Fintech Struts Down Main Street
Plus, Root's problems go deep.
Number of the Week: 1.3 million (explanation below)
Fintech Struts Down Main Street
Fintech founders are always happy to tell you how they are “democratizing” the world of banking and finance and if you’re willing to not interrogate that verb too closely, the claims are broadly true: a popular app can make certain financial activities more widely accessible and often at lower cost (think Robinhood’s commission-free stock trades).
Yet for the first many years of fintech’s existence, even most of the “democratized” companies and services have still felt elite. They often require a degree of technical sophistication and are typically aimed at people with a decent amount of disposable income to invest or spend.
That dynamic is evolving, as illustrated by this week’s blockbuster announcement that Walmart has bought (subject to regulatory approval) the neobank One and the wage-access firm Even. In the classic build-or-buy question that expansion-minded businesses face, Walmart has clearly landed on buy. On the build side, H&R Block just launched Spruce, a mobile banking platform with features—such as no monthly fees and early paycheck access—designed for low-to-moderate income customers. This is how the Spruce press release begins:
Living paycheck to paycheck is one of the biggest sources of economic stress for Americans today—and these anxieties impact mental and physical health. Two-thirds of the U.S. population struggle with one or more aspects of their finances, including spending, saving, and planning.
Workers of the world, unite! You have nothing to lose but your Earned Income Tax Credit!
What’s fascinating about fintech is that not only does it apparently allow a company like Walmart to enter the banking sector from which regulators have repeatedly repelled it for decades, but also creates new competition between companies that weren’t previously competitive, in categories that they weren’t even known for. Admit it, did you ever imagine Walmart and H&R Block going toe-to-toe to see which one could sign up more working-class savings accounts?