Musings on: Fintech for All

The last 3 months have felt like 3 years in terms of how drastically our lives have changed. After spending endless hours reflecting on that shift, I’ve started to synthesize and translate some of those changes into potential opportunities for startups. One area I’ve been particularly struck by is the outdated financial infrastructure on which our country runs, the populations disproportionally affected, and how this moment could serve as an impetus for investment in change.

Why now?

More than a quarter of the labor force — close to 43m people — have claimed unemployment benefits in the last 3 months, as unemployment coverage was temporarily extended to include gig economy workers, freelancers, contractors and furloughed workers. Many Americans are relying on the social safety net and public programs for the first time. This came at a time when many Americans were already in tenuous financial situations — 60% now live with little to no emergency savings.

This surge in demand has revealed huge cracks in our public financial infrastructure layer. In March, the CARES act approved ~$290b in direct payments to individuals making under $99k or households under $198k, dollars that were intended to provide an immediate stopgap for essentials like food and rent. For those un(der)banked or with an unlinked bank account from past tax filings, the support could take up to 5 months to arrive (!) as the Treasury can only print ~5m checks / week and ~100m households are expected to receive benefits. There are now warnings of fraudulent checks and programs running in tandem, as rapid identity linking and verification is near impossible at this time. Government and bank officers looking into eligibility for various programs include unemployment, stimulus checks, PPP and EIDLs also struggled to determine eligibility based on updated financial data.

Meanwhile, new solutions are emerging from the private sector. We’ve seen companies with strong engaged audiences leverage that positioning to step in to distribute funds quickly and judiciously. Propel and GiveDirectly have partnered together on #Project100 – their effort to distribute the largest private cash transfer ever of $100m – $1k sent to 100,000 households on food stamps who are most likely to have been impacted professionally by COVID.

Similarly, companies with easily accessed payment rails, data and identity are stepping up to meet temporary needs. Plaid expedited a payroll product to assist with PPP loan applications. Venmo and Square helped users virtually set up direct deposit to reduce the “check-load” and get money to people in need faster. The Treasury leveraged prepaid debit cards from Metabank to that same end as well.

While these are each inspiring efforts, the existing shortfall in infrastructure represents an opportunity as we think ahead. As we try out standardized payments, are we laying the groundwork for a broader viable safety net? Can we better scale to suit these needs again, be it for another outbreak or other unforeseen hardship? How can the government and banks be better prepared to reach Americans in real time? Moreover, can new infrastructure help gain the necessary flexibility to think in terms of new initiatives and programming, to reduce those living on such thin means in general? If there was ever a window for experimentation and budget toward change, now feels like that moment.

A WPA poster promoting the New Deal-era job program.

What if? How might we?

Given the changes above, this section is meant to explore opportunity areas. “What If” extrapolates scenarios & programs that are on the table in some form today. “How might” translates those into potential technological solutions and areas for startups to consider.

What if the next wave of government stimulus programs focuses on professional re-skilling as part of a New “New Deal”? It could be based on specific targeting as well(geo, willingness to move, existing skills). How might companies build services so the government can better allocate stimulus to helping folks develop their talents in a changing world, thus addressing societal dislocations like the growing supply gap for nurses, developers, lab technicians, designers, etc?

What if the current tenuous economic state for many serves as the final push towards real time payments, so you can be paid as you work, and pay as you consume? How might companies best facilitate income and debt that occurs incrementally as incurred, leveraging anything from new rails to new solutions (e.g. virtual cards) and/or micropayments?

What if these targeted disbursements continue, from either the public or private sector, based on specific needs (e.g. socioeconomic status, freelancer / gig economy workers, students, retirees) going forward? How might companies build deeply engaged, targeted and verified communities to act as conduits?

More thoughts to come — feedback/comments welcomed. If you are tackling one of these opportunities, we’re eager to learn more! Please reach out to monica@kleinerperkins.com to get the conversation started.