APEX Panel: The Changing Shape of Personal Financial Services (Feb. 25, 2015)
With more than a quarter of U.S. households either unbanked or underbanked, there is a major opportunity in creating alternative financial products to serve that segment. But, fierce competition, fast-changing business and delivery models, and regulatory pressures are among the key issues providers must navigate to succeed. During a session Tuesday afternoon at the All Payments Expo in Las Vegas, experts shared insights from the front lines of creating and investing in high-quality consumer financial products.
Vikas Raj, director of investments for Accion Venture Lab, a global seed-stage investor in financial inclusion-focused payments and lending startups, identified some of the hottest current verticals in consumer financial services. He listed digital remittances (especially via mobile wallets), marketplace lending and new data for credit-scoring models as among the areas his firm is most excited about. Alternative credit-scoring models also are top-of-mind for Mario Avila, CEO of Emerge Financial Wellness, a provider of workplace-based financial wellness tools. Avila pointed to models that exist in other countries—for instance, basing credit decisions on employment tenure in Latin America—that only now are being explored in the U.S. Regulatory and other challenges must be overcome to successfully import such models, he said.
The workplace also is playing an increasing role as a delivery channel, Avila noted, linking the rise of employer-based financial services to employer-based health initiatives. “Just as employers are seeing that their employees’ physical health is important, that has grown to include employees’ financial health,” he said. “The employment model will continue to grow and see new players enter the market.”
But while much of the change in the market is being driven by startups, new players have much to gain by partnering with more established financial services providers, the panelists agreed. “No startup is an island,” said Raj. “Every one of our startups relies on corporate relationships and partnerships, whether as a direct customer whom they sell to … as a channel partner, or just as a key resource provider,” he noted.
Partnering with large players that have a broader reach and more resources is critical to increasing financial inclusion at large—which should be a driving force for any personal financial services provider, Avila said. “The end goal is to create systemic change, so being able to partner with large institutions is key to being able to deliver change and impact the industry on a major scale.”
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