One of the staunchest champions for financial technology has become the American consumer.
According to a new report from Plaid, a fintech company that connects financial accounts to a single app, nine out of 10 consumers have at least one fintech app, and half of all fintech consumers use it to save at least $50 each month.
Plaid’s Head of Universal Access, Raja Chakravorty, joins Converge to discuss how consumers have become more confident with each fintech evolution. He also breaks down how more data in the system makes businesses better and more competitive.
“It gives them that confidence,” Chakravorty says. “The innovation and competition that fintech [supplies] in the ecosystem provides that safety net.”
From open banking to open finance
With fintech empowering bank customers to control their financial data, Chakravorty says consumers are largely accustomed to sharing it with those they trust — such as banks, insurance companies and retailers — in a manner they are comfortable with.
He adds that the next wave is open finance, where consumers share the rest of their financial lives, connecting money outside their bank accounts. That could include everything from funds in a trading account to a Starbucks gift card. Then, AI can offer financial recommendations in real time.
This proliferation of use cases will flood our financial systems with valuable consumer data that can be used to enhance the customer experience.
“By providing more data into the system, it helps consumers and it’s good business,” Chakravorty says.
Wider, transparent datasets yield more inclusion
Instant payment rails are under development, which will bolster pay-by-bank options. However, for the millions of unbanked or underbanked Americans, fintech is poised to solve many barriers that have shielded the lower half of the economy from the benefits of the U.S. financial system.
Take credit scores, for example. Most younger members of the workforce are flagged for their debt even though they may be gainfully employed. Meanwhile, there are biases against working-class borrowers because they don’t have a mortgage or other acceptable measures to deem credit-worthiness.
However, an increase in verifiable digital transactions can help prove financial responsibility in ways that haven’t been possible before — whether it’s a track record of a user paying monthly rent on time or the underwriting of their cash flow.
“There [are] all of these different items that help supplement credit scores with this self-permissioning of data that have huge financial aspects of a person’s financial picture,” Chakravorty says. “That’s great for the economy, and it leads to more financial inclusion. But it has to be done in an intuitive way and ensure that it’s user-friendly. … Consumer trust is going to be critical.”
Want more insights on the topics shaping the future of cross-border payments? Tune in to Converge, with new episodes every Wednesday.
*The information shared on this blog is for informational purposes only and should not be considered financial advice. Please note that the opinions expressed on Converge are solely the opinions of the host and the guests, not Convera’s.
