Profiles in InnovationTargeting Overlooked Populations

Financial Solutions Lab

The Center for Financial Services Innovation (CFSI) is the nation’s authority on consumer financial health. CFSI leads a network of financial services innovators committed to building a more robust financial services marketplace with higher quality products and services. Through its Compass Principles and a lineup of proprietary research, insights and events, CFSI informs, advises, and connects members of its network to seed the innovation that will transform the financial services landscape.

For more on CFSI, visit our website and join the conversation online: www.cfsinnovation.com @CFSInnovation, #FinHealth, #FinLab /CFSInnovation Center for Financial Services Innovation Center for Financial Services Innovation /CFSInnovation

The Financial Solutions Lab (FinLab) is a $30 million, five-year initiative managed by CFSI with founding Lab partner JPMorgan Chase & Co. The Lab seeks to identify, test and bring to scale promising innovations that help Americans increase savings, improve credit, and build assets. Lab participants share a relentless focus on building products that will improve the financial health of Americans. The Lab provides capital, national partnership opportunities, industry expertise, mentorship, and cutting-edge consumer and design insights necessary to build the next generation of leading financial products and services.

To learn more, visit: www.finlab.cfsinnovation.com @TheFinLab

Special thanks to Adam Herling, John Thompson, Maria Lajewski, Ryan Falvey, and Shannon Austin from CFSI, and Amalia Kontesi and Colleen Briggs from JPMorgan Chase & Co.

Financial Solutions Lab

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FinTech Startups Take Financial Services to New Levels of SophisticationThe third class of FinLab companies is targeting at-risk populations with more advanced financial products and solutions than ever before The Center For Financial Services Innovation has watched the fintech industry transform since initiating its inaugural Financial Solutions Lab (FinLab) cohort in 2015. Now in its third year of a $30 million, five-year partnership with JPMorgan Chase, the FinLab continues to support the development and growth of fintech solutions for underserved consumers. But this year, the program has rounded a corner in terms of the level of sophistication being applied to new technologies. “We are seeing people take on products that are very complex,” says Ryan Falvey, FinLab managing director.

With thousands of tools in the fintech marketplace, there is no shortage of products and services being offered to consumers. Considering that more than half of American households report that they struggle with financial health, according to Federal Reserve data, the challenge becomes not just offering a broader array of fintech tools, but making sure those tools solve the specific needs of consumers.

This year, instead of taking a global approach to financial problem solving, FinLab companies have shown they can have the biggest impact by focusing on particular populations and challenges those consumers face, rather than building a one-size-fits-all solution. “By designing solutions for underrepresented populations, we can support niche products tailored to the needs of people who may have been overlooked in the past,” says Colleen Briggs, Executive Director of Community Innovation for the Office of Corporate Responsibility and Global Philanthropy at JPMorgan Chase.

This year’s cohort includes technologies designed to meet the needs of specific high-risk populations including low-income bus transit riders, the aging, and newly arrived immigrants. “We are seeing more sophistication of business models and much more specific problems businesses are solving,” says Falvey. “That specialization is a sign that the industry is getting more sophisticated.”

With increasing complexity come other crucial developments helping push the fintech industry to new levels – not just in serving specific populations but also in offering actionable steps for consumers to take, partnering with influential stakeholders and innovating in areas that haven’t benefited from new technology in decades. Here’s a closer look at the exciting takeaways from this year’s lab and financial services technology as a whole.

Creating Complex Solutions For Niche PopulationsSolving problems for very specific segments of the population has become a particularly effective approach for fintech startups to take. For example, the startup EverSafe, which offers identity theft protection, was designed specifically for seniors and their family members in an effort to help the 18.5 million financial caregivers in the U.S. prevent the rampant financial fraud targeting elder populations. With seniors who face financial fraud averaging a loss of $120,000 each according to AARP data, honing in on elder abuse in particular targets a niche population of vulnerable consumers and their families.

Similarly, Token Transit, which offers mobile access to public transit passes, is working to create a way for low-income riders to decrease transportation costs and access tickets more easily. While big players like Uber and Lyft have created a more elegant car service experience, technology has been slow to adapt for lower-income commuters who can’t afford to call a car and rely instead on public transit. “For low-income consumers, this is a huge pain point. How do you get to work? How do you live your life?” says Falvey. “Bus transit is a part of the economy that historically hasn’t seen a lot of innovation.”

4Profiles in Innovation

Reinventing the Way Systems WorkFor many of the FinLab companies this year, coming up with a simple solution to a persistent financial challenge has required an incredibly complex process of developing partnerships spanning the country or in some cases, the world. For Token Transit, for example, that meant developing relationships directly with public transit offices across U.S. cities, working one city at a time to develop a sea change distribution model for how bus passes are distributed.

For the founders of Nova, which offers a global credit service that standardizes consumers’ credit history from around the world to fit U.S. regulations, that means literally traveling the globe, working with credit bureaus in different countries to obtain credit reports and then translating them to meet U.S. standards. Starting with Mexico and India, Nova is working to grow the business one country at a time.

Others, like Blueprint Income – which offers a personal pension plan to consumers who either lost their company pension or can’t afford the cost of buying an annuity – there’s an effort to rethink how people save for retirement by creating new, more affordable distribution models. “They are trying to reinstate how retirement products work,” says Falvey.

Similarly, Point, which enables homeowners to sell equity stakes in their home to investors in exchange for access to capital, is aiming to create a new asset class that taps into the $17 trillion of equity tied up in people’s homes. “If we unlock even a fraction of that, even one percent, that’s $170 billion sitting in people’s homes,” says Point founder Eddie Lim. “It’s an interesting way to think about how you jumpstart the economy.”

