The FinTech ecosystem is always debating the merits of NY versus SF. Today, we have a new contender to add to the mix: DC.
As many of you know I started my career in government, and I’m passionate about public service. When people ask me why I left my role in government to work in FinTech, my answer is that I’m hugely passionate about financial health. Money is power, and the fact that 27% of the American population is unbanked or underbanked astounds me.
As I dive into my journey in financial inclusion, I stopped by to talk to Jotaka Eaddy, the Vice President of Policy, Strategic Engagement, and Impact for LendUp.
Here are some of the insights she shared:
Monica: Having previously worked on criminal justice reform, how did you end up in FinTech and what are you working on in your role at LendUp?
I started my advocacy work at age 16, and eventually served as the senior advisor to the President of the NAACP. Economic empowerment is a tenet of seeking true civil liberties for all people, and FinTech can lead us there.
For my current role, I spend about ⅓ of my time in DC, and the rest in SF, leading engagement and development around policy positions for LendUp. On the day to day, this means I’m working to engage with advocates, elected officials, and regulators. I’m spreading the word about who we are and the impact we are driving. What is special about LendUp is our commitment to social impact. We’re a mission-driven financial technology company, striving to create a pathway for anyone in this country who wants better financial health. We offer the first socially-responsible credit cards -- the L Card and the Arrow Card, as well as loans that give borrowers the opportunity to decrease their fees over time.
We’re driving a national conversation about financial inclusion, and our team is focused on social impact, measuring and improving the financial health of our customers.
Monica: What is LendUp looking to achieve with its presence in DC?
Jotaka: We’re figuring out, how do we learn and drive impact? How do we formulate policy that helps drive impact for our customers? We want to communicate those messages with policy makers and influencers. It’s important to note, those policy makers and influencers are not just in Washington, they are around the country. Elected officials are at state capitals across the nation, and they have a growing interest in how financial technology can be a driver of financial inclusion for their constituents.
Monica: How has the FinTech landscape in DC grown/changed in the last 5 years?
Jotaka: There is lots of interest in FinTech. I have been engaged in FinTech for 4 years, and over that time, I’ve seen a real increase in interest. There is now a deeper understanding of FinTech, and I’m seeing a deeper desire to understand financial technology, and how regulations can change to help bridge gaps that FinTechs can solve for. In last 3-4 years, we’ve seen the CFPB’s Project Catalyst Initiative, and the OCC opened an Office of Innovation. The FCC has always delved into tech, but they are now more focused on in FinTech specifically. On the congressional level there is lots of interest. Some members are very vocal around financial tech, and they have hope that FinTech can fill gaps that have been created by the banking system. At the federal level, Congressman Emanuel Cleaver, Congressman Gregory Meeks, Congressman Patrick McHenry, are a few individuals engaging with FinTech. There is also a similar level of interest at the state level. Arizona and the debut of their Regulatory Sandbox is a perfect example of state level legislators taking initiative.
Monica: Who are some key players/departments in the government thinking about innovation and what are they working on?
Jotaka: LendUp, of course, is on the ground. The White House still does focus on innovation. During the Obama administration, there was a keen interest in tech overall. As a result, there was also a focus on FinTech, and there are still some conversations happening with this administration. The Department of Treasury comments and pursues conversations around financial technology. Trade associations like the ETA, CFSI, and FinNow, among others, are very active, and even companies like PayPal, which is a LendUp investor. There are more and more FinTechs advocating on the hill.
Monica: There has been a lot of discussion about governments around the world adopting tech and working with startups to provide better services to their people. The EU working with lending startups to provide SMEs with business loans is a great example. Have you seen the US government thinking about embracing innovation in its daily work?
Jotaka: We’re still in early stages, but we’re a lot closer than 4 years ago. Like I said before, we’re starting to see a deeper understanding of FinTech in the government. Recently, we’ve seen a network of state regulators discussing how we can have more coordination amongst state regulators. We’ve seen the OCC Fintech Charter. There are a lot more conversations happening about FinTech for social good. Over the next 2-3 years, we’ll see more movement. The policy level is not as fast moving as Silicon Valley, or the tech landscape. There is a lot at stake, and there is a healthy balance between moving swiftly and slowing the conversation down for due process.
Monica: How can startups get involved in the push for government adoption of innovative technology and policies?
Jotaka: To start, find like-minded startups with the same objectives, with a similar business model. Working in coalitions is important, and it's effective. There is so much info, and so many conversations. So much state legislation is coming out about financial technology. It can be overwhelming, but start by finding a coalition or a trade group. That’s good best practice for a starting point. Think about: which piece of the larger strategy should you start with? Start really small, and focus on building relationships with people who want to learn or engage more. You can even start with a goal to visit DC twice a year, and engage 2-5 members of Congress. Better yet, visit states where your business has a large footprint and talk to their elected officials.
Monica: Any last thoughts?
