Consumer-DeFi is the future of consumer finance

I started working for Google in 2014, and for the first time, I was earning money that I didn't know how to save or invest. I started thinking about technology for consumer finance and to build an assistant by Google to help people with their money. I wrote this proposal internally in 2015 and used it to get into Columbia Business School in 2016 to learn more about the financial system.

“To organize the world's capital and make it universally accessible and useful”

~Google's mission replacing information with capital

I left Google in 2016 and spend two years studying everything I could on banking and the financial system as well as working on a consumer finance app ClarityMoney to help consumers with managing their finances, which were acquired by Goldman Sachs in 2018.

After being through all the above, I am convinced that Blockchain is the necessary component for building a level financial playing field that works for the consumer, and here is why:

I) Backend Wall and Centralized Control

Robinhood continues to randomly pull other securities from its app for no legitimate reason. 

Case B. NELSON vs Robinhood

If you are building fintech on a legacy system you are bound by the same backend including consumer credit, ACH transactions, securities clearance, etc. Mottos such as "Democratizing finance" and "Putting the consumer first" have been mostly puffery for marketing purposes.

In order to radically innovate out of the current legacy limitations, we need a new backend platform. This new framework should address concerns around centralized control that is enforced through the legacy system. Blockchain is the only viable alternative based on available technology as well as a decentralized governance structure.

Often regulatory issues are cited as a blocker for migration from legacy systems to the new framework, however, one needs to consider that the regulator considers the alternatives that are widely used. We need to build a superior alternative and trust the judgment of regulators such as Gary Gensler, Brian Brokes, etc. who are well versed in blockchain technology and help educate everyone about blockchain technology.

II) Broken Business Models

The Treasury Department must move quickly with their plan to put more money into struggling banks so they have enough to lend, and they should do it in a way that protects taxpayers instead of enriching CEOs. 

~ President Barack Obama

Banks take a part of every transaction you make, 3% on a credit card transaction, account fees, ACH fees, overdraft fees, etc. A bank will charge a consumer, who makes $1800 a month, $35 overdraft fee for late payments while helping another to get away with millions in taxes. Most of the "innovation" for consumer finance is just repackaging the same products, shiny credit cards, and more confusing point systems.

The alternative business model is simple: To make money from consumers that have financial gains and not all. This model aligns consumers' success with the banks' success.

Bitcoin et. al.'s growth has been based on grassroots and participants make gains from the system, either through the growth of assets or mechanisms such as airdrops, etc.

Starting with a clean slate, blockchain has more potential for innovating new business models. Additionally, because growth in crypto is driven by community adoption, the models that put the consumer first and share the upside with the consumer will win.

?III) Generational shift and learning

We’re absolutely not in denial. The next chapter is being written as we speak, and it’s digitally led.

Citigroup (former) CEO Michael Corbat

A digitally native generation educated about financial transactions is up and coming and widely underserved and often ignored by the current system.

Bankers often ignore the new generation because this segment is not yet making enough money or has a high enough credit score. This is driven by short-term profitability views and not likely to change. Additionally, most of the top executives at banks might be missing the reality banks need to deal with in 10 years because of how fast technology moves and the age gap.

The new generation is digitally native, e.g. grew up with an iPad, and for most of them, a bank on their iPhone is the more natural approach. Former generations trusted a large physical location in a central square, the new generation trusts an Instagram page with good content and many followers.

The new generation has become more aware of the flaws of the financial system and is learning more about finance by using fintech and cryptocurrency. Blockchain is a more native platform for the new generation to onboard, the same way as Youtube, Instagram, and Snapchat.

Considering the above trends and issues, I believe we have strong odds to build a financially fair system for consumers on blockchains.

Love to hear your thoughts below!