs.
Not one, not even close from a technological standpoint.
But there needs to be.
So when we look at the whole ecosystem of how this works, you have to have ownership at the bank level just as much as you're looking for founders in fintechs.
You need people that are black, brown, and women owning these banks that are partnering with them as well.
May I ask a question, Ashley?
UWhat do you think prevents, you know, aside from really obvious things, the scaling up of, of this throughout the country?
So when we think about how the number of minority depository institutions, it's very small relative to so from your perspective, you know, what prevents us from, you know, doing this more, Creating more MDIs Yeah.
And doing this more and more, and like really connecting with the communities.
And you should probably tell this audience what an MDI is.
'cause I suspect that's not a common acronym.
It's a minority depository institution, which means that, you are mission driven, serving a minority focus that majority of your board are women and minorities, and the majority of your voting shareholders are the same.
Or you're situated in a community that serves that that particular population, that special designation gets you some benefits from the federal level.
So for example, during Covid there was a bill passed called eip, which was allowed them to get really low interest help from the government to scale and expand their opportunities.
That just things like that. Anything else you wanna add?
Academics to MDI that I, that I'm missing?
Yeah.
But we know sort of from, there's some really interesting academic research done by some graduate students at the University of Chicago who have done, they've taken MDI information, they've taken loan officer race information as well as borrower race information.
And we know that MDIs that are better essentially at lending to minorities with lower default rates.
And then they try to do some really clever economics and, and tease out exactly why that is and what's the secret source.
And it has something to do with the ownership of the back and not necessarily the race of the loan offices, which might be an obvious you know, and the question is why?
Well, and I'm so fascinated to hear Yeah.
Before I started doing all this, I was a lawyer at the largest law firm in the world representing these MDIs.
I was a lawyer for MDIS before I decided to start one mm-Hmm.
The race of the loan officer may not be the biggest issue.
Yeah. But the place where race is the biggest issue is the race of the auditor from the federal government to audit their books.
That is the issue when you sit down and talk to a minority owned bank.
And I was sitting to a woman who has a bank that she's been running beautifully but she says, Ashley, when the regulators come in and they audit my books, I have businesses that are black and brown that when they audit them, and let's just say the scale is zero to 10 10 being a really good business, five or less being bad, she says they could be paying every bill, not missing one payment, but arbitrarily because of the zip code.
This regulator may say this is a six. Wow.
And they're like, what do you mean it's a six?
It's the exact same thing that's across town that's doing the exact same business.
That arbitrary number forces that regulator to say, well, we're not that for that bank to be regulated in a way that makes them keep more cash, because they say 50% of your portfolio may go default.
And so we not, we don't wanna be on the hook for this loan's gonna default.
50% is like that. So you know what, you need to keep more cash in the bank to cover that.
And if they're keeping more cash in the bank, they're not loaning it back out to make money.
So they get caught in this perilous cycle.
And when you try to look at the auditors, 97% of these auditors are white.
And so when they show up, and to your point Mm-Hmm.
You gotta know who the customer is. Mm-Hmm.
So when they see that business, they don't see the extra that that entrepreneur has to do to survive.
Yeah. They just see zip code and maybe foreclosure rate in that neighborhood.
Right. It's red lining all over again. Different way.
It's red lining all over again.
So when you talk about how do we create more MDIs, I'm gonna hit on that.
The first thing is what you kind of brought up.
We have to divorce this concept that because it's minority run, it's not gonna make any money.
People automatically see founders that show up of color and they say, wow, that's a great idea.
And because usually those founders come from places and spaces that they know need help, that they lead with that heartfelt vision and that mission to do good and is predisposed in so many people, even people of good will who are like, this feels philanthropic.
It feels like I should be just giving my money to you.
I don't care what happens. I just want you to be okay.
But I guarantee you, the check you write to somebody who you don't care, what happens is a 10th of what you'll write, if you really care what happened, you're gonna make a return.
You still may support it, but it's a different kind of support.
