Financial Innovators Can Find Inspiration in Bay Area
What would happen if you took the creativity and user-focused design sensibility of Silicon Valley and applied it to one of the least consumer-friendly industries on the planet — financial services? What is the Apple of budgeting? The Facebook of lending? The Google of bill payment?May 30
FlexWage, which provides short-term financing to underbanked consumers, says its products are cheaper and more customer-friendly than the payday loans that regulators are scrutinizing.June 1
Old-school American Express is relying on young turks to figure out its next steps on digital payments. Dan Schulman, who leads the enterprise growth group, says a key piece of the strategy is creating the right culture to innovate.June 1
Swift, the international bank consortium, is trying to lead by example. The first product of its incubator may not transform banking, but meets an important test of any innovation: usefulness.May 30
Bankers, community advocates, innovators and regulators will be converging on San Francisco next week for the Seventh Annual Underbanked Financial Services Forum presented by American Banker and the Center for Financial Services Innovation. While the agenda will provide attendees lots of food for thought, and the halls will be packed for networking opportunities, I urge travelers to take a Bay Area financial services innovation tour of their own and visit some of the many financial services innovators in the area.
Bay Area start-ups have received the lion's share of the $1.9 billion invested by venture capital firms in early-stage financial services companies. Much has been written about innovators like my company BillFloat, Boku, Lending Club, Prosper, Square and Xoom. They're all located in San Francisco and the surrounding Bay Area.
A short drive out of San Francisco will take you down the 101 on the Peninsula and through to Silicon Valley. That's where you'll find M-Via, Nexxo Financial, PayNearMe, Progreso Financiero, TrialPay, UniRush and WePay. From there, drive to Pleasanton in the East Bay where you'll find Safeway's Blackhawk Network, and AccountNow nearby.
And that's only the earlier stage companies. Industry giants Apple, Google, Facebook, Intuit, PayPal, VeriFone, Visa and Wells Fargo should also be on the itinerary for any financial innovation visitor to the Bay Area. (You may need to make an appointment to visit some of the larger players, but most of the early stage companies will welcome your visit. Send an email to their CEOs, or contact me directly. I'll gladly make introductions.)
As with any tour, you'll find the real gems when you go off the beaten track and learn about some of the unsung local heroes. When we speak about financial services innovation, two come to mind: San Francisco's Mission Asset Fund and Oakland's Community Development Finance. These must-sees are not-for-profit innovators with strong business plans and as strong a drive as any VC-backed start up.
The Mission Asset Fund led by Jose Quinonez helps Latino communities formalize the financial activity that happens in traditional peer lending circles through their Cesta Populares (Lending Circles) program. Participants sign legally binding promissory notes agreeing to make payments towards their peer loan, and the fund reports the payment activity to the credit bureaus. The program has achieved great success over the past three years in helping low‐income Latino immigrants build credit histories, learn to use credit wisely, and increase their financial capability overall.
The fund is also the innovator behind the "Financial Facts" label for credit products. The label highlights important loan information in a clear, transparent, and easy to understand format so borrowers can make healthy financial decisions. It's modeled on the Nutritional Facts labels, developed by the Food and Drug Administration to inform consumers about the nutritional content in food. The same way that Nutritional Facts label revolutionized nutrition awareness, this label can be seminal a tool in changing the lending experience for millions of Americans.
In Oakland's Fruitvale neighborhood Community Development Finance operates what may be the only nonprofit, full-service check cashing and payday loan store in the country. Alternative financial services veteran Dan Leibsohn, the founder of what is now known as the Low Income Investment Fund, leads CDF.
CDF offers low-income customers below-market price financial services and education to help move them into the financial mainstream. These products include bill payments, money orders and debit cards. CDF's low rates and extremely strong financial performance provide evidence of viable alternatives to high-cost alternative financial services options in underserved communities.
None of the achievements of these innovators would be possible without the enabling entrepreneur-friendly qualities of the Bay Area: talented start-up hungry locals, venture capital and local government support. Most importantly you'll find that many of these innovators take to hear the advice of one of the greatest innovators of all time: "stay hungry, stay foolish."
Enjoy your visit.
Ryan Gilbert is a Co-Founder and the CEO of BillFloat Inc., based in San Francisco, and a panelist the upcoming Underbanked Financial Services Forum. He can be reached by email at Ryan (at) BillFloat.com.