Hi Sarah – please tell us about your fintech journey so far.
I co-founded Fintech Sandbox with F-Prime Capital Managing Partner David Jegen more than eight years ago. Its goal is to support the global fintech community and help promising fintechs accelerate product development by providing free access to data and resources when it would be most impactful – in their early stages when funding is limited. Today, the nonprofit has 40 leading data providers participating in its program and a wide range of corporate sponsors. It has now worked with over 290 startups from all over the United States, Canada, the United Kingdom, continental Europe, Africa, India, and Latin America.
As part of my work with Fintech Sandbox, I founded Boston Fintech Week, one of the top fintech and financial services events on the calendar, that provides a platform for discussion on the latest fintech trends and attracts thousands of attendees each year from all over the United States and the world.
I additionally started Capital Market Exchange (CMX) in the wake of the credit crisis, in order to identify and quantify emerging nonfinancial risk factors. Our predictive analytics platform leveraged a Bayesian estimation technique, NLP and AI to aggregate, normalize and quantify non-financial factors institutional bond investors projected would influence investment grade and high yield bond spreads.
At Vantage Ventures, we work hand-in-hand with a cross-industry portfolio of entrepreneurs who are tackling the next generation of challenges in FinTech as well as digital health, sustainable infrastructure and data and IOT. The goal is to accelerate startup activity and entrepreneurship in an unlikely place – West Virginia – by deploying proven processes to take new ideas to market and raise capital. As part of this effort, we open doors locally and nationally (and, at times globally) for our entrepreneurs with an engaged network of business mentors, customers, investors and, when helpful, policy makers.
For example, I co-wrote the West Virginia Regulatory FinTech Sandbox policy that became law by unanimous vote across party lines in the West Virginia House and Senate.
This has resulted in new fintech startups starting environmentally-focused neobanks and policy changes to attract, partnerships and investment from noteworthy partners like Berkshire Hathaway Energy and Breakthrough Energy to West Virginia.
I also designed the curriculum for a graduate level course on the evolution of Financial Technology at Brandeis University and taught in the first program in the U.S to confer a Master of Science in Fintech degree.
Needless to say, fintech is the common thread through my varied professional experiences.
Also Read: Global Fintech Interview with Frank Sandeløv, CEO at CardLab ApS
How, according to you, should companies embrace fintech to transform their business more significantly?
Companies, and particularly those that are rooted in or closely related to fintech, need to hone in on financial data and utilize it in order to better understand the problems we face, drive innovation, and transform their own businesses and, by extension, the world.
That being said, data access – particularly with alternative and ESG data – poses a substantial challenge to fintech companies who aim to drive innovation in many industries and deliver ESG solutions. But this problem is being solved through a collaborative system of data exchange that creates a circle of innovation between fintechs, financial firms and data providers. The result is bringing more opportunities in sustainable and inclusive finance, which ultimately makes a positive impact on our world.
Early-stage fintech startups need access to data as much as data providers and financial institutions need them to have it. It’s a symbiotic relationship that has many benefits to each party and it’s proving to be an effective way to help fintechs scale, innovate and ultimately advance the entire financial services industry in the process.
Financial institutions, connected devices and both traditional and non-traditional data providers generate enormous amounts of data that many fintechs – especially those at early stages – are using to bring new innovations to their various sectors and the financial services industry as a whole. As just one example, Fintech Sandbox even uses Weather.com as a data source to help entrepreneurs build portfolio risk models that incorporate climate. Also, these fintechs often create new datasets based on their work that can provide additional innovations to financial firms and provide benefits across sectors.
By providing more fintech startups with access to data, it not only benefits the individual startups by giving them a leg up, but also fosters innovation and growth for larger financial institutions. When fintechs have greater data access, financial organizations can learn about the newest technologies and ideas, which helps them develop their own fintech strategies. These can lead to new business perspectives, technologies, or processes in different business areas, especially with ESG.
Please share two Fintech Sandbox startups/products that you are particularly proud of, and why.
