Another Recession is Coming. But This Time, We Have Fintech

The American consumer is face-to-face with a many-headed behemoth. Like a hybrid beast of Greek lore, this monstrosity is a grim mélange of growing wealth inequality, a global pandemic, policy failure, and decades of economic string-pulling that has kept corporations and their billionaire owners afloat.

The effect is a slow-but-suffocating squeeze on the average citizen: inflation and rising tuition costs make higher paychecks an irrelevancy. The prospect of securing the most important investment that a typical consumer will ever make—a home—has become a cruel mirage. Factor in a recession, and things seem hopeless beyond repair.

I’m not an economist. But I do have a strangely diverse array of experience. I’ve been a refugee. I’ve sold used cars. I’ve served in the U.S. military. I’ve been a bank regulator and a financial advisor. I’m a unicorn founder of companies that created financial solutions for the gig worker economy, and most recently, undercredited Americans.

What all of these experiences have taught me is that nothing is 100% predictable. Beyond the peripheral vision of the economists hunched over charts, stats, and international affairs is The Unknown…something that alters the trajectory of events in a way that’s impossible to estimate.

Fintech.

This story won’t play out like a Greek epic. There’s no hero coming to the rescue. Instead, we have compelling ideas and technologies emerging that will loosen the grip of the impending recession.

Here’s what to watch for:

1. Accelerated evolution

The first year or so of the pandemic was a bleak and terrifying time. We lost loved ones. We lost jobs. We lost togetherness. I personally lost a lot of faith in humanity.?

Historically, pandemics have wiped out populations and devastated every aspect of society. With these events as our only guide, we collectively assumed that we were doomed. We hoarded food and, for some reason, toilet paper.?

Then, oddly, the seemingly-inevitable apocalypse never descended upon us. Why?

Because we evolved at an implausible rate.

Remote work, a trend touted by “spoiled millennials” with the audacity to reject grueling commutes and equally grueling breakroom small talk, became an omnipresent savior.?

Platforms like Zoom and Slack scaled at absurd rates to keep businesses operational. Tech investments were completely recalibrated, with billions in capital going to the digital economy.?

Along with video conference and collaboration tools, investors flocked to supply chain and automation technology solutions that eased the pains of global production and created a “bionic workforce” that could overcome labor shortages.

The end result was far less catastrophe than our toilet paper stockpiles seemed to indicate.

Would all this innovation have happened without the pandemic? Probably. But it would have taken a decade, at least. With another “apocalypse” on the horizon, we can count on similar unpredictable tech evolutions to push us through.

2. Decentralization

This will not be a crypto soliloquy, I promise.?

Decentralized finance is a fascinating wildcard in the face of a recession, but I have my eye on a different kind of decentralization:

Decentralized trust.

For better or for worse, Americans have disassembled their trust in the mega-entities that once dictated our opinions, decisions and ideologies.?

We’ve seen the terrifying implications of the decentralized trust in the proliferation of political extremism and rejection of scientific consensus. But, as with anything else, decentralized trust has a silver lining—especially for fintech.

Consumers who once feared using a credit card online are now comfortable depositing checks digitally, and using an app to transfer money to friends and family. Megabanks are no longer considered the only secure option for financial services, as blockchain technology has made high-grade security possible for an organization of any scale.

This decentralization of trust has opened the door for disruptions like nontraditional lending, with niche capabilities that benefit the unique circumstances of a borrower.?

Along with this fragmentation in lending, partnerships between fintech providers and non-financial services have become more common. As a result of these partnerships more holistic consumer data is collected, opening the door for optimized financial offerings and better options for consumers.

In short, decentralized trust has a ripple-effect that leads to consumers accessing loans, investment tools, and more through fintech that would otherwise be unavailable. During a recession, this access can keep Americans afloat by reducing barriers to credit and homeownership.

3. Mass empowerment

There are swaths of the American populace that don’t understand the power of a good credit score—not because they lack financial literacy, but because they’ve never experienced life without good credit.?

With inadequate credit, consumers pay more for necessities, lack access to credit-based investments like homeownership and education, and endure financial emergencies with no safety net. Poor credit begets poor credit, and the consequences persist from generation to generation.

In this age-old and unpropitious credit continuum, a recession can be a death-blow. Unless something big changes.?

Change won’t come from megabanks, credit agencies, regulatory bodies, or lawmakers. Those ships are too big to change course before we’re beset with the woes of an economic downturn.

The changes will come from fintech.

Fintech companies are creating more inclusive and accurate models for assessing borrower risk. Fintech companies are distributing loans more equally to minority business owners. Fintech companies are disrupting predatory payday loans. Fintech companies are enabling reliable gig work incomes. My own fintech company allows members to build credit without taking on new debt or paying for a secured credit card.

A transformation is already underway, and fintech is just getting started. What will happen when millions of Americans gain access to life-changing credit? How will this newfound economic power of the masses counterbalance a recession? Is power in numbers enough to turn the tides?

I don’t have the answers to these questions. What I can offer is some buoyancy in these heavy times; a reminder that humans can solve problems almost as fast as we create them.?

This colossus is coming for us. But fintech isn’t the hero of this tale—we’re more like the blacksmiths. If fintech can get enough proverbial shields and swords to the masses, the American consumer just might prevail.