Reflecting on Money20/20 last week, it’s clear that leaders from all sides of the fintech equation took some big swings this year. From SPAC deals to checking accounts becoming a seemingly mandatory offering for consumer fintech scaleups, 2022 is already shaping up to be another innovative year for the category. From our vantage point, customer debt obligations are still the driving force behind most fintech solutions.
But if cash flow makes the fintech world go round, how are we addressing its second-biggest, fastest-growing category: student loan debt? Here’s a glimpse into how fintech leaders can rethink debt to uncover revenue, engagement, and brand opportunities looking ahead to 2022 and beyond.
We all know the basics: student loan debt in particular has tripled in the last 15 years. It will likely reach $2 trillion in 2023, and each trillion in debt translates to $4 billion lost in lifetime wealth. Despite rapidly shifting federal loan policies, long-postponed payments will resume in February, amplifying the persistent, powerful racial wealth gap. Student loan debt is creeping up on mortgage debt, a reality that will require big moves from fintech leaders.
So, what does this mean for fintechs? Regardless of category, we have a unique opportunity today to connect with customers holding student debt (and debt in general), unlocking new resources and driving growth in service of our shared goal: advancing economic opportunity for all.
Hot off the heels of Money20/20 in Vegas, here are three questions to consider as you think about the role of debt in your 2022 planning process.
1. Where can we unlock value and drive conversion to other products?
Fintechs possess resources that more traditional financial institutions lack. In particular, we have the capacity for nimble, timely innovation that can transform debt loads into workable capital—and big impact.
Take, for example, our recent pilot with a leading fintech: our solutions generated $17.4 million in total projected savings. Nearly 14,000 employees carrying an average of $31,000 in debt saved $245 a month, racking up $23,490 per person in projected savings.
Unlocking savings at scale translates to unleashing economic growth at scale, which benefits individuals and fintechs alike. Talk to most scaling fintechs, and these stories of unlocking and redirecting cash flow are not uncommon. Supporting efficient solutions for everyone means more money flowing into the marketplace. And positioning yourself as a trusted partner on student loans is a great way to build your brand with customers who see student loans as a major source of stress. The combination of free cash and growing brand loyalty is a great formula for driving conversion to the other products you offer.
2. How are we hitting our DEI goals?
A bright line connects fintech services and their mission statements: financial institutions focused on amping up their customers’ financial progress have the opportunity and the responsibility to connect customers with viable, accessible student loan solutions. Visionary fintechs can also help relieve financial stressors that exert outsize effects on women and people of color.
Agile technology platforms can help fintechs deliver concrete benefits to consumers, generating a broad range of real-world, practical benefits. Freeing up savings for individuals swiftly lifts their financial profiles. Credit scores and purchasing power scale up accordingly. The extra liquidity empowers consumers to achieve important personal milestones, which are in turn supported by additional financial products.
3. How can our industry be a force for change and growth?
Converting trillions in debt to viable assets means blazing a new, tech-empowered trail in a huge and hungry market. Making the case for student loans, nearly 45 million borrowers carry this type of debt, and that’s a market share no fintech can afford to overlook. As fintechs, we have a responsibility to offer solutions to the biggest problems consumers face—and student loan debt is certainly at the top of that list.
Like you, we’re deep into our strategic planning for 2022. We know that fintechs that unlock debt ultimately unlock value for their organizations. As you plan ahead, think about what unlocking $2 trillion in debt might mean for your portfolio in the New Year.
So, how will you future-proof for student loans and other growing debt categories in 2022 and beyond? Ask Summer, we can help.