Going Beyond Advice to Action-Based Solutions And rather than simply educating consumers on smart financial practices or offering suggestions on financial health, fintech startups are increasingly aiming to build actionable solutions right into their applications for immediate financial results. Many of this year’s startups have tackled the question: How can elegant design and technology transform experiences that have historically been complicated for consumers?

Tomorrow, an app that allows users to draft a legal will in a matter of minutes on their smartphone using a 36-question survey, is looking to create a simple solution for the more than three-quarters of Americans over the age of 40 living without a legal will in place. To do this, the company had to collaborate with 65 attorneys across the country as well as regulators to create a streamlined mobile-friendly alternative that doesn’t just teach people how to write a will, but does it for them. “We wanted to make it completely visual and controllable in the palm of your hand,” says Tomorrow founder Dave Hanley.

In the realm of financial planning, Grove is connecting long-term improvements in financial health to short-term actions. The product gives users specific steps to take with their investments and finances, and is building the capability to directly take those actions on behalf of users. To enable this level of engagement, Grove’s founders use Certified Financial Planners, or CFPs, to build one-on-one customer experiences that leverage technology to help consumers manage their financial lives.

Finally, the app Dave, which helps users avoid overdraft bank fees, doesn’t just notify consumers when their balance gets low, it actually connects directly with users’ checking accounts and looks for recurring trends in user spending and income through a set of predictive algorithms to stay ahead of a user’s finances. When someone’s balance looks to be nearing a potential overdraft, they are given the option to front part of their paycheck or borrow money from Dave to avoid paying penalty fees.

“With all of these solutions, it’s no longer about offering consumers passive financial information. It’s more about delivering action-oriented tools to help consumers actively improve their financial health,” says Briggs. “Fintech entrepreneurs are really building that approach into the design of their solutions.”

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Getting Products into the Right Hands as Efficiently as PossibleAs the fintech industry matures, there continues to be a decrease in barriers to adoption, making them more accessible to consumers who need them most. And this year’s FinLab is a strong indicator of the increased efforts on the part of fintech applications to find their way into the hands of the most at-risk consumers, says Briggs.

For example, this year the lab partnered with the World Disability Institute in an effort to help think about distribution and design from the perspective of the underserved disabled community. With the support of JPMorgan Chase, the FinLab also launched its first Nonprofit Fintech Working Group in an attempt to help connect leaders in fintech with leaders in the nonprofit world to share ideas and collaborate. “Nonprofits bring a lot of expertise about particular communities to inform the design of the products,” says Briggs. “They can also provide a trusted source of distribution to increase access to these products.”

In the spirit of CFSI’s mission to reach underserved communities in need of financial tools, the new Nonprofit Fintech Working Group helps broaden the connection between financial tech and those consumers who need it most. “Fintech companies can learn from the needs that nonprofits see and nonprofits can potentially find new tools to serve their customers,” says Falvey. “This is all part of our mission to answer the questions: ‘How do we get more people to develop these types of solutions and how do we continue to push the industry forward so that more Americans can achieve financial health?’”

Profiles in Innovation

6Profiles in Innovation: Blueprint Income

Profiles in Innovation: Reinventing The Way Retirement Looks For Blue-Collar Americans

WHAT THEY DO Create personal pensions

LOCATION WEBSITE New York, NY blueprintincome.com

Blueprint Income is creating a new way for consumers to ensure they have a reliable and steady personal pension Working as a policy advisor on retirement issues at the U.S. Treasury opened Matt Carey’s eyes to how retirement looks for Americans today. In 2013, with the days of company- sponsored pensions long gone, Carey wondered whether there was room for an alternative approach. “In the old system, we used to give people pensions from their employer and their employer mitigated the risk,” he says. “In this new system, all the risk is on employees.”

Later that year, Carey left his Treasury job and enrolled in Wharton Business School with the hopes of figuring out and building a new retirement saving alternative. The challenge: Figuring out how people could still guarantee themselves a steady retirement paycheck without taking on the risk of a 401(k) or shelling out the enormous upfront costs required of an annuity. “Retirement is one of the really big things people need to be doing more about at a time when everyone is doing less for them,” he says.

At Wharton, Carey met Adam Colombo and Nimish Shukla, who joined him as co-founders in what would become Blueprint Income. In 2015, Carey decided to leave his MBA program and focus full-time on the business. The solution he and his team were working on would provide a personal pension plan in place of the company pension of the past. As an initial step, Carey, Colombo and Shukla each became certified as insurance agents, which enabled them to sell insurance directly to consumers.

Unlike 401(k) plans, which place all the risk on employees’ shoulders and don’t guarantee a steady stream of income, the solution Blueprint Income came up with aims to remove that risk factor. What’s more, in contrast to annuities, which require an upfront investment of upwards of $100,000 – a chunk of change many consumers would have trouble fronting – Blueprint Income enables consumers to pay for a guaranteed pension through smaller payments over time. “Annuities are hard to compare across insurers because there’s a lot of jargon and misaligned incentives among agents and consumers,” says Carey. “We are trying to create a new paradigm where your employer doesn’t have to take the risk, but you get the same benefit.”

To do this, Blueprint Income offers consumers a personal pension plan backed by insurance companies rather than employers. Carey and his team see it as a way of modernizing the insurance industry by building a user-friendly platform through which consumers choose various insurers that provide them with their pension. “When I came up with the idea, I thought, ‘Insurance companies are not digitally savvy enough to coordinate this by themselves,’” says Carey. And so he and his team set about building the technology.

