Last fall, executives at Bee, a mobile financial services company, were having fruitful conversations about working together with municipal agencies and other organizations serving immigrants, people of color and low-wage workers.
To hear Vinay Patel, Bee’s CEO, tell it, such partnerships would be a natural fit. Bee could get access to potential users and the agencies would be able help their constituents gain access to low-cost financial products.
Those conversations came to a screeching halt following the election of Donald Trump.
The abrupt shift harkens to Maslow’s hierarchy of needs, Patel said. Financial services are decidedly middle-tier, and those organizations are now focused on the more basic needs of their constituents.
“There is a widespread reorganization of priorities,” Patel said. “If you believe that low-income workers, immigrants, minorities more generally are not going to have the kind of protections, I don’t want to say legal protections in law, but actual outcomes in fact … when those outcomes begin shifting, the financial services problem starts dropping in urgency.”
Much has been said about the future of banking in the Trump era. While some bankers have rejoiced about his promise to roll back regulations, others came out against him when he signed an executive order banning travelers from seven Muslim-majority countries. Plenty have also weighed in on what his administration might do with net neutrality, cybersecurity and visa programs that keep banks and fintech companies well supplied with highly qualified foreign workers.
There is another subsector with a complicated point of view: the financial firms and organizations such as Bee that have made serving the unbanked their mission. For those, Trump’s election has been at best, a mixed bag so far.
For many of these firms, immigrants of varying legal status make up a sizable part of their clients and potential clients. The fear quickly spreading through those communities stands to challenge the way these firms connect with people. Others see Trump’s ability to connect with blue-collar voters as a vindication of what they have long known — millions of Americans are struggling to make ends meet and are in desperate need of help. Lastly, to others, the new political reality is an opportunity to lean into technology and let it rise above the political fray.
Of course, at just barely a month into the new administration, many say the new political world is just too fresh to properly assess.
“It feels like it has already been a year, but it has still only been a month,” joked Arjan Schutte, managing partner of Core Innovation Capital. “So, the technical answer is that nothing has changed.”
‘Fear and uncertainty’
But for many, everything has changed.
The Trump era “has inserted a great degree of fear and uncertainty into our space,” said José A. Quiñonez, founder and chief executive of Mission Asset Fund, an organization that has leveraged informal lending circles to help people improve their credit scores.
Since the election, Quiñonez said, Mission has sought to be a resource for its community by offering insights and advice. The organization’s people are stationed at the Mexican Consulate in San Francisco, prepared to answer questions, he said.
Several other organizations also said that they’ve responded to their customers’ fear by becoming advisers.
“It is sad and quite depressing how the last month of government action can go far to erode trust,” said Jimmy Chen, founder and CEO of Propel, the maker of an app that helps people manage their food stamp benefits digitally.
“We want to help families understand how their benefits work and we have a responsibility to help them understand how it is changing and what actions they might have to take for their own self-interest,” Chen said.
People want to know what would happen to their money if they got deported, for instance, Quiñonez said.
Like Patel, Quiñonez mentioned Maslow’s hierarchy, but said that even if more basic needs take priority people shouldn’t neglect the higher ones.
“You still need to continue to save. You still need to think about your credit rating. That doesn’t stop all of sudden because there is fear,” Quiñonez said.
For instance, Mission Asset Fund has long promoted lending circles for the money needed to apply for Deferred Action for Childhood Arrivals, former President Barack Obama’s executive order that offered protection to undocumented people who came to the U.S. as children. Many immigration advocates have advised young people not currently in the program to avoid applying for it until the future of the program under the Trump administration is clearer. Mission Asset Fund, however, is still encouraging lending circles for such programs so that its clients are prepared to act quickly when the time is right.
He said the volume of lending circles hasn’t dropped, but the organization adjusted its targets following the election because “we knew there was going to be fear.”
Deregulation and innovation
If you consider the underbanked in the aggregate, the election’s outcome was a good thing, Schutte said.
“If there was ever a clarion call for people to realize the underbanked, that there are millions of people who feel left behind, the election was it because it was the working class of America who voted for Trump,” Schutte said. “In no way am I a fan of him. Nevertheless, I owe him gratitude for shining a spotlight on a population the rest of the country was not paying attention to that is big, angry and hurting.”