Jotaka: There is an incredible amount of opportunity in FinTech for financial inclusion. It’s not monolithic. Various FinTechs are focused on various verticals of the industry, but there are just not as many focused on the 56% of Americans who have been shut out of traditional banking. There is a great opportunity to service a community that has been pushed to the margins. We see more companies focusing on financial inclusion and financial health, and it’s a trend that I hope to see grow, since there is a great amount of opportunity. I got into this line of work when it became clear to me that technology and innovation can be a true driver for change. We can bring dignity back to financial services. That's what we're doing at LendUp.
To many of us, access to a bank account is not something we question. Gowing up in Australia, my whole grade had a bank account opened when we were in primary school. From this early age, it gave me a place to save money, make payments and earn interest. As I’ve grown up, it’s made my life easier - from buying groceries at a store, to dealing with a medical issue, or saving to buy a house and get a mortgage - I can do all of these things because I have access to those products and services that fall within the formal financial system.
Unfortunately, not everyone in the world has access to financial products that meet their needs. According to the Federal Deposit Insurance Corporation, 7% or 9 million Americans are underbanked. That is, they don’t have access to savings, payments and credit. And globally, the numbers are staggering. According to the World Bank 42% or 2 billion adults globally are outside of the formal financial system.
Why are people falling outside the formal financial system?
It’s a complex problem and there are myriad reasons why this occurs, which can include the fees and costs associated with maintaining bank accounts, minimum balance requirements, access to banking infrastructure, and the provision of products by banks that meet their needs. A wide-reaching lack of trust in financial institutions, especially in the U.S. since the 2008 crash, is also a factor.
What are the real world implications?
Being outside the formal economic banking system can be a huge burden. People without traditional financial access often pay excessive amounts in fees and transaction costs to do the most basic transactions like making payments or cashing checks. On top of this, it limits access to credit and in many cases people must resort to alternative credit outlets like “payday loans” and money orders which can charge high fees.
Why is financial inclusion important?
Providing financial products that meet people’s needs, improves their quality of life. It’s a means of reducing poverty and increasing prosperity. Simply having a bank account opens up opportunities to access secure and fairly priced credit, insurance, save, build a business deal with emergency situations, and pay for education.
What is being done to facilitate financial access?
There are a group of FinTechs seeking to drive both economic innovation and create social change - they’re using technology to make a difference. Here at Empire Startups we’ve been lucky to have had many of these game-changing founders speak to our community. Here’s a quick look at few of them:
- Using mobile technology as an entry point
- Juvo analyzes mobile phone behavior of customers to generate an identity score which can then be used to get credit to other financial products and services.
- Harnessing alternative data points to provide access to credit.
- Tala has created an app that uses alternative data to deliver instant credit drawing on thousands of mobile data points including network diversity, social connectedness, geographic patterns, and financial transactions without a need for formal credit history.
- Understanding consumer behavior
- Bee is an alternative to a checking or savings account and lets consumers who don’t have easy access to traditional banks manage their money and bank entirely from their smartphones. The company uses pop-up kiosks and street teams to sign up customers in-person in the neighborhoods where they live and work.
Two months ago, I took a massive risk: I quit my job with a government organization and took a job with a startup. I left what many would argue is the safest job, to go work for a company with little job security. My parents thought I was insane. Was it worth the risk? I sat down with my friend Sean Michael, who also recently transitioned to a role at a startup, and we came up with 5 things we think you should know about working for a startup:
Anything is possible, money and time are your only constraints. During the interview process, Empire Startups Founder Jon Zanoff asked me what my ideas were. I rattled off a few things I knew would make a tangible difference, and Jon said “Great, now you just have to make them happen”. At the time, I didn’t realize he wasn’t listening to my answer, but rather gauging my reaction to having that much autonomy. Startups are high growth organizations, so the possibilities for improvement and growth are limitless. The number of hours in the day and the costs associated with these changes are usually the only barriers. It was really easy for me to propose the launch of a blog and make the case for the value it could add, but after adding a few more projects into the mix, on top of my standard workload, I see how my own time and energy is a limit to how much we can do.
Bureaucratic hoops are replaced with rings of fire. Start-ups require quick, on-the-spot decision making. In larger and more hierarchical organizations, projects get held up while getting proper-signoff. It can be frustrating to put forward a proposal you’re enthusiastic about, and then realize it will take several months just to get approval for the project, let alone implementing it. In startups, you’re frequently the decision maker and the rescue squad. You have to put out fires and make rapid-fire decisions while giving every decision its due diligence. You can put an idea forward, get the go ahead, and begin implementation all in the same day. The question isn’t whether you have ideas, but rather do you have what it takes to deal with a crisis while also managing several timelines.
