Financial Education: Crossing The Chasm Between FinTech And EdTech

In August 2016 TechCrunch asked…

And the answer is… not yet, but maybe!

Is EdTech enjoying the same hype and excitement as enjoyed by our FinTech brothers and sisters? No. While rarely a day goes by without a FinTech flag waving, EdTech gets less press and less hoo-ha…

Other than a few acquisitions, exits have been few and far between, and valuations have been lower than enjoyed by our FinTech colleagues.

EdTech is lagging when it comes to investor returns and so less investment dollars are being committed. In its peak year, EdTech investment reached $3.1B (fuelled by 8 deals grabbing almost $1B between them with a further 485 deals sharing the rest of the pie). Meanwhile FinTech funding hit $13.8B spread across 653 deals (both stats from our beloved CB Insights).

Finally, while FinTech is the technology-enabler of financial services — ostensibly the moving of money faster or cheaper or easier or safer or smarter — the definition of EdTech has grown ever more opaque.

How do we resolve the tension between technology companies which have found a home in the education sector and education companies which use technology to enable scale and reach?

Is an efficiency app, for example, an EdTech company if it sells exclusively to K12? Can it be equally classified alongside a literacy app that teaches kids how to read?

And the definition challenge is compounded by the commercial one. How does a company, let alone a startup, generate revenue in a space notorious for its glacial pace and resistance to change?

How can we navigate a sector with policy restraints similar to those in healthcare with a far tighter budget and a fragmented (and potentially torturously long!) buying cycle? Where is the “education sandpit” within which experimentation can occur and collaboration be explored, and how do we create such an ecosystem when there is so little incentive (for the most part) to embrace change?

Yes indeed, EdTech is a challenge. But like so many challenges there are enormous rewards to be had!

The sector is (forgive me for the over-used expression) ripe for disruption. It enjoys absolutely enormous and significant network effects. The futurist Thomas Frey, writing for the World Economic Forum, predicted that, “in 2030 the largest company on the internet is going to be an education-based company that we haven’t heard of yet”.

We must challenge education because it’s a global imperative. As the world changes so must the way we prepare students for it. The ripple effects of raising standards of education cross space and time, and at ASUGSVSummit last year (2017 underway right now!) Michael Moe, founder of GSV Asset Management, presented the case for raising standards — by bringing all American students to basic PISA standards $27T, and raising these standards globally has the potential to double global GDP.

Digital learning can raise knowledge, confidence and creativity so that all students have the opportunity to develop the skills they need to be able to fully participate in our dynamic and fast-changing world.

So it’s not a question of if. It’s a question of when.

Last week, the US financial education company EverFi proved that you can do good and do well as they closed a mammoth $190m raise bringing total investment to $250m. We are happily waving to them from across the pond and saying thanks for putting EdTech in general, and financial literacy in particular, under the spotlight we say thanks and wish you well!).

And that such an EdTech raise should happen for a financial education company is intuitively logical — after all, financial education crosses the chasm between FinTech and EdTech. Dan Schulman of PayPal postulated that, “the biggest barrier to full financial participation is […] a basic lack of knowledge [so] as we increase access to banking services, we need to increase financial literacy.”

That a financial education company would prove that commercial enterprises can be mission-driven while increasing shareholder value opens the door, nay, kicks down the door of the doubters.

If you needed any further proof that EdTech is having a moment, more news hit the press this week of acquisitions in the space; Purdue University acquires Kaplan University and in a single swoop becomes a significant player in digital and adult education. Also in a surprise move 2U announced it has acquired GetSmarter to offer premium online short courses to working professionals.

Successes such as these are a win for the entire EdTech community and a beacon for all investors looking to support the journey of impactful companies addressing a plethora of challenges in a too-long static space.

Financial education, delivered digitally, can mean millions of students getting money smart in their own place and time!