Financial Technology Startups Are Bringing the Underbanked into the Economy

Innovations in FinTech are helping more people access previously expensive and predatory financial products: and it’s changing the economy

For over 46 million Americans living below the poverty line, the road to financial stability is a long and arduous one. Alternative financial services, the only options for many Americans, are often expensive, predatory, and catch consumers in a cycle of use. In a phrase: it’s expensive to be poor. $320 billion is spent annually on these services, forcing 76% of Americans to live paycheck to paycheck.

The meaning of economic development is changing. Innovation in technology can bring the more than 88 million underbanked Americans into the mainstream economy. More Americans use mobile apps to pay bills, find the best prices of products, and check their accounts before making large purchases than ever before. We’re relying less on traditional work environments and moving into the “hustle economy”: small businesses now account for 54% of all sales in the US.

That’s why Village Capital, in collaboration with PayPal, has assembled a cohort of financial technology companies that are solving crucial problems around financial inclusion and resiliency. FinTech startups have the potential to: 1) build financial literacy and repair credit, 2) offer easy-to-use, non-predatory services, and 3) help build and scale small businesses — and get Americans on track for a healthy financial future.

One of the first steps to building financial resilience is understanding the foundations of personal finance and building good credit. “It comes down to the lack of financial education that’s really not pushed early on in life at the elementary level. So many of those in poor financial health are deliberately bombarded with predatory and usury services and company practices that only lessens their quality of life and keeps them disadvantaged or totally excluded,” says Divine, Founder and CEO of BLAK Financial Technology.

Other platforms are using financial literacy tools to help people build an understanding of their personal finance. LearnLux, which uses interactive tools to engage millennials and connect them to meaningful resources, was founded on a similar premise: financial literacy needs to be a priority. As The Wealth Factory has found, gearing financial literacy gaming towards a younger user prepares the next generation for financial success. eCreditHero is building a platform that scans credit reports for negative items and disputes false claims, which disproportionately affects women of color.

Access to affordable financial tools for underbanked populations, as well as financial stability for a non-traditional workforce, is a crucial component of financial inclusion. To improve the financial health of underbanked borrowers, Fig Loans offers non-predatory, low-interest loans using alternative credit scoring methods to gauge creditworthiness. Interwallet provides low-cost financial services to 34 million underbanked and immigrant households.

DocuVital, an end of life financial planning platform, is making it easier and more affordable to prepare for one of the most expensive and stressful times in someone’s life, accounting for around 10–12% of healthcare costs. For unplanned costs that can threaten at-risk populations, Finova Financial has revolutionized the title loan process to help Americans gain access to emergency cash without having to worry about predatory rates or practices.

To tackle the enormous issue of saving for college, Gradvisor makes it easy for employers to offer 529 plans to their employees. Upsie is rethinking extended warranties by creating a more transparent process and protecting consumers from high mark-ups. And Painless 1099 is bringing stability to the 10.6 million freelance working Americans by automating taxes.

The last step to building a secure financial future is the ability to scale small businesses. “As US demographics shift toward the year 2040, small businesses will be a key driver in the employment of minorities, and thus, critical to the national economy. The more that small businesses scale, the more economic contributors they create and empower,” says Doug Speight, Founder and CEO of Cathedral Leasing.

With each entrepreneur addressing the same problem of financial stability from a different perspective, this cohort of FinTech companies will work to solve the biggest issues facing Americans today. We are thrilled to support these entrepreneurs to provide award-winning venture development curriculum, the deep industry expertise of PayPal, and the expert opinion and perspective of investors. At the end of the program we’ll invest in two of the businesses with our co-investing partner Access Ventures. Financial technology is the key to a more equitable, secure American future.

Please welcome the Village Capital 2016 US FinTech Cohort:

Divine, BLAK Financial Technology, Inc

Doug Speight, Cathedral Leasing

Joel Brown, DocuVital

Nicole Sanchez, eCreditHero

Jeffrey Zhou and John Li, Fig Loans

Alfredo Rosing and Derek Acree, Finova Financial

Marcos Cordero, Gradvisor

Gabriel Borden, Interwallet

Ace Callwood, Painless1099

Angel Rich and Autumn Leatham, The Wealth Factory

Clarence Bethea, Upsie