To get the ball rolling in 2015, Blueprint Income began by first selling large upfront purchases resembling annuities. Over time, they convinced insurance companies they partnered with to consider alternative pay structures that spread the costs out over time so that consumers didn’t have to pay as much upfront. Gaining the trust of both consumers and insurers was a major initial hurdle.

7Profiles in Innovation: Blueprint Income

“How do you build the technology, the content and the experience that convinces someone to hand over a pretty large amount of money to an insurance company?” says Carey. “That was a big challenge right out of the gate.”

To address this issue, Blueprint’s most crucial asset was being as open as possible about the numbers. “The biggest thing was transparency,” says Carey. “At the end of the day trust is what convinces somebody to buy.” For Blueprint that means transparency around both pricing and information – giving consumers a clear sense of where their money is going and what it is going towards.

To get users started, Blueprint Income collects basic information from them, including how much they are saving for retirement, whether they’re in good health, what their income is and how much time they have until retiring. Consumers can ask questions through a mobile-friendly app. Based on the information gathered, they are then given an individualized buying plan with a low upfront cost that can be paid for via a subscription. “Rather than buying all at once, we are turning the market into what a pension is,” says Carey. “Typically people will contribute once a month, and every day you work, you get a slightly larger pension.”

Say, for example, you’d like to ensure that you receive a steady paycheck of $7,000 in your retirement years. Instead of paying out the upfront cost of a $100,000 annuity, Blueprint Income makes it possible for someone to open a contract for a personal pension with as little as $5,000 and a monthly subscription payment of $500.

“We are making it really accessible for anyone,” says Carey. “Pensions were a pretty blue-collar product and that is our core focus.”

Much as CFSI has helped push the fintech industry to reimagine how technology can help streamline and improve access to financial services for the underbanked, Blueprint Income is hoping to create a modernized alternative to the way the insurance industry operates. “We knew there was a real need for the insurance industry as a whole to find ways to modernize,” says Carey. “What we found was that insurance companies were much more willing than we expected to have their products on our distribution channel.”

Blueprint Income has been in beta since September 2017 and plans to officially launch in early 2018. The company sees its priority customer as someone who is either Gen X or an early baby boomer without a pension. “For someone who likes the idea of a pension but doesn’t have one through their employer, we are the place they get it,” says Carey. “Most of our early customers are folks who had a pension through their employer and it’s been frozen.”

As the company grows, it plans to lower the minimum payment required of customers so that more people can access the product. Carey also hopes to eventually make the personal pension accessible through more channels including employers. “Retirement shouldn’t be a luxury. It should be accessible to everyone,” he says.

8Profiles in Innovation: Dave

Profiles in Innovation: An App to Prevent the $33 Billion in Overdraft Fees Americans Pay Each Year

WHAT THEY DO Prevent overdraft fees

LOCATION WEBSITE Los Angeles, CA dave.com

Dave helps consumers avoid overdrafting with a “set-it-and-forget-it” approachAll it took was a $3 latte to convince Jason Wilk he needed to develop the business idea he’d been turning over in his mind for some time. That latte, which resulted in a $40 overdraft fee, underscored for Wilk just how prevalent and frustrating the experiences of getting slapped with overdraft fees can be. “You make this rationalization that you can afford a $3 cup of coffee,” says Wilk. “But sometimes using your debit card is like playing roulette – and clearly many of us are bad at roulette.”

As a result, more than a quarter of Americans have ended up overdrafting in the past year, with ten percent of those people having overdrafted more than eight times. In 2016, U.S. banks made a whopping $33 billion in overdraft fees alone. But what if there was a simple way to keep track of how much you have in your account and stay on top of overdrafting before it happens?

Wilk and his co-founders John Wolanin and Paras Chitrakar decided to build a product that would be helpful to the majority of consumers and their common financial pain points. But first, they surveyed 1,000 people across the U.S. so that they could better understand what those pain points were. The answers came as no surprise: Most respondents to their survey were worried about overdraft fees, and not having a readily available $400 fund in case of emergencies.

In 2015, Wolanin, Wilk and Chitrakar began exploring ways to prevent easily avoidable overdraft fees while also creating a means for consumers to borrow small amounts of money to cover costs they’d otherwise be charged overdraft penalties for. They found that a lot of potential overdrafts are the result of transactions of less than $20 in total, on purchases like a latte or paying a Netflix monthly subscription fee.

The co-founders created a prototype for an app they called Dave – named after “that friend everyone has who spots you some cash when you need it.” The app alerts users in advance and can help prevent overdrafts by instantly advancing the user up to $75 at zero percent interest. Arriving at this simple and straightforward solution took quite a bit of trial and error, says Wolanin, who has a doctorate in psychology and has long been fascinated by the intersection of product design, human psychology, and technology.

Dave’s design team went through more than 200 iterations of the design for Dave.com before arriving at the version that consumers use today.

In all that trial and error, the co-founders learned quite a bit about what matters most in developing a fintech app. For example, when first iterating the app, the logo initially used was the cartoon image of a young hip-looking guy, but the designers quickly learned that swapping that image out with what is the current Dave logo – a smiling cartoon bear – had a surprising effect on users. “We wanted to have a really friendly and secure-feeling brand,” says Wilk. “People really resonate with the bear. They find it cute and safe.”

