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In 2019, I helped found a company called GradJoy. It was animated by a simple idea: help people connect all of their student loans and make it easy for them to pay the loans off. It didn’t work out like we hoped, but it did open my eyes to a much deeper problem with financial connectivity.
For every college degree, a student gets a new loan for each semester, and there was no easy way to connect them to all of these. Smaller loan providers require you to log-in directly and work out confusing workarounds to pull data. Others might be available to connect with through existing connectivity solutions, but those connections can break down easily. Some of those loan providers can’t be connected to at all.
We knew that there was a need for a product like GradJoy, but it was too hard to be useful. There was no way to access all of this data about liabilities in one place. There was no way to automate payments. There was a total lack of financial connectivity.
It’s easy in theory to fix this problem. You create a tool that can connect to an account and provide access via API, letting other products plug into it and access its data. But it’s harder in practice. Liabilities are fragmented and complicated. They require users to connect accounts manually, and one-by-one, and in the US, there are over 8,000 financial institutions where these liability accounts live. The data that gets pulled is frequently old and outdated. Connectivity providers often use tactics like screenscraping which are unreliable. They often can’t facilitate payments.
This may sound like a narrow problem, but it’s an issue that has considerable impact on our lives. The average American has accounts at a range of financial institutions, regularly uses between 3 to 5 financial apps and carries more than $100,000 in debt, spread across multiple credit lines. And more than 40% of Americans will open a credit card in the next 12 months. Our financial life is exploding but we can’t access a full view of it or streamline how we manage it.
There’s a cost here. Americans carry more than $18 trillion in debt and pay a whopping $250 billion in credit card interest each year. There are huge inefficiencies in how these are managed that carry a large financial toll to consumers.
GradJoy didn’t work, but we saw that if you could fix the issue of connectivity at the core of why it wasn’t possible, there was a much greater opportunity at stake.
There is a way to think outside the box here. It is possible to pull a profile of all of someone’s credit cards and liabilities with just their name and phone number. And once you’ve established what accounts they have, you can make direct connections with each of them that can be updated in real time if needed and make payments to those accounts as well as reading data. You can do these and put each user in control of the whole process and how their data is used.
When you think in this way, you open up a much broader opportunity to remake how consumers interact with their financial lives. The result is something that feels a little magical for consumers, and for businesses building financial products is a massive unlock.
I see three core areas of impact when solving for financial connectivity that define the bigger prize.
1. Help Consumers Understand, Manage and Engage With Their Debt
If you let consumers easily access data about their liabilities and link it to the financial services they’re using, you’re empowering them with information and giving them the steps to action. Or put more simply, an app to help you pay down your debt isn’t going to be useful if it can’t connect to all your debts and help you make payments against them.
With a clearer understanding of their financial picture, consumers will spend less money on debt. A company like Cleo – an AI financial assistant with more than a million users – is a great example of this. Its Debt Reset product lets its users easily connect all of their credit cards and liabilities and helps build personalized repayment plans.
And this data access has two-way benefits: companies can better serve their customers with debt consolidation and refinancing offers, helping them reduce their interest payments. SoFi is another great example of a company that has invested well here, and since it has begun focusing on improved financial connectivity for its users, they’ve been able to help 20% more borrowers qualify for lower rates.
2. Empower Consumers to Make Seamless and Secure Digital Payments
Companies spend so much time and money getting people to their site to buy their product or enroll in their service but still stumble over an age old problem. It’s clunky to dig out your wallet and enter in 16 digits. You might not have the right card on hand or get declined for unknown reasons. This ends a surprising amount of sales: about 70 percent of shopping carts online are abandoned, with overly complicated payment processes a major driver of that. And when consumers abandon their carts, they’re often gone forever.
There’s a completely different way to think about the checkout and enrollment. Through the same way that consumers can connect to their credit cards and liabilities, that connection can be turned into a persistent payment token at the point of sale. Seamlessness in digital payments is usually equated with higher fraud risks, but this might be the unicorn situation where both are reduced. Because this connection is tokenized, it reduces the PCI burden on merchants, and every time a consumer goes back to that site, their full wallet is already connected, so they can switch their choice with one simple click or not have all of the subscriptions disrupted when a card is declined.
3. Make Current Financial Products Work More Efficiently and Effectively
There’s just more that can be done when you know someone’s full financial picture. Think about something like a credit card. It is one of the most ubiquitous consumer products in the country that people use on an almost daily basis. But the process isn’t optimized or efficient at all. We have to connect with them all separately. We never know what the best card is to use for what transaction, based on the myriad of different benefits. And we let a vast fortune of credit card points go unredeemed.
Making this better can be as simple as giving someone a simple hub to manage all of their credit card repayments. But it can go well beyond that.
Example: Bilt allows consumers to access their loyalty program and earn credit card points on rent, student loan, or mortgage payments. It used to allow consumers to connect just one card. When it allowed consumers to easily connect their whole wallet of credit cards to Bilt, it could allow users to start earning rewards on everyday purchases. Seamless connectivity increased card enrollment by 148 percent and spend per member went up by 83 percent.
Beyond these three core immediate areas there’s also the possibility for this unlock to be greater than the sum of its own parts: You’re making it easier for consumers to pay, understand their credit profile, and access products that fit them better. As a business, when you solve the issue of connectivity, you’re building products that are built on better data and have the potential to invent entirely new revenue lines by making yourself broadly useful in a way you just weren’t before. More innovation like this, and consumers broadly will have better access and control over their data, making them feel empowered and like they’re not just using, but benefiting, from their financial services.
The next generation of GradJoys won’t face the problems we did, and consumers will be the ones that benefit. Win-wins don’t come around that often. Let’s not take this one for granted.