Throw away all notions of the 9-to-5. We all know that work-life balance is important, but that balance shifts when you work for a startup. If your startup-up is scaling quickly (which you hope it would be!) you’re almost always on call. Every issue that pops up is urgent, and requires your immediate attention, which means answering emails on weekends and solving problems in your pajamas. Perhaps you work entirely remotely, so you’re home becomes your office. This all sounds daunting, but as most startup employees can tell you, is also incredibly rewarding. I found that being entirely in charge of a project meant that I was happy to take a call on a Saturday, or in one case, even teach myself enough Python in one evening to complete a project. When you have autonomy over your work, you feel responsible for it, and at the end of the day, proud of your organization.
If you’re really worried about losing all work-life balance, or even worried of burning out, ask about the company’s flexible working policy prior to taking the job. Can you work from home, or take work home in the evenings instead of sitting at the office until late at night? At the same time, you need to be realistic about how much time you are willing to dedicate to your job. Startup employees are passionate about what they do, and that leads to more than 40hours a week, almost every week. Only take the job if you’re passionate about the mission, and ready to do whatever it takes to help the company succeed. Everyone around you expects hard work, but it’s because they love their job, and expect a similar level of commitment from their colleagues.
Making waves is encouraged. In government and corporate environments, the challenge is to be innovative without rocking the boat too much. The bureaucracy involved in making even minor changes are enormous, and can be exhausting. In startups, however, you want to make waves – and lots of them. Every process is always up for reevaluation, and flat, agile organizations are always interested in looking at new ways of doing things. This can be really exciting, since you have more room to think creatively and will see your ideas being incorporated, but it does take time to take a risk and shift away from the sense of security and stability of corporate guidelines.
You will become your own teacher and boss. Resources and time are stretched thin at startups, so you’re expected to take initiative and make things happen yourself. This isn’t to say you will not get training or that you’ll be left to flail in the deep end, but rather that you are expected to look for your own answers. At times, you’ll feel like you’ve been abandoned, left to your own devices, but think about the tools at your disposal, and be prepared to make mistakes. Case in point: We recently switched over to a new CRM system at Empire. I was tasked with migrating information from one system to another. I was expecting guidelines on what information we want in the new system, but I was basically told to just make sure the new system had everything we needed, and was easy to navigate with a clean format. It was on me to learn how to do this migration and to set up the new CRM as I saw fit. I created my own criteria for the database, and set myself goals and deadlines. I knew I could reach out for help at any moment, but I was energized by the process of finding my own way to the end goal.
Working for Empire Startups has been an incredibly rewarding experience, but startup life was definitely a significant adjustment. A job at a startup gets you a lot of autonomy and responsibility. It can be an incredible growth opportunity, as long as you’re prepared to be flexible and change your mindset towards what office culture looks like. Startups are for you if you’re ready to work hard and let your passion fuel you, to push yourself harder than you’ve been pushed before. If you’re balancing different things, and are not sure that you can dedicate your entire self to this role, working at a startup probably isn’t for you. Startups really value diversity of experience and perspective, so if you’re worried that you’ve never worked for a startup before, don’t be. A fresh set of eyes is always welcome, and a focus on the future is paramount.
|Rank||Company||Amount Raised||Fund Closed||More Info|
|1||Climb Credit||$130 M||Oct-19||>|
|2||Finova Financial||$102.5 M||Oct-18||>|
|6||Digital Asset||$40 M||Oct-16||>|
|11||True Link Financial||$8 M||Oct-11||>|
|19||VISOR ADL||$1.7 M||Oct-5||>|
|19||Proof, Inc.||$1.7 M||Oct-10||>|
|21||Payment Rails||$1.1 M||Oct-10||>|
Didn't Kabbage just fundraise? Following their August raise, Kabbage leads this period with another round. In related news, Earnest was acquired for $155 M, a long slide for a former-unicorn.
|Rank||Company||Amount Raised||Fund Closed||More Info|
|10||Slice Labs||$11.6 M||Sep-13||>|
|14||Lively, Inc.||$4.2 M||Sep-7||>|
|16||Alt Thirty Six||$0.67 M||Sep-21||>|
|Rank||Company||Amount Raised||Fund Closed||More Info|
|1||Braavo Capital||$70 M||Sep-13||>|
|2||Raise Marketplace||$60 M||Sep-19||>|
|3||The Zebra||$40 M||Sep-19||>|
|10||YayPay Inc||$5.3 M||Sep-13||>|
|12||Liveoak Technologies||$2.5 M||Sep-13||>|
|14||Machool Technologies Ltd.||$0.5 M||Sep-7||>|
The steady beat of ICO-as-fundraiser has started showing up on our biweekly reports. It's interesting they're showing up on Crunchbase as generic "funding rounds" — see BitBounce and SURETLY below.
|Rank||Company||Amount Raised||Fund Closed||More Info|
|6||Domuso Inc.||$3.1 M||Aug-30||>|
|8||Bestow, Inc.||$2.5 M||Aug-29||>|
|9||Finaeo Inc.||$2.25 M||Sep-5||>|
|x||Cloud Lending Inc.||Undisclosed||Sep-6||>|