9Profiles in Innovation: Dave

Finding the right language to communicate with users in a succinct and clear-cut way also took quite a but of experimenting. For all app users, there’s a measure of anxiety, confusion and frustration that comes along with opening a new app on your phone, says Wolanin. He sees his primary job as designer to minimize that confusion as much as possible using clear and smart design. “A lot of designers do their app a disservice by putting in dummy text when designing,” he says.

It was also important for the app to provide a way for people to keep track of overdrafting without having to constantly remember to check up on it or stay on top of their spending. “There’s this tendency to think people will look at your product and come back to it every single day. Unless you are in the top five apps, they won’t continue to use it everyday,” says Wilk. How, then, to create an app that does its job even when users aren’t looking at it?

Dave notifies users of important overdraft information via text message so that they don’t have to keep tabs on what is happening on their own. “I’d rather have someone set it and forget it,” says Wolanin. To do this, Dave connects directly with users’ checking accounts and then looks for recurring trends in each user’s spending and income via a set of predictive algorithms.

For example, if you have $50 in your account and the app has detected that you have a $70 cable bill coming out in the end of the week, it will notify you to prevent that overdraft from happening. Users are also able to get a percentage of their upcoming paycheck up to 10 days ahead of time for as much as $75 in order to prevent small overdrafts. “We predict all your upcoming expenses and typical spend before your next paycheck,” says Wilk.

For access to this service, users pay $1 a month and are given the option of adding a tip onto their balance after they’ve been advanced some of their paycheck. Dave continues to develop the algorithms running in the background that enable the app to work on its own.

“We want to make it so that we are doing all the work and the customer wonders how it happens,” says Wolanin.

Participating as part of the FinLab’s 2017 cohort has played an important role in helping to make that happen. “We’ve learned a lot about the industry from CFSI,” says Wilk. “The fact that they can connect us with these institutions and regulatory bodies has helped us tremendously.”

10Profiles in Innovation: EverSafe

Profiles in Innovation: Protecting Seniors From Financial Exploitation

WHAT THEY DO Protect aging Americans from fraud LOCATION WEBSITE New York, NY EverSafe.com

With elder fraud on the rise, EverSafe has created a personal detection and alert system to protect family finances from fraudAs a serial entrepreneur, Howard Tischler had started three successful companies. But when he learned his ailing mother lost much of her life savings to scammers, he didn’t know what could be done to help her. The financial exploitation started when Tischler’s mother, who was diagnosed with Alzheimer’s disease, was sold an auto-maintenance policy over the phone. “At the time she received the call, she did not own a car, had no license, and was legally blind,” says Tischler. Nonetheless, she had somehow been signed up for an $80 monthly auto plan.

One scam led to another, says Tischler, and by the time he discovered his mother was having financial trouble, she’d already lost more than $100,000, taken money out of her annuity to cover bills, paid a penalty on early annuity withdrawals and stopped paying her long-term care insurance. “You wouldn’t think that from an $80-a-month car maintenance membership, she would lose control of her life savings, but she did,” he says. “Once I got a look at her finances, I saw $8,000 and $10,000 credit card bills.”

According to AARP, 45 million Americans serve as caregivers for older relatives, and nearly 18.5 million of them provide financial caregiving in particular. But keeping an eye on a loved one’s finances can be tricky – and for those facing fraud, according to AARP data, the loss per victim averages $120,000.

As Tischler grappled with the aftermath of his mother’s situation, he came across an article about a high-profile elder fraud case being tried in New York. In desperation, he reached out to Liz Loewy, the prosecutor on the case, to discuss what had happened to his mother and how something like this could happen. “Howard knew his mother’s financial advisor. He wanted to know what banks and firms were doing to focus on these issues,” says Loewy. “The truth is many of them now recognize the enormity of the problem, but could be doing more to monitor suspicious activity related to aging and deteriorating financial capacity.”

Loewy would know. In the 1990s, she cut her teeth helping to create the first-ever elder abuse prosecution unit in the country while working for Robert Morgenthau at the Manhattan District Attorney’s Office. For 18 years, Loewy ran that unit, and oversaw around 800 elder abuse cases each year. In one particularly heartbreaking case, Loewy represented a Holocaust survivor with dementia who had $1.3 million taken from her accounts by an accountant. “The cases I saw were devastating for the victims and their loved ones,” she says. “And almost every one of these cases could have been prevented with better monitoring.”

That initial conversation between Tischler and Loewy was the first of many. What if they could develop a way to ensure people protected their life savings in the same way they safeguard their homes, cars, and personal property?

11Profiles in Innovation: EverSafe

Together they set to work, developing an application they called EverSafe. The service assesses a member’s historical financial activity when they enroll to establish a personal profile. Financial transactions (bank, investment, credit card and credit report data) are analyzed on a daily basis. EverSafe then identifies erratic behavior based on historical spending patterns. When abnormalities are detected, the app alerts members as well as their designated trusted advocates. “The basic concept was to be able to deliver a personal suspicious activity report to the consumer and their loved ones or professionals so that they could be alerted that something is going on – before there’s a crisis,” says Tischler. For example, while his mother had been working with a financial advisor, he was never alerted to the fact that she was paying late penalties monthly. “I would have loved to have this for my mother,” he says.

At its core, EverSafe is a machine learning system, using algorithms to detect and monitor financial activity. Because many retired people live on a set budget for fixed expenses, identifying and taking note of irregularities is a clear way to ensure money isn’t being mishandled, says Tischler. “We are looking at transactions aggregated across accounts, institutions and categories and what that says about a person’s financial behavior. Our alerts are quite different from those at banks and firms,” says Tischler. “We take into account the patterns Liz observed on elder financial abuse prosecutions, add observations from machine learning algorithms, and alert for things like missing deposits – things like Social Security or pensions – as well as changes in spending, unusual investment activity and unauthorized account openings, to name a few.”

