Fintech Request for Startups

The past five years have brought significant excitement to financial services. From a consumer perspective, there have been more products launched in this period than in the previous 225 years, since the first bank launched in the United States. Driving this innovation is an increase in mobile adoption coupled with expanding consumer demands for better financial services. Likewise, a number of tools and services targeted towards developers have allowed them to build applications to meet this consumer demand.

We’ve seen many legacy financial products finally move online, allowing us to more easily get loans, make payments, budget, invest, and much more. However, most of the improvements within fintech have focused on digitizing and distributing existing financial products; making them simpler and—not unimportantly—cheaper. In only a few cases have we seen fundamentally new tools and services launch. This will change in the coming years.. We will see many completely new financial services products—driven in part by stronger alignment between financial service providers and consumers, which leads to better, more useful products.

We’re excited to issue our first Fintech Request for Startups (drawing on YC’s style of RFS). The list below represents a number of underserved areas of financial services where we believe there can be significant improvements made to existing products, or new ones created.

Consumer tools

• Better bills. Bills are often made to be opaque and unengaging, perhaps with the hope that consumers will “set it and forget it.” Tools that allow consumers to actively monitor, better understand, and easily update their bills are much needed. Likewise, bill / rate benchmarking services and simple credit products to avoid overdrafts or missed payments could also drive great consumer value.

• Consumer-centric loan servicing. Once most loans in the United States are issued, they are immediately passed off to a servicer, who is responsible for collecting (“servicing”) the loan until it’s been fully paid off. This is generally an impersonal relationship, and in the event a loan reaches collections, it’s often dehumanizing. There is significant opportunity to create a consumer-centric loan servicing model that helps coach consumers out of debt and -- ideally -- helps them to build good credit.

• Personalized insurance. There is increasing interest in non-traditional property and casualty insurance, particularly around short-term policies that cover specific items. For example, laptop insurance for a trip abroad, or bicycle insurance for just a few hours. As data becomes more plentiful, accurately pricing these policies will become more practical.

• Tax preparation. Despite being a relatively straightforward problem to solve, few startups are focused on tax preparation. Digitizing the U.S. federal + state tax codes would make for a great open-source project, and doing so could enable many new entrants.

Banking Services

• Abstractions from the core. Almost every bank in the United States relies on a mainframe-based “core” banking platform, predominantly built by a few long-tenured providers (Fiserv, FIS, Jack Henry). Interfacing with these proprietary “core” systems is incredibly difficult (and often requires the cooperation of the core providers themselves), meaning that many banks cannot build new features or functionalities for their users. Creating an abstraction layer on top of the core to allow banks to innovate more quickly could have massive value.

• Hardware + software for branches. In-branch banking is waning, but a significant portion of our banking interactions still occur in-person. >80 percent of mortgages are still issued in person. Though the trend towards digital, asynchronous banking continues, it could take decades. In the meantime, there is significant opportunity to digitize the in-branch experience for lending, account opening, identity verification, and much more.

• Mobile bank account opening. Opening a new account is the first step towards a long banking relationship, yet doing so is a cumbersome process that still often requires in-person branch visits, phone calls, and multi-day wait times. There is a significant opportunity for an SDK that can be embedded in existing mobile banking applications to enable bank account opening on mobile devices.

Infrastructure

• Brokerage-as-a-Service. To build an investing or robo-advising application, developers must work with a clearing broker that executes trades and holds shares on behalf of an individual. As investing applications continue to grow, there is opportunity to build a modern back-end clearing service that brokerage and investment applications can be built upon.

• Compliance-as-a-Service. Regulatory and payments compliance is difficult for startups, yet more and more must figure it out every year. There could be opportunity for plug-and-play compliance programs and platforms for early stage companies to help satisfy requirements for KYC, AML, BSA, etc.

If you’re building something related to any of these (or thinking of doing so), we want to help. We’d love to put our resources, connections, and capital behind these! Let us know at rfs@plaid.com.

This list represents the input of many members of the Plaid team, as well as a number of entrepreneurs, bankers, investors, and friends in financial services. Thanks also to Aaron Harris, Ravi Viswanathan, Rick Yang, Arjan Schutte, and Jake Fuentes for their input and help editing.