Dilemmas in Finance: How FinTech is as common as a checking account
Kate Larrabee
9/25/20234 min read
Today, people are making money in ways that were impossible to imagine five or ten years ago. The creator economy, the gig worker, as well as hybrid work, have resulted in a new mindset: “I want the stability of a mainstream income, and the flexibility of alternative options to make money. The present moment has created opportunities for FinTech brands to serve emergent needs and resolve dilemmas for the creator economy, Gen Z investor, and even your aunt Frances.
The creator economy is changing the way that people earn a living, whether you’re an Instagram influencer or a freelance graphic designer. But traditional banks haven’t caught up. Take Alexandra Botez for example. The Stanford graduate earns six figures playing chess on Twitch, where she has 877,000 followers. But when she tried to apply for a business credit card, she was rejected twice.
- Tech Crunch
Across the financial industry, there is a move to democratize wealth management but also a need for consumers to adapt to a new way of handling money. Increasingly, young investors, the underbanked, and lower-income individuals that previously didn’t have access to private banking or investment resources are gaining access to money management services and have the power to direct their investments. However, just having access isn’t enough for most people to optimally manage their money and plan for their future. So, while democratization is happening, these newly available resources for wealth management may not be fully utilized. As a result, the majority of dilemmas people seek to solve with FinTech services organize broadly around gaining access to the professional expertise and analysis that will help them chart a financial path forward. Read my comment then this as an example: As a result, a lot of creator economy workers find themselves facing money-management problems that workers with “regular” jobs don’t.
Below are core financial dilemmas that exist in the lives of three main audiences: Creators, Gen Z investors, your aunt Frances (aka the general public). FinTech brands are coming to the rescue by offering these workers new services to meet their unique needs. Here are three tensions that grabbed our attention.
01. Creators: Recognition and validation for new professions
Dilemma: I want the stability of a mainstream income AND financial services that understand my business.
“There are more than 50 million creators in the creator economy with 3.2 million who consider themselves full-time, pulling in six-figure incomes. As creators continue to spin online content into legitimate businesses, Karat Financial aims to position itself as an indispensable resource where they believe traditional banks haven’t been” … “part of what we do is explaining to the financial industry what it is to be a creator, as well as explaining to creators how to think about their financials.” - Fast Company
People working in the Creator Economy that make an alternative living leveraging social media platforms like YouTube, Twitter, and TikTok go unrecognized by traditional banks and investment services. They seek inclusive financial brands that will recognize their business and serve their unique needs.
“With over $3M in revenue per year and 20 employees, the bank still doesn’t trust me with a credit card. Karat gets it. Banks don’t.” – Karat Financial testimonial
FinTech resolution: Karat Financial, self-described as, “Credit for people with a bigger vision” offers creators a business card connected to their social status – essentially giving their social media following more gravity than a credit score. The brand’s hyper-streamlined messaging and UX would appear to indicate a market position as a “cut through the clutter” financial brand for people who have bigger things to deal with than red tape. Essentially resolving both sides of the Creator dilemma with the inferred purpose of “Bigger Vision, Better Bank”.
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02. New Investors: Getting in the game with what you have
Dilemma: I want access to investing AND I want to start with the small amount I have.
Largely overlooked, people with smaller account balances want access to the same tools and resources offered to more well-off customers. Regardless of the dollar amount, young and new investors with less than $500 or even $5, want the option to engage.
FinTech Resolution: Designed for people who don’t believe they have enough money to invest enter micro-investing brands. FinTech micro-investing brand, Acorns resolves this dilemma by providing investment access starting with spare change and automating micro contributions often not more than the cost of a cup of coffee. Positioned for young and more inexperienced investors, Acorns uses simple and plain-spoken language that is approachable for all investors, not just seasoned investment pros. It speaks to the resolution of this dilemma in its mission which is, “to look after the financial best interests of the up-and-coming, beginning with the empowering step of micro-investing".
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03. General Public: Gaining peace of mind with “self-driving money”
Dilemma: I want to manage my money like a professional AND I want it to work for me when I’m not thinking about it.
There is a nearly universal desire for professional financial guidance yet most people don’t have access to a professional advisor or guidance. To combat financial anxiety and overwhelm, many people seek self-managing solutions. They want peace of mind that their money is working for and not against them.
FinTech Resolution: Wealthfront solves this dilemma by offering fully automated investment portfolios designed by financial experts, for “more growth and less worry”. It would appear the brand is positioned at the crux of this consumer dilemma. Wealthfront helps less financially savvy people build financial foundations and map financial futures. The brand’s purpose is to enable people to invest for the long term on their terms. A leader in its category, the brand normalizes investing for the many, but there are service tiers and paywalls for accounts below and above $100k.
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Dilemmas hold a dual opportunity to meet customer needs and hone a brand’s purpose
At the heart of modern customer dilemmas in finance, there are refreshing new ideas that resonate across audiences. FinTech brands are finding new ways to effectively bring these ideas to market as experiences that resolve dilemmas by focusing on their purpose. [How about something like this . . . “As the way people can earn money evolves, Fintech companies have stepped in with innovative solutions to help them manage their incomes, service their businesses, and grow their nest eggs. What’s exciting about these offerings is the opportunity for brand creation that matches the strength of the business idea.
Sources
· BCG: https://www.bcg.com/publications/2020/bionic-banking-may-be-the-future-of-banking
· JWT: https://www.wundermanthompson.com/insight/the-future-100-2021
· CNBC: https://www.cnbc.com/2021/08/24/avoid-fomo-while-investing.html
· PaymentsDive: https://www.paymentsdive.com/news/super-apps-are-the-next-evolutionary-step-for-financial-services/601424/
· TechCrunch: Karat & Creator Economy: https://techcrunch.com/2021/07/01/a-bank-for-the-creator-economy-karat-raises-26m-in-series-a-funding/
· Fast Company: Creator Economy: https://www.fastcompany.com/90649157/karat-financial-wants-to-be-the-chase-for-the-creator-economy