For example, if a senior has historically used around $300 a month in cash across accounts and that number starts to rise, EverSafe would send an alert regarding that increase to both the user and a trusted family member or advisor, pointing them to potential fraud or exploitation that might be happening.

But it’s not just fraud that the application is looking to address in the older population. It’s also their financial health. According to Daniel Marson, professor of neurology at University of Alabama, individuals start to lose their financial capacity as early as age 53. “It’s not as though you wake up one day and are suddenly unable to balance your checkbook,” says Loewy. “The deterioration of financial capacity happens over time.” For seniors who don’t want to run the risk of outliving their savings, preparation is key. “Folks think about advance planning with respect to their will, but they don’t think about taking simple steps to protect their hard-earned nest egg and their identity,” says Loewy. “Focusing on this, in advance of a crisis, can ensure that they don’t outlive their savings.”

12Profiles in Innovation: Grove

Profiles in Innovation: Grove Makes Financial Planning Accessible to More Americans

WHAT THEY DO Understandable financial planning LOCATION WEBSITE San Francisco, CA usegrove.com

Company offers personalized financial planning with a pricetag more people can affordChris Hutchins has always been looking for ways to save a dime. For years, friends have sought out his advice on how to live frugally and be smart with their money. “I’ve always been someone who optimizes money in every way possible,” he says.

In 2015, while working at Google Ventures, Hutchins wanted to figure out a way to combine his savvy with technology to help people better manage their money on a larger scale. “I realized most people don’t have a clue what’s going on with their finances,” he says. “They know it’s important, but generally aren’t willing to spend thousands of dollars a year to figure it out.”

Though 85 percent of adults say they feel financial anxiety, only 32 percent actually seek out professional financial advice, according to data from the 2016 Northwestern Mutual Planning and Progress Study. Part of the reason is that working with a financial advisor is notoriously expensive. Creating an initial financial plan costs an average of $2,500, according to data from the Financial Planning Association.

Hutchins founded Grove to make it easier for people to manage their finances and their future responsibly. He built a financial planning service that costs considerably less than a traditional advisor, while still offering very personalized advice. To bring down costs, the Grove team figured out a way to automate and streamline as much of the process as possible.

Collecting data from clients has typically been done manually by financial advisors, making it a time and labor- intensive process. Grove has built software that can gather this information more efficiently and then assist advisors in using the inputs to create a financial plan.

Because Grove is able to automate much of its information-gathering process and develop algorithms to streamline financial planning, it’s able to offer individualized services at a much lower price point. Grove charges $900 per year for financial planning, which includes an annual update of the plan. This compares with the average cost for a one-time plan at $2,500, or potentially over $5,000 per year for a traditional financial advisor. Hutchins notes, “This dropstep-change in price will open financial planning up to a whole new set of people.”

In addition to creating efficiencies through software innovations, Grove is focused on making financial planning feel more approachable for people. Hutchins knows that financial advice can be intimidating. “Getting a 60-page report with huge tables and tiny print is totally overwhelming for people,” Hutchins says.

Grove is leveraging clean design and clear language to deliver financial advice that is jargon-free with easy to understand visuals and actionable recommendations. Where a traditional financial plan might advise a client to invest her 401(k) into 60 percent stocks and 40 percent bonds, Grove offers advice on which investment funds to choose, and how much to allocate to each.

13Profiles in Innovation: Grove

The team at Grove has been experimenting with how to maintain the personal connection that traditional advisors have while driving more of the communication with technology. “You see companies trying to use technology to replace humans in so many different ways,” says Hutchins. “Our secret sauce is that we are not trying to replace humans. We are trying to make our advisors more efficient, and make the touchpoints they have with clients as impactful as possible.”

Instead of shying away from regulation, Grove embraces it. Grove is a registered investment adviser and makes their fiduciary duty clear to their clients. Hutchins explains, “Our responsibility to give the best advice to our clients is a great match with our mission as a company.”

Partnering with CFSI as part of its FinLab has also been crucial in getting Grove off the ground. “We started this as a very mission-driven company. The goal was to identify a really big problem and find a way to solve it,” says Hutchins. “CFSI is also very mission-driven. Because of the history of the FinLab, there’s been a great pool of founders who’ve solved similar problems that we can lean on.”

14Profiles in Innovation: Nova

Profiles in Innovation: A Global Credit Passport To Help Immigrants Rebuild Their Life in the U.S.

WHAT THEY DO Globalizing consumer credit data LOCATION WEBSITE San Francisco, CA neednova.com

Nova is a cross-border credit bureau making credit data transferable around the worldNicky Goulimis had excellent credit living in the United Kingdom, but when she came to the U.S. for graduate school, she found herself constantly turned down for credit cards and other services requiring U.S. credit history. Goulimis’ problem was hardly unique. The U.S. is home to 42 million immigrants, with an estimated ten million of them having immigrated in the last three to five years, according to State Department data. For those millions, no option has existed to help transfer credit history from their home country to the U.S., making getting access to basic financial services a logistical nightmare.

While studying in the MBA program at Stanford, Goulimis met Misha Esipov and Loek Janssen, also students at the time. Together the three talked with other international students at Stanford to figure out if they were experiencing similar challenges. “Half of the student body is international, and 100 percent of that half will tell you they can’t get a credit card or a student loan. They can’t get a cell phone. They can’t rent an apartment,” says Esipov. “There’s clearly a broken system.”

