The state of consumer fintech

Published on
26 Jun 2015
Initial Author
Tanay Jaipuria

Marc Andreessen in an interview recently said the following about finance: “We can reinvent the entire thing”.

How can tech change finance? I think it can do so in three main ways:

Increasing access to information thereby allowing consumers to make better decisions
Reducing the friction in conducting transactions where friction can be time or effort
Lowering the fees/rates on transactions by serving as a cheaper middle man.
To show how it has already been doing the above, I’ll first start with a basic equation from Macroeconomics 101:

Y = C + S
which means that Income = Consumption + Savings.

I think all consumer fintech products fall in one of two categories based on the equation:

Products that change how individuals consume
Products that change how individuals save

An overview of the consumer fintech industry
Consumption and Spending
Consumers tend to consume in two main ways: (1) send money to family/friends and (2) spend money on purchases. Additionally, they also track their spending. Tech has impacted each of these three activities.

Sending Money
Technology has made this simpler, cheaper and quicker (e.g., Venmo, Pay with gmail, Square cash and TransferWise)

Spending money
Technology has reduced friction and enabled smoother payments (e.g.,Apple Pay, Google Wallet and Paypal)

Tracking spending
Technology has increased access to information for consumers (e.g., Mint,Level money and Billguard)

Savings and Investment
Savings can be positive (investing) or negative (borrowing).

In both cases, tech has helped by:

(1) increasing access to information (e.g., Openfolio, Angellist in the case of investing; Lendingtree and Credit Sesame in the case of borrowing)

(2) making it cheaper (e.g., Robinhood, Wealthfront in the case of investing through reduced fees, Lending Club and Prosper in the case of borrowing through access to alternative funds)