Build what matters - The unglamorous side of financial services

Nothing like a natural disaster to bring us back to reality. Food, water, shelter, clean air, along with power and wifi, the basic modern day necessities that we need to survive. Things that we take for granted. And when it comes down to it though, it is the human connection – the communities that we live in and the bonds that we forge, that matters. We look at the unglamorous side of financial services in this episode.

For those of us who look at new technology products day in and out, who have the privilege to sit on the other side of the table, scrutinizing what new ideas people come up with around the world, it is easy to get jaded. After all, talking about AI sounds so much sexier and more futuristic than talking about how to promote financial wellness for underserved consumers.

Build what matters, the unglamorous side of financial services, The Other 50

But what about our roots? Banking is not about creating the next new shiny gadget, nor the robot that greets us at the branch door that one day may cease to exist; nor is it simply about lending more money faster and easier. Financial services is ultimately about serving people and closing the gaps in our society. It is hard. And it is not glamorous.

None of us are strangers with financial products that nudge us to spend more. Credit cards compete for customers with their best “cash back” offers: “Spend more to get cash back!” “Can’t afford another TV? No problem! Get our no interest financing for the first three months.” With a wide array of payment methods and deals to choose from, temptation to overspend – without the pain of paying, lurks at every corner.

Let’s face it. We live in a world of consumerism. According to Bloomberg, consumer spending makes up almost 70 percent of the U.S. economy, a higher percentage than almost every other country. If the U.S. economy manages to sustain its record-breaking expansion into 2020 (that is a big IF), it would be because U.S. consumers kept on shopping and did not lose their nerve despite all the talk of recession. But how long would this last?

Americans are taking on an increasing amount of debt; according to the Federal Reserve Bank of New York, “total household debt increased by $192 billion (1.4 percent) to $13.86 trillion in the second quarter of 2019.” It was the twentieth consecutive quarter with an increase, and the total household debt is now $1.2 trillion higher, in nominal terms, than the previous peak of $12.68 trillion in the third quarter of 2008. The picture is so stark that “65% of adults with debt don’t know when or if they will ever be able to pay [it off]” according to a recent blog by MX.

As an industry, we need to go back to doing what matters. Aside from generating shareholder value, businesses need to serve a social purpose. Faced with rising inequalities in our society where the top 10 percent of households represent 70 percent of all U.S. wealth, where nearly 40 percent of Americans cannot cover a $400 unexpected expense, we need to create the tools to help steer consumers towards a more secure financial future.

In addition to providing insights on their spending behavior, we need to create products that inspire them to plan and save. And we can do well while doing good. Aspiration is a wonderful example in trying to change the narrative in banking. So is MX, whose founder and CEO Ryan Caldwell said at the recent Money20/20 conference:”“When all is said and done, our job at MX is to make it so the world’s brightest minds don’t have to worry about their finances, but can instead focus on doing good in the world.”

Let the music begin.

In this new episode of “The Other 50”, Theo and Brad chat with Mary about her passion in banking and fintech, reflecting on the realities of modern day consumer finances, and the need for financial services industry to go back to our roots and do more.