With no existing agency able to translate credit history from other countries so that it’s meaningful to U.S. lenders and financial institutions, millions of immigrants face financial barriers that only further complicate their lives in a new country. Esipov, who emigrated from the Soviet Union with his parents and Janssen, who came from The Netherlands to the U.S. for graduate school, were both familiar with the financial limitations imposed on immigrants. For example, credit card applicants without U.S. credit history are required to start from scratch – first getting a secured credit card that requires an up-front deposit, which also comes with major borrowing limitations. Getting loans for international students to help pay off tuition is also a notoriously challenging hurdle, forcing many to either pay out-of-pocket or figure out how to get a loan from their home country. And in the world of property management, it’s common for an applicant to be asked to put down a six to 12-month deposit in the absence of rental history. “You just moved here, and you have to put down an extra $10,000 to $20,000 to find a place to live,” says Esipov. “That’s something that technology and better information can solve.”

Goulimis and her co-founders wanted to create the ability for people to move anywhere in the world and take their financial history with them. She and her co-founders decided it was time to figure out a solution. “It felt like one of those obvious problems with an obvious solution, so it inevitably turned out to be very challenging,” she says. “We were these ridiculous grad students who thought we would simply go around the world and collect the data from overseas credit bureaus. Blind optimism at the time has led us to where we are.”

In 2015, they created Nova. To get the idea off the ground, the three founders needed to partner with overseas financial institutions and regulators, effectively building a global business before they even became a domestic one. This meant they had to not only figure out a way to gain access to credit bureau data from across the globe, but also how to standardize it to be compliant with U.S. financial institutions.

15Profiles in Innovation: Nova

Processing data from around the world so that it’s compared apples to apples instead of apples to oranges has been one of the biggest challenges facing Nova. At the heart of the business, says Esipov, is an International Credit Passport. “We are creating a central repository for global citizens to build and store their financial identity,” he says.

Getting there has required a complicated and ever-evolving set of algorithms designed to standardize data points so they fit a U.S. regulatory model. For example, some countries include gender and age information in their credit reporting, but U.S. regulations restrict credit bureaus from including age and gender on credit reports. Nova had to build a data mapping system that ensured data was filtered out when aggregating information. “We receive data from overseas credit bureaus and we instantly process it and turn it into something that is standard, secure and compliant,” says Goulimis.

Janssen, who was a graduate student at the Institute of Computational Mathematics and Engineering when he teamed up with Goulimis and Esipov, both studying in the MBA program at Stanford, set about building a global technology system for cross-border credit reporting. “My first mission was to create the prototype for one central dashboard where someone, for example, from Mexico, could go on and say: ‘I want my data transported to the U.S.,’” says Janssen. “That global data infrastructure is incredibly difficult to build out, but it is the heart of Nova’s capabilities.”

Nova first started with two countries – Mexico and India – working to create a data engineering system that could automatically translate credit history reports from those two countries into a standard credit report that would work in the U.S. Today the company has integrations into the largest countries that send immigrants to the U.S. and is constantly working to expand its coverages.

Nova imports credit data, buying it for local rates and charging end users, or lenders, a premium for that information. “Different countries have different reporting standards, but the core of what they capture is substantially the same,” says Esipov. “We map the information we receive onto Nova’s proprietary global data dictionary. That enables an Indian credit report to look like a Mexican report to look like a traditional U.S. report.”

Working with CFSI has given Nova a chance to access fintech startups working on similar challenges facing underbanked consumers in the U.S. “We are a company that cares deeply about our social impact, both in terms of the immigrants that we serve, and in terms of the way that we build our business. CFSI has helped us reinforce our values and make our appeal as broad as possible,” says Goulimis. What’s more, having the resources and support of an institution like CFSI has helped Nova get past what others have previously seen as insurmountable barriers to entry. “Building a business like ours –with its inherent complexity of partnering with the largest financial and regulatory institutions in the world – really does take a village, and CFSI really has provided that village of mentors and gurus,” says Goulimis.

16Profiles in Innovation: Point

Profiles in Innovation: A Startup Giving Homeowners a New Way to Access Home Equity

WHAT THEY DO Help homeowners tap into home equity LOCATION WEBSITE Palo Alto, CA point.com

Point is giving homeowners an opportunity to tap into their property wealth Eddie Lim had built four venture-backed businesses and was ready to start a new one when he hit upon a major pain point in the marketplace. Lim owned a home in the Bay area and wanted to refinance his mortgage so that he could use some of the money he’d put into his home toward his latest business. But the big banks didn’t agree with him. Because Lim was between jobs and had no income to report, refinancing his home was seen as a liability by banks. “I had so much theoretical wealth in my home but I couldn’t access it,” he says. “I started talking to people I know in the mortgage and real estate industry. I asked: ‘Why doesn’t this exist? Every major market has debt and equity, why not this?’”

The more people Lim spoke with and the deeper he dug into this question, the more convinced he was that there was room in the marketplace to restructure the way home equity is accessed by its owners. “For most homeowners, their home represents their single biggest asset and the majority of their net worth,” says Lim. “From a wealth diversification perspective, that’s like having a single stock in your investment portfolio.”