Indeed, the underbanked and lower earners could benefit from the relaxed regulatory environment Trump is promising.
“It could help in terms of innovation and this is a customer segment that is cost-prohibitive to serve, especially in an environment of strict regulation,” Schutte said.
If Patel heard radio silence following the election, Drew Edwards, CEO of Ingo Money, heard kazoos and foghorns.
The payments company, which serves alternative financial companies, sees the election as a major win for innovation in the underbanked space.
“From election day, the tone changed among all of the providers in the market that are providing alternative financial services,” Edwards said. “The attitude changed. People who didn’t want to talk about new products, who said they were in survival mode, are asking about new products again.”
Essentially, check cashers, payday lenders and others (including banks) that provide “just-in-time services” have been fearful for the survival of their businesses given the regulatory climate and have shied away from new products. With regulations expected to relax, such providers have a newfound optimism. A peer-to-peer payments product backed by prepaid cards was previously a tough sell; now at least three providers are in advanced talks.
“It has been night and day. The simple fact is that the fear went away,” Edwards said.
However, he said, he is hoping for a balanced regulatory environment. One that is based on free-market principles where consumers decide what is best for them, but also one where full disclosure is demanded.
“I don’t want every Tom, Dick and Harry to be able to do what we do without doing it right,” Edwards said.
Patel said he is just hoping for a rational approach to financial services regulation.
“An intelligent approach I value much more than an approach that aligns with my personal political feelings. I just want it to be technocratic, because then it will be smart, predictable and everyone will be able to adapt to it well. Not going to do better than the technocrats,” Patel said.
Tech’s time to shine
From that standpoint, many say that technology’s equalizing power might shine particularly bright during this administration.
“We feel confident that no matter what hurdles or challenges might arise from this new environment, the technology exists for fintech companies and financial services providers to ultimately connect with the consumers that need it the most,” Jennifer Tescher, CEO of the Center for Financial Services Innovation, said in an email.
Patel of Bee also made similar comments, but from a bit of a different angle. To him, technology companies have a responsibility to step in and help communities at risk if the government no longer prioritizes them.
“The fact that we may no longer have the winds of government means the winds of tech and the private sector will need to carry for low-to-moderate income families,” Patel said. “As a company in that space, we need to have a responsibility to kick ass. If we do, we can provide really good services at really low costs to lots and lots of people who otherwise won’t get them.”
Not all immigrants and people of color are poor, of course. But even fintechs that serve upwardly mobile members of those communities report a change in how they do business.
My Money My Future is a personal financial management app geared toward millennials of diverse backgrounds. The users tend to be college-educated professionals. It’s a group that is not necessarily underbanked, but definitely underserved, says founder and CEO Ramona Ortega. The typical user likely has a bank account, but also likely struggles to build wealth or improve their credit score.
To Ortega, the political climate has its advantages and its challenges.
On the positive, it is a tremendous opportunity to offer resources to its users that they likely won’t find elsewhere. For instance, tips on how to protect their money if they are DACA recipients who worry President Trump will reverse that order.
“We have an authentic voice and we are going to own this other demographic,” Ortega said of her startup, which was launched in October and is currently in its beta phase.
The challenge, which Ortega says was not caused by Trump but heightened by him, is navigating a financial system as a startup when it is trying to build trust with users who are following the money carefully.
Think of the backlash that Uber received after its prices surged during protests at New York’s John F. Kennedy International Airport following Trump’s signing of a travel ban from seven Muslim-majority countries. #DeleteUber became a popular hashtag, as users vowed to switch to Uber’s main competitor Lyft. However, some progressives found that alternative equally problematic since Lyft is backed by PayPal co-founder Peter Thiel, an ardent Trump supporter.
Essentially, users of My Money My Future are “woke” — a slang term that refers to people who view themselves as aware of social injustice and racial inequality. Such a user base entails picking bank partners and investors carefully.
“There is more scrutiny on what we do,” Ortega said, “because millennials of color generally don’t trust financial institutions.”