The Path Toward the American Dream Is Not Paved In Debt

The Path Toward the American Dream Is Not Paved In Debt??

By Theodora Lau and Bradley Leimer of Unconventional Ventures?

From the most basic to the most complex, financial relationships are held together by the basic tenets of savings, investments, monetary exchanges, protections, and the leveraging of credit and debt. When any of these areas are neglected, these relationships can become one-sided, even predatory. It doesn’t have to be this way. What could we do to make banking better to improve more people’s lives? Let’s be more honest with each other –– about banking, about capitalism, and about future outcomes.???

What would our world be like if more banks and fintechs could change their business model to align with customer's financial objectives? Would our industry be focused more toward improving the stability and financial condition of every community they are privileged to serve — instead of competing for mercurial levels of profit? What if the industry truly embraced a stakeholder model that looked more at the long term impact of their actions within an interdependent and collective system, rather than catering to the demands of quarterly earnings steered by dissociated shareholders and executive compensation??

Why can’t saving and investing be as easy and ubiquitous as Buy Now, Pay Later? Why doesn’t the industry focus on building up consumer wealth rather than profiting off of their spending habits? Debt is a real challenge for the American Dream, a dream far out of reach for most people.

The average American is now $90,460 in debt. While this is a combination of mortgage and student debt, auto and credit card obligations, and other encumbrances, the constant presence of large deficits can be debilitating for protracted financial wellness as well as prolonged issues with physical health. Recent research by the Department of Labor found that “people who carried consistently high levels of unsecured debt were 76 percent more likely to have pain that interfered with their daily life than people with no unsecured debt.” To make matters worse, the stress of paying down this debt and the impacts on people’s physical health lasted even after these liabilities were paid off.?

What can be done to alleviate these twin challenges of physical and financial stress? How can an industry so focused on getting people to spend more, and to take on more debt, be persuaded to change its very profit model? The answer is more nuanced, but it has to do with time –– as well as purpose.??

All debt isn’t created equal??

The total debt balance for American consumers is now nearing fifteen trillion dollars (including mortgages). Student loan debt, mortgage debt, and personal loan debt have all experienced increases through the pandemic, while credit card debt dropped in 2020, the first time in eight years.?

Can we find a way to influence how the industry looks at the wider impact of debt on the society, and the way it generates profits — beyond lucrative fees, especially on those who are the most vulnerable? Is providing yet another loan to a debt-laden consumer a responsible solution to eliminating debt, for example?

The question isn’t whether profit is good or bad; rather, it’s the opportunity cost of how debt, and dependency on debt, erodes the ability for people to lead financially secure lives and pursue their dreams.??

A focus for very few fintechs?

The financial services ecosystem has been inundated with a tremendous amount of external capital aimed at disrupting the way people and businesses bank. The fintech sector is booming, with a record $94.7 billion in global funding in 2021 so far — nearly twice as much as all of last year. And the past quarter saw the birth of 43 fintech unicorns, bringing the year’s total to 200, according to CB Insights’ State of Venture Q3’21 Report. Many of these startups are focused on capturing customers as neobanks, or targeting payments and various schema of cryptocurrencies, while others are focused on dismantling incumbents through the layers of service and infrastructure –– the plumbing underneath.????

But how many of these startups are focused on better money management, and more specifically, debt management? While much of early fintech investment focused on providing insights into our financial lives, through data aggregation and more engaging building blocks toward financial health, there has been a dearth of new entrants focused on improving the long term financial well-being of consumers, and this impacts the health of our communities, and the overall equality of our society as further wealth gaps arise over time. This feels like a missed opportunity for an industry that is meant to disrupt the status quo.???

This is why we recently spoke with Sunjay Pandey of Woven Money, about what they are building and how they are addressing the issue of consumer debt and its impact on our communities. They are also trying to upend a business model and change consumer behavior in the process. Here’s just a taste:?

“Make sure your money is doing the right thing for you always. The technology exists. The compute power exists. The ML exists. The cost of doing it at scale is $1 to $2 per year per human. Why can’t we build an experience that is fully aligned with the interests of humans and still make money and build massive businesses and expand the total addressable market?"

We must all not only dare to dream, but act on these dreams to drive necessary change.?

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One Vision Podcast (links to all players)?

What would our world be like, if banks and fintechs could change their business model to align with customer's financial objectives? What if there was more focus on reducing debt and truly building real wealth over time? In this week’s episode of One Vision, Theo and Bradley chat with Sunjay Pandey, founder of Woven Money, about their goals of helping consumers achieve long term financial security.??

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This is the second in a new series on the changing nature of consumption and how it impacts the financial services business model and the future of the only home we have. Our first installment discusses the complex web of supply chains and features our conversation with Wall Street Journal tech reporter Christopher Mims speaking about his new book, Arriving Today: From Factory to Front Door -- Why Everything Has Changed About How and What We Buy.

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Our new book, Beyond Good, is available at Amazon, Barnes & Noble, Kogan Page, and everywhere fine books are sold. Keep in touch with our book launch events at BeyondGoodBook.com.

Beyond Good is a call to arms for business leaders to recognize how they can do well by doing good. Business for good, which is the philosophy that you can pursue profits while delivering on sustainable and societal development goals, is already delivering big changes.?

With exclusive interviews with experts from the B-Corp world, policy makers and executives, this book showcases how companies like Microsoft, Flourish Ventures, Ant Financial, Sunrise Banks and PayPal are doing their bit to make our world better.

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Unconventional Ventures helps drive innovation to improve systematic financial wellness. We connect founders to funders, provide mentorship to entrepreneurs, strategic advisory services to a broad set of corporates, and broaden opportunities for diversity within the ecosystem. Our belief is that anyone with great ideas should have a chance to succeed and every voice should be heard. Visit unconventionalventures.com to learn how you can partner with us. ?

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