So if we can get to the point where we see these folks and hold them and not, not hold them more to a different standard, but to just walk into it knowing that yes, you can be profitable, but also know that you can play a role in making them profitable.
Ms. Hobson said it best.
She said, women don't already own businesses, don't have a capital problem.
They got a customer problem.
Help them expand into the markets where you are.
Give them access tol customers and clients, and you'll solve for the capital problem. Yeah.
You know, I feel like we are dancing around this topic, but I'd like to dive in.
For financial health and inclusion focused businesses policy and the regulatory environment matters so much than for the rest of FinTech.
You have a different customer set, you have different customer considerations.
That pernicious effects, like you mentioned, of bank of capital requirements and how they affect your ability to experience that multiplier effect, lending back into the community creates real impacts.
And so for people who've worked in financial inclusion, it feels like sometimes you run into limits where tech alone is not enough, and there need to be broader changes in order to create financially healthy customers.
And banks and fintechs have a big role to play.
Policy makers have a big role to play.
Cities have a big role to play.
I'm curious, how you view that intersection and what you'd like to see more of to create more financially healthy core consumers.
And Jen, I'd like to start with you.
As I am want to do, I actually, wanna answer your question, but I actually wanna reframe it slightly.
I don't think there's such a thing as financial health and inclusion businesses.
Hmm. I think the goal is every business, every company in the financial services world should be in those businesses.
Mm-Hmm. And in many cases are, whether they call it that or not.
Mm-Hmm. it doesn't mean that we shouldn't be putting extra emphasis on focus and making sure that everyone is included, or that they have an ownership stake for that matter.
But this idea that somehow there's a niche of fintechs out there, uh, that are fin health fintechs, like, then it makes it seem like financial health is just a widget.
Like, if we just created this great app, right.
Everyone's financial health would be better.
But it's not that simple.
And so for me, financial health is really about focusing on the outcome.
That's what financial, that's just what we decided to call the outcome.
We could call it 10, 20 other things.
And it's unusual in financial services for folks to care about the outcome.
Because in particular, banks and credit unions, even though they all say that they're customer centric, they're generally organized around products and product p and Ls.
And it's very different when you reorganize your p and L and you are thinking about this from a customer perspective.
And that's why, again, they didn't pay me to say this, but like, the reason why I am excited to be here and to have a long standing relationship with MX is because it's really back to what Ashley was saying earlier, it's really about deeply understanding your customer or your potential customer, and using data to do that.
And not just using data, but getting past the averages and disaggregating the data by race and ethnicity, by gender, by, you know, you name it.
Because averages really skew, what's really going on for different people.
And I would suggest that particularly for existing banks and credit unions, these are your customers we're talking about.
So certainly there are people who aren't included.
Either they don't have a bank account or they can't get credit.
Right. But the vast, vast, vast majority of people in this country are engaging with one of you Mm-Hmm.
And they're not getting everything they need. Sure.
And so it's really about what, what do I need to better understand about their lives so that I can design not just products, but experiences and engage with them at the right moments in time to intervene when I can make a difference in someone's ultimate financial health outcome.
That's how I think about it.
May I ask a question here as well, Jen?
It's a business proposition and the Financial health Network has been successful in, you know, making this proposition and having companies onboard, you know, with this.
And what do you think makes some companies interested and how do, and some, and do you, how do you see the sort of landscape changing, with this, you know, big organizations you've got lots of those working with you, and how about the smaller ones As well? Yeah, so I'll go back to something that Nick said earlier.
I have a lot of folks on my staff who are really fixated on the business case and business case matters, don't get me wrong.
But I, after doing this for 20 years, I really believe that it's really about the it's about the leader and it's about a leader who has empathy and Mm-Hmm.
Because if you have empathy, you know, you'll find a business case you're willing to go do the work to find it.
Right. And if you don't, and someone makes a business case and it convinces you, but it's off in some way, there's no ability to learn.
It's always like, oh, we, yeah, we tried that.
It didn't work. Right.
