We have to do better
Like most technology industries (AdTech, EdTech, RegTech, CleanTech, and all the rest), FinTech is attracting a lot of attention. Last year alone, more than $31B poured in to startups all over the world.
Events at New York City’s FinTech Week (April 16–20, 2018) provide a great opportunity to share success stories and inspire the next generation’s SoFi, Kabbage, and Robinhood. Leaders from venture capital firms and large financial institutions have gathered to prove their ability to keep up with the disruptors. There’s a lot of talk going around about making the world a better place, and it seems like everyone who says it really does believe.
So, why is it so hard? We’ve got money, technology, talent, and partners clamoring to make our solutions real. We know that our future customers who are struggling to pay off debt, budget, save, and invest need our products. The analysts and researchers assure us that there is a market, and it is huge.
So, why is it so hard? The answer is trust.
How do we convince people to trust us? It’s clear that the answer to this question will drive the adoption and returns we’re all seeking. Panels of experts and keynote speeches have been crafted around deciphering what it means to generate trust.
Certainly, it’s difficult for a new brand to catch the eye of a stranger on the internet and motivate her to hand over her money. That’s partly because in finance, it’s not just about the cost of products and services, it’s that the products themselves hold peoples’ hopes and dreams.
The first element of creating trust is to be trustworthy. Choose to protect your customers more than is required by law. Respect their data; appreciate their desires for communication; provide a transparent cost structure. Be someone that your customer can rely on.
The second element of creating trust is telling people that you’re trustworthy. Plenty of people have good advice on how to do this: create a thoughtful user experience; lead with value; advertise with a brand that shows consumers you understand them.
The problem, and why FinTech is inherently difficult, is that companies can do the second set of items without doing the first. There is absolutely nothing stopping a company that isn’t worth trusting from creating a beautifully designed app and placing motivational advertisements featuring the latest memes.
Events like those during New York City’s FinTech Week have shown that the industry isn’t even clear on who we can trust. We hold up anyone who can parrot the words “financial education” as a leader in the field without a clear sense of what their impact is. Panels are comprised of successful startups: one who spent years validating their models to make sure no low-income person would be unnecessarily harmed, and one who issues cheap credit with a vague hand-wave at AI and machine learning. Both claim to be serving the underserved, and so we sit them next to each other, side by side, as equals.
In reality, the second company may not have any idea of the impact their loose standards are having on real customers. Investors heard “machine learning” and jumped at the chance for a Series A. This company may have a slick interface, and they may even lead with value by taking a loss on the customer’s first loan. That does not mean this company is trustworthy. The company may be using personal and transactional data unethically or needlessly damaging already subprime credit. For some FinTechs who claim to be saving the world, the best case scenario is that their existence is distracting, but ultimately benign.
How do we know, then? How do we create standards and accountability? It’s unlikely that the answer is more regulation. What can we do to separate the positive world-changers from the more devious ones?
Unfortunately, it’s unclear. But we do know one thing: if we, as part of the industry, can’t tell the difference between those who deserve trust and those who are putting lipstick on a pig, there’s absolutely no chance that consumers can.
We have to do better.