In the U.S. alone, this amounts to a whopping $17 trillion of equity tied up in people’s homes after mortgage debt – more than twice the value of the entirety of the NASDAQ, according to published reports from Zillow and the Federal Reserve. “This is an incredibly big market we are talking about,” says Lim. “If we unlock even a fraction of that, even one percent, that’s $170 billion sitting in people’s homes. It’s an interesting way to think about how you jumpstart the economy.”

The question, of course, becomes: How to pull that off? In January 2015, Lim did an initial round of funding to help get his idea, which he called Point, off the ground. He needed to figure out how to structure his business – building the technology and determining how to legally execute a transaction for a new consumer finance product. Point exists at the intersection of a handful of industries including real estate, capital markets, mortgages, title insurance, and servicing. “This is a new asset class. It literally doesn’t exist,” says Lim. “That means there is no playbook for what we are doing. Even just getting out of the gate was challenging.”

Point works by making it possible for homeowners to sell small chunks of equity in their homes to investors as a way to get access to cash without having to take out a loan or pay interest rates. For investors, there is the potential benefit of sharing in the equity growth of a home over time once it’s sold. For example, say your home is valued at $350,000 and Point invests 10 percent of its value up front, giving you access to $35,000 in cash. Since Point isn’t a loan, there’s no monthly payment for the homeowner. When the homeowner decides to sell or refinance her home, Point shares in the appreciation of the home if it has gone up in value. Point also shares in the depreciation of the home if it goes down in value. In this example, Point might share in approximately 25 percent of the appreciation or depreciation for its $35,000 investment. “It’s good for you and it’s good for us when your home value goes up,” says Lim.

17Profiles in Innovation: Point

For the consumer, the process is very similar to the online mortgage experience. A homeowner fills out a brief online application and then has a quick call with someone from Point. After a preliminary offer is given, a third-party appraiser is sent to the home. While Point isn’t a mortgage or loan, the company follows consumer protection standards in place for mortgages, requiring a three-week waiting period. “There are a lot of consumer protections in place for mortgages and we wanted to follow all of those waiting periods,” says Lim.

Point customers tend to fall within the age range of 35 to 55 years and to have owned their home for at least five years, enabling them to have accumulated enough equity that they can sell. While the product is not for everyone, Point is especially useful to homeowners who are looking to cover the cost of a specific crucial life event or expense. For example, an investment might go toward the cost of expensive fertility treatment or other major healthcare bills. It might go toward paying off credit card debt in order to help bump up a credit score as much as 100 points in three to four months.

Homeowners can also use the equity to cover the cost of renovating part of their home as a way to increase the overall value of the home before selling it. “The number one thing that unifies our customer base is that they are at some point in their life where they are optimizing for cash flow,” says Lim.

Point makes money by charging consumers an up-front three percent closing fee. When selling investments to investors, Point also takes a fee from those purchases. Lim and his team don’t claim to have invented a new way of accessing equity, but rather developing a streamlined and newly regulated technology that makes accessing that money simple and secure. “The concept has been around for a long time, but productizing it is what’s new,” says Lim. “The idea is easy, but how do you actually execute on it?”

18Profiles in Innovation: Token Transit

Profiles in Innovation: Changing the Way Low-Income Consumers Access Public Transit

Token Transit gives low-income Americans a way to save big on transportationMorgan Conbere had been working at Google for four and half years, commuting to and from work daily on the glossy, window-tinted, high-speed-network-connected Google shuttle bus. All that time on the road got Conbere and his co-founders thinking: Why hasn’t the relatively archaic public transit system found a way to use technology to upgrade riders’ experiences? “Here I was riding the Google bus an hour and a half each way to an office park in the suburbs,” says Conbere. “I wanted to do something that impacted the city and community I was living in.”

And it was no small undertaking Conbere had in mind. Public transportation accounts for 11 billions trips across the U.S. each year, with many of those trips happening in smaller U.S. cities where access to cost-efficient monthly passes is restricted to central stations. While tech giants like Uber and Lyft have built sleek solutions that make paying for a hired car easy, technology had yet to come up with a similar fix for those millions of people riding the bus each day. “We wanted to bring that really nice Lyft and Uber experience to public transit,” says Conbere.

In 2015, Conbere left Google to work on his idea full-time. To start, he and his co-founders reached out to public transit offices around the country and spoke with countless public transit riders. “We learned that a third of low-income families don’t have a car or access to a vehicle,” says Conbere. “These are the people most in need of transit to get to work and to school. Addressing that challenge leads to so many economic benefits for the community.”

The solution he and his co-founders – Zachary Browne, Samuel Daly, and Ekaterina Kuznetsova – came up with was Token Transit, an app that enables traditionally underbanked users to purchase transit passes through their mobile phones using credit, debit or prepaid cards. “This is a category of people who are greatly underserved,” says Conbere. “We are providing access to purchase something they otherwise had a challenge getting their hands on.”

At the end of 2016, Token Transit began working with its first transit community in Reno, Nevada. Less than 10 percent of riders there used credit cards to pay for transportation, Conbere and his team quickly learned, with 90 percent instead using prepaid debit cards or cash. What’s more, riders in Reno could only purchase discounted weekly bus passes at the downtown transit station, which for many meant commuting an hour each way just to buy a pass. Token Transit aimed to eliminate that travel altogether by offering an easy-to-use mobile alternative.