As opposed to, well, we're gonna keep trying it until we make it work.
So I actually think this Fin X experience that Nick described is really an empathy building experience.
Ultimately, it's putting yourself in the shoes of your customer or some of your customers.
And it is, no matter who has gone through it and what their role is in their company or organization, it is just incredibly eye-opening.
Oh, eye-opening. It's a little bit like Undercover Boss.
It's the same idea, right?
You, when you walk in someone's shoes and you really understand it from their perspective, you start to, you start to think differently.
And so, while we as an organization, I think are really focused on changing norms..
So that this is just the way business gets done I'd be lying if I said that was sufficient, right?
Like empathy matters a lot. Mm-Hmm.
Yeah. Actually, I'm curious to hear your experience buying a bank.
A Utah based bank is a very differentiated decision in the world of FinTech, but you have so much experience and expertise in this space.
Clearly you saw an opportunity there that a lot of other founders haven't seen.
I'm curious what drove that decision what you see as being the core benefits of the model that you've taken on.
And if you're comfortable sharing with us, to Jen's point, you're not building a financial inclusion business.
You're building a bank that should be a generational bank, that should be a legacy bank.
Right? Where's redemption gonna be in 10 years based off of this advantage?
You know we get asked that a lot of times, like, why Utah?
When, for those that don't know, my co-founder, uh, and both my FinTech and this bank acquisition as Dr.
Bernice King, the youngest daughter of Martin Luther King Jr.
And so, when Dr. King and I set out to think, where is the future of banking for African Americans, where can we find a home?
Utah made all the sense in the world.
And I know that doesn't, on its surface, seem like it makes sense, but let me break it down for you at the end of the day.
In order for us to think about the future of banking, especially in the black community, every other black owned bank was in the LMIA low to modern income area.
We needed to flip the economics on its head.
Brookings Institute said it best when they read about redemption.
And us starting this, what redemption does is challenge to face of who can own what and where in America, why not have an African American owned bank in Salt Lake City.
Why is that so strange to think about?
What is the fear of something like that?
But what is the opportunity is the better question for us?
Utah's the number one state to do business straight.
Any way you look at it every year, it comes up number one.
So the regulatory environment is right.
That's why everybody wants to buy a bank here.
So why wouldn't we wanna buy a bank here?
Two, the people, Dr. King, did not break the back of Jim Crow and create us way for me to sit here on this stage by doing it by himself.
There was no civil rights movement without a lot of people from a lot of different backgrounds wouldn't have happened.
If we're going to create a different type of bank that can stand the test of time and do all the things we hope it can do, African Americans cannot do it alone.
So we had to find a place where allyship was in practice.
And the people in the community who are very unique set, I can't think of any other place I can go in America that has a base of people.
Many of them come from the LDS church.
Many of them don't look like me, but they spent two years living somewhere else with people that don't look like them in language.
Many times they didn't speak.
And then some of them came back here with a different worldview, with an understanding of otherness.
And with that baseline of understanding that commonality, we can build something special.
And you add to that a great philanthropic community, this would be the first bank created where over 25% of our cap table is from program related investments from nonprofits.
Think about that. People who are leaning into the mission.
But at the end of the day, we also wanna create value for our investors.
And by buying a bank that has zero delinquencies, day one, we start off as the most financially sound African American bank in the country, day one, we can build it strategically and methodically in a way where we can both hit our mission, but also be able to create extreme value.
Because we have customer base that is not just in the black community, but all the names that you see on most of the buildings, driving around downtown Salt Lake, all the way to entrepreneurs in the African American community that you may see on your timelines doing amazing things to actors, to entertainers, to athletes.
There's a special opportunity to create a bank that's not just a community bank, but a bank of a community.
I gotta ask you, Ashley. Yeah.
So clearly you've made that pitch before.
And I buy it completely, but when I think about bank or no bank I get the ownership argument completely.
Mm-Hmm. But leaving that one aside, just purely from an operational perspective now, right?
Think about the choice that Green dot or Varo made versus the choice that chime made.
