Financial technology is nothing new, but the relatively recent addition of “fintech” to our corporate lexicon not only added some sex appeal to the space, it also spawned some misconceptions about what the industry’s all about. Perhaps that can be chalked up to the fact that no one really knows how the market’s semi-fundamental shift will ultimately play out.
Either way, surprises and uncertain futures are inherent to the start-up world. And while I generally understood that when I made the leap from a director-level position at Capital One to entrepreneurship, nothing can truly prepare you. But with that being said, I’ll try to help pad the landing — or at least peel back the curtain on an emerging curiosity — by sharing some of the most surprising things I’ve learned as CEO of the free-credit-score website WalletHub.
- How Much Room There is for Improvement: Having worked at one of the most sophisticated institutions in the financial establishment, I already knew that strategic money management was not most people’s forte. But I didn’t fully appreciate the scope of the problem.
For example, U.S. consumers have racked up more than a quarter of a trillion dollars ($251.6 billion) in the past five years, including an astounding $71 billion in 2015 alone, according to CardHub research. What’s more, nearly a third of all consumers (28 percent) have bad credit, according to WalletHub data.Such statistics foster cause for serious concern, but also represent a significant opportunity for improvement, for both consumers and companies alike.
- How Scared Financial Advisers are of Reviews: Securities and Exchange Commission policy changes in 2014 cleared the regulatory path for advisers to use customer testimonials to attract new business, provided that the reviews in question are not cherry-picked.But many advisers have been disturbingly reluctant to do so, which is troublesome in the sense that reviews should represent an opportunity for reputable advisers to attract new customers and grow their businesses, while rightfully taking market share from bad actors.
So is this just an aversion to change or perhaps fear of technology? Or are more financial advisers than we imagined worried about what value they really bring to the table or which disgruntled former clients may come out of the woodwork? I’m still not sure.
- The Inefficiency of Insurance Regulation: People talk about the tax code being complex, but the structure of our domestic insurance markets puts it to shame. Each state is governed by different laws, regulations and competition dynamics, which creates confusion for consumers and fosters value-draining fragmentation within the industry.
As a result, reforming this inefficient corner of the fintech market isn’t as simple as the Consumer Financial Protection Bureau handing down new rules. So it looks like we might be stuck with this problem for a while.
- It’s Not All About Millennials and Silicon Valley: Both the corporate and consumer sides of the fintech industry are painted with a decidedly youthful brush, typically depicted as operating out of chic Silicon Valley offices with designated spaces for naps, yoga mats and other such calling cards of a generation turning traditional business practices on their head.
Such a characterization is accurate to a certain extent, but it’s definitely not representative. WalletHub, for example, is based in downtown Washington, D.C. — just a few blocks from the White House and the Consumer Financial Protection Bureau. What’s more, Betterment, IEX and Oscar are all in New York, Avant is in Chicago and Kabbage is in Atlanta. And the consumers are just as eclectic, too.
At the end of the day, these are but a mere handful of the tales I could share from the frontlines of the fintech industry. But the story has yet to be completed, and the best is still yet to come. So I’ll be sure to check in again in the future, and hopefully I’ll be even richer in experience by then.
Odysseas Papadimitriou is CEO of the personal-finance website WalletHub, which offers free credit scores, full credit reports, 24/7 credit monitoring and customized money-saving advice. Before founding WalletHub, Papadimitriou served as a senior director at Capital One. He holds a bachelor’s degree in economics and a bachelor of science degree from Brown University as well as an master’s degree in business administration from Duke University.