WHAT THEY DO Use tech to upgrade public transit access and experience

LOCATION WEBSITE San Francisco, CA tokentransit.com

19Profiles in Innovation: Token Transit

Conbere and his team also quickly realized that the process of distributing passes to riders is difficult for transit agencies – and that riders nearly universally would prefer to access distributed passes on their phones. And while some solutions see mobile ticketing merely as a tool to pay with a credit card, the pain of pass distribution remains the real reason many employers don’t participate in transit pass programs. Getting discounted passes in the hands of people who need them most – including seniors, the disabled, veterans, and low- income households – was a major challenge the Token Transit team knew they needed to address. As a result, Token Transit began connecting with social services, consumer advocacy groups, and city managers and planners to figure out how to reach the people most in need of this kind of service.

Riders are able to purchase transit passes through the app using prepaid cards rather than simply credit cards. They are also able to take advantage of a fare-capping feature that helps low-income riders meet the upfront cost of purchasing a transit pass when they don’t have all the liquid cash needed in-hand. For example, while a monthly bus pass in Reno costs $65 and saves regular riders up to 50 percent of the cost of monthly transportation, for many low-income consumers, making that $65 payment at the start of each month just isn’t possible.

“Most low-income consumers that want to save money on transit don’t have that $65 up front,” says Conbere. “With Token Transit, you can buy $2 passes every time you ride the bus, but once you hit that $65 cap, the rest of your rides that month are free.”

Today Token Transit operates in 18 transit agencies around the country, with 30 additional contracts in the works as part of their expansion plan. “We wanted to treat it like a software startup rather than a government agency,” says Conbere.

Working with CFSI as part of its 2017 FinLab cohort has given Token Transit access to partners, researchers, and data around the very population most in need of Token Transit services. “Our app is offering services to the exact demographic CFSI is trying to work with,” says Conbere.

20Profiles in Innovation: Tomorrow

Profiles in Innovation: Protecting Your Family’s Future With the Touch of a Screen

WHAT THEY DO Free wills and easy access to life insurance

LOCATION WEBSITE Seattle, WA tomorrow.me

Tomorrow gives users a way to manage their will, trust and life insurance in a simple mobile appOver the past five years, Dave Hanley’s world has been turned upside down. In that time, he lost both his parents and his best friend – experiences that opened his eyes, not just to how precious life can be, but also to the importance of being prepared for anything and everything life sends you. A father of four, Hanley has been careful to make sure his legal will is up-to-date and his life insurance is adequate. And he’s become a vigilante in preparing others for the worst – templatizing his will for friends and family so they could use it as a model for their own – and most recently, launching the app Tomorrow, designed to simplify and transform the experience of family financial planning altogether.

Hanley started by digging into the statistics on wills and life insurance – and he was shocked at what he learned. Three-quarters of Americans do not have life insurance and two-thirds have no will establishing guardianship of their children, according to a 2017 Caring.com survey. What’s more, 78 percent of Americans over the age of 40 don’t have a will at all. “Wow,” Hanley thought as he took those figures in. “This is a massive societal issue.”

Hanley wanted to figure out a way to get more people thinking about protecting their families and loved ones. He had come from a career in micro-credit banking, having worked as a Fulbright Scholar in the field, and he had founded an academic journal focused on the topic. He’d also started and sold a social media agency to Deloitte. Now he wanted to figure out a way to get more people planning for the unexpected. There had to be a way to make the process simpler, Hanley thought as he and his team set about designing Tomorrow.

Hanley and his team worked on streamlining an otherwise archaic process as much as possible. As simple as Tomorrow’s user interface appears, it has required an incredible amount of legwork and planning to get there. After gathering feedback from potential customers, regulators and lawyers, Tomorrow created a national set of documents that was then carefully reviewed by 65 attorneys across the country. Hanley and his team then got to work developing an experience that was approachable for users, with very visual ways to make decisions.

The app helps users set up a will and trust in a matter of minutes. In July 2017, the Tomorrow app officially launched, giving people a way to draw up a legal will, set up a trust and decide on the right amount of life insurance, in a matter of minutes, on their phone, all at no cost.

Both the visual and social aspect of the process were crucial to the design of Tomorrow, says Hanley. When putting together their legal will, for example, users can literally walk around their home with a smartphone, taking pictures of items and deciding in that moment who they want those items to go to. They can also watch short videos on the app, explaining the different roles they must designate, including guardian and executor. Once they learn about each one, users are given an opportunity to decide who they want for each responsibility, notifying the person they’ve chosen directly by text through the app to make sure they’re in the know.

21Profiles in Innovation: Tomorrow

And while buying life insurance has historically been a complicated and time-consuming undertaking, Hanley knew if he could make the process simpler, and less daunting, more people would take matters into their own hands. While the will and trust features of the app are completely free, Tomorrow, which is a licensed insurance broker, receives a brokerage fee each time a user decides to purchase a life insurance plan. “Instead of going head-to-head with other online brokerages, we are meeting the needs of people who are not in the market for life insurance,” says Hanley. Tomorrow has a partnership with nine different life insurance carriers so that users can pick the best option for themselves. “It only takes three minutes to apply for life insurance through the app because we leverage the information we have from your will,” he says.

The median age of Tomorrow’s users is 36, though they tend to range in age from 25 to 45. While many users turn to the app because they have a child or spouse they want to look after, others join for less obvious reasons – wanting to ensure a guardian for their pet or protecting a boyfriend or girlfriend in the event that something happens to them. What’s more, Tomorrow also has a built-in social feature that encourages users to invite family members and friends to join, making it easy to communicate with others directly about topics that otherwise go largely un-discussed. Users can print their will directly from their phone or send it to family or others to review. “We wanted to make it completely visual and controllable in the palm of your hand,” says Hanley.

22Profiles in Innovation

Profiles in Innovation: Notes

Financial Solutions Lab