Mm-Hmm. Pros and cons on both sides.
And it's not clear to me that we know which path wins the day, aside from the ownership, important ownership benefits.
And I'm curious, how do you think About that. Yeah.
I think you, it's sort of like what you the question, the answer you gave about the owner have to have the empathy, right?
It's hard to divorce the ownership question, but here's the pathway for us.
All of the African American owned banks right now are less than a billion dollars.
Yeah. Not one black bank has over a billion dollars in assets.
So that alone is an issue.
Two, none of us can name the ticker of a black founder company on Wall Street.
One of my biggest investors, one of the wealthiest African Americans in this country, told me, Ashley, we have to have a ticker that people can look to on CNBC and know that they're, are the hopes and aspirations of the people reflected on the big board.
We've been locked outta the system for too long.
People give us so many other opportunities saying, look, why don't you do something else?
We just now figuring out how to make capitalism work.
I'm a capitalist, but we have very few receipts to show that we can make capitalism work.
It's real hard to have a system that says, capitalism is where we were day one, when 12% of your population had to work for free.
It's real hard to say that capitalism works when over a hundred years, women couldn't own property.
And that's the way that you created wealth.
Well, we're just now, because of so many advancements of so many people that, that gave their life for me to be here and a lot of other people to vote in this room, to finally get to the point where we got enough education, we're pulling enough wealth to crack the code on this capitalism code to tell us that banking might not be for us.
We're a little late to the party, but we're showing up with some friends who believe in what we're doing, who know that we can do this together and create something special.
So we're right there. And I think history will look back at this and look at redemption and say what they did was not conventional who they did it with, or friends that were nor not normally from the same country clubs, the same alumni associations, but what they put together created a capital base, a foundation that our community had never seen before, to give us a platform to be maybe the bank that these fintechs can sit on top of one day to make sure that the next time you have a FinTech that wants to go into a community and offer their services, that that money actually comes back to a bank that's mission driven and owned by people who you're marketing to.
Novel idea. Everybody else has been doing it, but I think it's time for us to get in that game.
Thanks. So, full disclosure, I've actually been a terrible moderator today.
We had these five lovely canned questions and we didn't get to any of them.
But I feel like we ended up having, ultimately I think it very, very interesting conversation.
I'm really glad with the way it flowed.
We are going to open it up for audience questions in about a minute.
So we can do 10 minutes of questions while we have three brilliant minds on this stage with us.
But maybe we can just end with one question.
I'd love to hear from our canned questions list.
What innovations in payments and lending, or in FinTech more broadly, have you seen recently that really excited you focus on financial inclusion, or not focus on financial inclusion, but to Jen's point, with the impact of helping financial inclusion?
What's an innovation or a product you've seen recently that you've been really excited about?
I'm happy to go. I'm a little bit different to sort of Jen's perspective on you know, most people are banked.
There are a lot of, you know, I think my natural focus and my research is on people who spend a lot of money on financial services.
So payments, innovations I think are, are really exciting.
But I don't really think that in the United States, we've really got there with sort of with some of those things.
And I think part of that is sort of, for example you know, verification or know your customer type verification.
And you can look to developing countries like India with biometrics.
So anything related to sort of that stuff and how that might help payments, and is super exciting to me.
But yeah, So I think I'm most excited about cashflow underwriting.
Mm-Hmm. And underwriting leveraging non-traditional credit bureau data.
Mm-Hmm. We have been focused on this issue for literally 20 years when I started, if you talk to a credit officer, loan officer, you know, well, if it's not Fico, it's crap.
You know, it's nothing. And we've come so far.
I was just at a conference a couple of weeks ago.
The entire topic of the conference was cashflow underwriting.
Mm-Hmm. Like, and one of the companies that we invested in Nova.
And there's other lots of other companies prism, petal there, prisms also.
Here we are investor in them.
Like, there's just a lot going on there.
So I was excited to hear about mm-Hmm.
