If the many Hollywood sensationalizations are any indicator, the finance world is dramatic — especially the Wall Street world. In Daniel P. Simon’s book, The Money Hackers he profiles some of the biggest Wall Street disruptors and how they revolutionized the finance world.
“Money Hackers” are defined as the new and young fintech companies that are surging ahead of old models of banking. Simon’s profiles become a guide to thinking outside the box and disrupting your own sphere of influence. His argument is that to be a misfit is to be successful, especially if your creed is powered by the people.
What can the everyday consumer learn from the fintech disruptors you profile in your book?
The ideas created by the ‘Money Hackers,’ including putting the consumer first, beautiful design and democratizing access to finance are here to stay. This is especially true as the economy continues to navigate the pandemic, and fintech innovators like those mentioned in the book, step up and lead an effort to prioritize the everyday consumer.
Consider that at the start of COVID, several fintech lenders put pressure on the government to involve them in the process of providing relief funds to small businesses as part of the Payroll Protection Program. Ultimately, those lenders were able to provide funds faster and more fairly than their bank counterparts.
Another takeaway is that a crisis can spur innovation. We saw the 2008 financial meltdown do just that, as new platforms like the App Store were born. Today, we see companies like Zoom respond to COVID and grow exponentially. Consumers should expect this kind of activity to continue in fintech, as new players develop ideas that will disrupt traditional financial services and change how we interact with money.
You write how consumer-first fintech succeeds over traditional banks. How have consumers influenced business innovation?
Web 2.0 ushered in freemium business models that have brought us to the point of no return. Once consumers become accustomed to ‘free’, it’s very hard to take that back and convince them otherwise. Consider Robinhood, who began offering stock trades for free. Robinhood pulled back the curtain to reveal that stockbrokers had been charging fees unnecessarily, and as soon as people understood this, they would no longer stand for it.
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This doesn’t mean that businesses can’t still be profitable. Consider Facebook and Twitter who don’t charge their consumers for access to their platforms, but generate revenue from their advertising model. Also, fintech like Venmo that offers free peer-to-peer lending to consumers has experienced tremendous growth. Earlier last year, PayPal reported that Venmo grew its payment volume by 56%. Today, organizations no longer have to just sell products and services, as they can build platforms that are highly profitable and monetized.
Are there risks to be wary of if Big Tech becomes both the merchant and the lender?
This question should concern traditional banks. Big Tech has such intimate and active relationships with much of the public that could choose to take financial action, including obtaining a loan, via the tech platforms themselves. This puts Big Tech in a position to disrupt lending in a major way. Big Tech’s ownership of vast amounts of data provides a competitive edge over the banks, as they can better understand consumer needs and effectively target them with financial products that they would benefit from.
Your book explores how fintech innovations are born to tackle a specific problem. What will we be solving in a post-pandemic world?
COVID will only spur more action to democratize access to a range of tools to help consumers maximize their financial position. Historically, these tools have been reserved for the wealthy. But we’re already seeing the everyday consumer take advantage of these tools, via fintech, in areas like home buying, where organizations like Unison will help home buyers with a down payment.
Also, companies like SoFi allow consumers, for just $1, to own a piece of a company like Tesla or Amazon that are typically out of reach for many investors. Ultimately, fintech will push a shift in financial services that benefits the many rather than the few.