THE PATH WE PAVED TO BRING THE FIRST IMPACT SAVINGS PRODUCT TO MARKET
Does this mole look bad?
Have you ever been to the party when there’s a dermatologist in the room and everyone wants to ask them about a recent sunburn or questionable birthmark? I am sure you know what I am talking about.
I often find myself in a similar situation, except my expertise is finance, and instead of looking at skin tags, my friends ask me where to keep their savings, how to invest their 401k, or which ETFs to choose. I love talking about finance, and am always happy to share advice. As I answer their questions, my friends listen, nod, agree, and give me an emphatic “thanks!” I do my best to help, but I’ve noticed an interesting pattern.
Financial inertia. The solution: simplify.
Nothing happens. Whenever I followed up with my friends after giving them advice about how to get their financial house in order I find out that, almost always, they haven’t actually done anything.
Curious, I ask why? The answer I typically hear back is, “it is just too complex, too many papers to submit, too many unknown terms, too many choices to make…” My takeaway: the financial world burdens users with complexity leading to serious inertia. Only when forced into a decision will most people take action. This financial inertia prevents users from exploring new products.
Finding inspiration for financial innovation.
Before CNote, I had a privilege to work for a social fintech venture in Kenya. It was a life-changing experience that made me question some of the fundamental assumptions I acquired working in the U.S. financial sector. One of the guiding principles I carry with me from my experience in Kenya is that you should be “Doing what’s right, not what’s easy.” Through that lens, I’ve found the motivation to dedicate all my energy to CNote, because I know we’re working towards a more equal and inclusive world.
In Kenya, I watched the financial sector move from its first steps to rapid development. Interestingly, it did not follow the historic track of the United States, Britain or Japan.
Kenya followed its own path, defined by local circumstances, technological innovation, and human behavior. Kenyans will never know credit cards–with the mobile wallet on their phones–they could care less about plastic.
In that sense, some of the things we hold near and dear in the U.S. financial system feel like ancient relics. This is is just one anecdote but observing this and many others during my time in Kenya, it made me question how hard it really is to innovate in finance. Maybe change isn’t as distant and unreachable as it seems? Perhaps this inertia can be overcome with enough effort?
This led to a question that burned in my mind and helped lead me to where I am today:
“Do we have to follow the path of finance from decades, or centuries ago, if it doesn’t serve most people?”
We view finance as this immutable industry, but I’ve seen financial change happen and I know we can reshape the world of finance to better fit the needs of real people, not just the top 1%.
This is where the journey of CNote starts.
CNote’s mission is to create accessible financial products that maximize individual and societal wealth.
How did we know what we would build? We talked to people. A lot of people.
We had over 200 interviews with individuals to understand how they think about money, how they make money decisions, what they care about, and what their concerns and desires are. We then pulled out the core elements from these insights which formed the foundation of our product: simple to understand, easy to use, safety first, impact investing matters.
Once we knew what people wanted, we started building. With the team of financial experts, impact investment advocates, designers, lawyers and an army of volunteers, and true believers, we launched our first product, a savings alternative with 2.5% return and 100% impact.
CNote went live in December 2016, but only to accredited investors. Obviously, we wanted our product to be accessible to everyone, but new financial products typically can only be offered to those who pass certain thresholds for income and liquid net worth (read: the very wealthy). Regulators work off the assumption that those that are wealthy are more savvy investors and have the cushion to handle the risks associated with investing in new products. This is a calculated decision, and while prudent, it also means that we average investors have limited access to financial innovation. Limited access was never going to work for us here at CNote, so we pressed on to make our product available to everyone.
Paving the way — Social Impact Savings, Open to All.
At CNote, our intention has always been to be “open to all.” We don’t think the opportunity for financial prosperity should be limited by your gender, skin color, net worth, or where you were born.
Interviews and feedback from early users made clear there was significant demand for a savings product that provided a better return along with delivering tangible social impact. We knew getting our product qualified for all investors would not be an easy mountain to climb–there was a reason no one else has done it before. We didn’t let that stop us.
The best time to start was yesterday, the next best day is today.
In December 2016, we started preparing the paperwork to file with the Securities and Exchange Commission (SEC), to explain the essence of our product, the history of CDFIs, and the impact they have on communities across the United States. We submitted the first filing in January 2017.
What followed is 10 months of back and forth with the SEC, involving written comments, letters, memos, analysis, and meetings with lawyers, auditors, and accountants. We had to confirm, and confirm again, that this new product would not have a minimum and we that we would not charge users any fees. “No, we are not crazy, we simply do what we think is fair.”
We were asked: why are you doing this? Are you sure you want to do this? The answer was an emphatic “yes.” That answer flowed from thinking about all the people that are being overlooked by the traditional financial system and would benefit from our product. I remembered the financial innovation I saw in Kenya. That kind of innovation is what we were working to achieve here in the United States. I could not see CNote being a true vehicle for innovation and change, unless we could serve everyone.
Mission Accomplished, CNote Gets SEC Qualification.
Finally on August 28th, 2017 we got news — the SEC qualified CNote’s offering. All those lawyers fees, sleepless nights, and bouts with doubt finally paid off. We did it!
Now, anyone can get a 2.5% return on their savings along with 100% social impact. CNote is available to everyone: to me, to you, regardless of income, wealth, or anything else.
With CNote, you not only earn more on your money but you help provide the funding, and opportunity for a woman-led small business in a low-income community to grow. It’s a shared prosperity model: as your savings grow, so does the positive impact you have on financially underserved communities across the United States. As these communities grow, jobs are created and people get real opportunities for financial empowerment.
Making CNote available to everyone was hard, but it was not impossible. With the right attitude, team, intention, and a lot of patience, we did it. Challenging the status quo and creating a new financial product is the first step. Our bigger goal is to shift the focus of the financial industry from profits to people. Join Us.