Your work in that space. On the mortgage front, I think the mortgage front will be tougher, but it, but also with FHFA, uh, you know, pushing the GSEs to pilot. Like there's movement there. There's movement.
So I'm really excited about that because I do think that some of the innovation, innovation that we've seen in lending, um, I say that because some of these vendors don't see themselves as lenders.
They're cute.
But they're not attacking the underlying problem.
And in fact, while there are some interesting things that may come out of buy now pay later, or earned wage access, or they really are a bandaid in many ways.
And so I'm really excited about tackling the underlying sort of fundamental challenge.
And just to piggyback off that, I was here at MX last year when I had that same sort of conversation around how do we rethink cashflow based underwriting.
And so on. The tech company, Dr. King and I have that focuses on that, we created our own model.
It was like, let's just sit down with people that have the problem and create the solution.
And so we're bringing to the marketplace.
We just piloted in Cleveland, Ohio.
We're rolling out the first in a long time credit scoreless mortgages.
And how do you do that? You gotta have a lot of people that believe that this is a direction that the marketplace eventually will go.
And so we're underwriting it off of cash flow, primarily based off of your rent payment.
Nobody gets some mortgage that costs them more than what they were paying in rent.
Just makes sense to us that if you can pay it in rent, why would you not pay the exact same amount if it's a mortgage?
And when you look at that and you try to tackle what the mortgage can look like, then, you know, let all like good ideas come to the table.
When you step outside of the regulatory environment of banks lending for mortgages, you got a little bit of space to get creative.
So we look at what the UK was doing and we said, well, why do mortgages have to be 30 years?
If I'm trying to get a new home buyer in there, why not go to 40 if I can get that payment to a position where they own it, and then yeah, they can refinance later, but at least I get them in the door to own the home with a 40 year mortgage.
'cause the monthly payment is lower. And at the same time, that asset is appreciating in value while time goes on.
Now, hopefully you don't pay it off for 40 years when most of us refinance.
Nobody takes the same mortgage for 40 years. Right.
But if you look at all these innovative ideas of longer mortgages, hard money lending, cashflow underwriting, there's a way to get people access.
The question is, can you create enough inertia in the marketplace where people feel like this is a risk tolerable way to make money?
That's at the end of the day. So I have to be able to show that these mortgages that I'm creating, all of which are CRA eligible.
If you don't know what that is, that's something that banks need.
And like, how can I get these CRA eligible mortgages off my balance sheet back into the system to where banks wanna buy them for CRA market for CRA needs.
But also at the same time, when you get a mortgage from US Financial Literacy, this is the glue that we talked about.
if you're gonna really help someone financial literacy, we give it to the borrower, but we also offer it to their kids.
It's for the whole family.
You wanna break cycles of poverty.
You either figure out how to talk to mom to dad when mom's making sacrifices.
Let the son and daughter know why mom's changing, how she's moving, why she may not be doing what she was doing before.
'cause she's one that set a good example for you, but you're also getting an education on that.
Equip the whole family with what they need, equip the whole family with options and make sure that the entry point is one that they can start with, but they also have what they need to be successful.
We're just not trying to put people in a mortgage just to have it, but to have one that can create wealth for their families, but also education that can span generations.
Thank you so much. We have five minutes left so we can answer one, maybe two questions if we're efficient.
This is for Ashley. So many of the minority community, Dave Wilkes, this is Ashley.
I'm curious, so many of the minority community uses these alternative products, whether it's Cash App or Chime or other products.
How do you see the vision at the bank, especially in this ecosystem, mx to open up what you're doing to the financial services community to help drive innovation for the minority community?
Yeah, that's a great question, David.
At the end of the day, we have to solve for that.
'cause again, I'm just looking at from living in this space, literally living in it.
If I am getting my hair cut and Castle Berry Hills in Atlanta, which is a historic part, African American part of town, my barber's gonna tell me I need 50 bucks Or cash app. He's literally right next door to a black owned bank.
That money just went from my bank account at a black owned bank to cash app to sitting at a not black owned bank with really no diversity on their, in their leadership on the bank that it sits on top of, not Cash app, but Sutton under it.
And I just, we just lost that money completely.
So for us to be able to create the velocity banks, and I think this is, this is what Jennifer brought up.
Banks have to start functioning like fintechs at the end of the day.
Yeah. I have to be able to be in a position to where I can, I can go to that gig economy worker, that point of sale person who's like, I got a service or a product I wanna sell wherever I am, where whenever I'm there and be able to do that transaction with ease.
But he also get the security of knowing who he's banking with, not missing that relationship point.
And so the future has to be meeting them where they are, but also understanding that they need a banking relationship because he as well as a cash based business, the value that we need to attack from a banking perspective.
There are so many African Americans and people of color who have great businesses that are all cash based.
'cause they don't trust banks. How do you get that person to now go get a loan so that he can expand his barbershop, hire more people, because otherwise it'll take three times as long to do it on cash when he needs to get credit.
But there's a trust gap that we got to bridge.
I just love that vision, Ashley.
And I think the hardest part of it is the customer, the consumer education.
And what I mean by that is like the fact that you and others in the room know that cash apps, it's, you know, is powered by a bank and that bank is, you know, to understand the broader, the circular economy that you're trying to create in a way to, I mean, that just takes, it takes educating people about that.
Yeah. Getting them off of cash is one thing. Yeah.
But having them understand that when you send them the money, right.
So that gonna be the hard part.
And to them, a lot of people they don't even know that's Cash app's not their bank. Exactly.
They're Like Right. Bank of Cash App. Mm-Hmm. That's right.
And that education and it came to a head in, in a little bit of a way and you had the FinTech Greenwood come up that was Yeah.
A FinTech, but Greenwood had to stop saying it was a bank because people were like, oh, this is a bank.
No, it's not. Right. It's a FinTech, it's sitting on top of a bank.
But look at what just happens with that dichotomy.
Black owned FinTech sitting on top of a non-minority owned bank.
People here, to your point, I want to bank there, but they really just put their money over here.
Yeah. And the bank that actually is doing the loan to your church is on the verge of going under that is what we have.
That deceptiveness is just not for the customer. Yeah.
We gotta take responsibility as the investor class is making sure that we're investing in things that don't perpetuate that misconception.
Okay. I think I saw one more hand go up over here and we have a little bit of time left.
Was there something you had a question over on this side now what?
That question's expired. Okay.
We have a new question over here.
First of all, I'm Brent from Form free, and this is, I love this topic and I love this panel and it's so good to see you speaking about something that I've been passionate about for 17 years.
The mission is love.
The mission Ashley speaks so eloquently about is serving and the environment, to your point, needs that something a critical juncture needs to be like broken through an impasse change has to occur at the highest levels of government agencies all the way down to those, those banks.
So how do we, how does MX play a role here, which has such a broad reach?
What are, what is MX thinking about in terms of, you know, the cash flow calculation, residual income, looking at alternative ways other than just the three digit score?
Thank you.
I appreciate you brother for bringing that up because we've had this conversation you and I have and others in this room.
You got a lot of heart-centered people like you who truly believe it, have lived a life that understands, some of these challenges have been adjacent to them yourself.
You know, in everything you do, if you're trying to create a solution for anybody, the people with a problem have to be involved.
Look at your advisors, look at your boards, look at the people you're surrounding yourself with.
All these ideas are great in a vacuum, but if you actually put people who are close enough to the problem, you might take a great idea and make it amazing by inspiring it with the inspiration from people who actually need the help.
And if all of us went back and looked at our boards and say, who can I add to my board?
Who can I add to my advisory team that may have a little bit of a different perspective and proximal view of what I'm trying to solve for?
Then a lot of the things we're talking about will have a better chance of making it to market Here. Here.
That is a good note to end on. Yeah.
Ashley, Emily, Jennifer, thank you so much for being with us here today.
I'd love to get a big round of pause for our great time.
View Full Transcript