I am extremely proud of our past resident, Petal (now valued at $800 million), which helps people build credit, avoid debt, and spend responsibly. They also launched Prism Data, which helps underserved consumers and small businesses by offering an API that ultimately gives them better access to credit. They have been able to harness data access in unparalleled ways, and have seen tremendous growth and success, and even launch their own platform to support other companies and provide them with access to their technology.
I am also extremely proud of our past resident Novo, a checking account and fintech platform built for small businesses, which recently announced $35 million in funding (bringing its total equity funding to more than $170 million). While I will elaborate further in a question below, fintech has been critical to helping support small and medium sized businesses (SMBs) in this challenging economic environment, and to see the success of one of our startups that helps support SMBs is incredibly gratifying.
Also Read: Global Fintech Interview with Leanne Holder, CEO at Giving To Services SVS Token
Given the rapid pace of change in fintech today, what would your top five tips be for reskilling initiatives for teams belonging to this niche?
Others have written extensively about the technical skills needed to successfully work in the digital economy. I’ll take a different tact here. Instead of offering tips on reskilling, I’ll share Jeff Bezos’ seminal thoughts leading up to Amazon’s IPO.
In his letter to shareholders, Bezos wrote, “We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions…. We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case.”
Embedded in these three sentences is what I recommend fintech professionals incorporate into their work;
- be bold, but build for long-term value creation;
- own your market; and,
- treat failure as a lesson, not as your final destiny
The cost of and access to data are the major challenges for FinTech startups. What would you advise other fintech founders to do, to overcome these common challenges?
As mentioned before, by working closely with data providers and financial institutions (and doing this through utilizing organizations like Fintech Sandbox, which provides startup with free access), fintechs can access new data sets, which helps them build products and services, influence investment decision making and open up new ways of conducting business – all working towards greater sustainability and financial inclusion. This has many benefits to each party, such as the development of new, monetizable business ideas using the data, which advances the entire financial community. Many of these ideas benefit society at large.
Also Read: Global Fintech Interview with Jyotirmoy Chakravorty, Founder at Ubona Technologies
What are some of the top FinTech trends you’re seeing get more attention in 2023?
A major fintech trend that I am seeing get more attention is the increasing prominence of artificial intelligence (AI). As many debate the viability of AI and its potential to disrupt industries, eliminate jobs and fundamentally alter society, financial services is seeing clear benefits from this technology via fintech partnerships with early-stage AI startups. The key ingredients for success include the fintechs having access to the right data to build products to meet these institutions’ needs and proper governance and oversight to produce the best outcomes using AI. The 5,000+ banks in the US can’t reasonably be expected to leverage the AI opportunity on their own – and to see real, positive results that can build the industry in the best way possible, they must engage with the innovators who are leveraging data to build the future of AI.
I have also been seeing the increased challenges that small and medium sized businesses (SMBs) have been facing, particularly in today’s challenging economic climate, but how fintech has been giving these small businesses more options and opportunities to thrive through embedded finance options, micro-lending technology and other digital financial solutions. (However, in order for fintechs to continue to be able to support SMBs, they need critical access to data.)
As a note, Fintech Sandbox’s upcoming Demo Day 9.0, which will be showcasing global startups and the technologies and products they built during their involvement in Fintech Sandbox’s Data Access Residency, both AI’s applications in fintech/finance and the ways that fintech and access to data support SMBs will be key themes.
Tag (mention/write about) the one person in the fintech industry whose answers to these questions you would love to read!
I hope that Todd Combs reads these answers!
Thank you, Sarah! That was fun and we hope to see you back on globalfintechseries.com soon.
[To share your insights with us, please write to sghosh@martechseries.com]
Sarah is the co-founder of the Fintech Sandbox, a Boston-based not for profit providing entrepreneurs access to high quality data sets, and Capital Market Exchange, a venture capital-backed predictive analytics platform for institutional bond investors. She is also the Executive Director of Vantage Ventures, an effort to build and invest in scalable, capital efficient companies in Appalachia.
Alongside F-Prime Capital Managing Partner David Jegen, Sarah co-founded Fintech Sandbox more than eight years ago. Its goal is to support the global fintech community and help promising fintechs accelerate product development by providing free access to data and resources when it would be most impactful – in their early stages when funding is limited. Today, the nonprofit has 40 leading data providers participating in its program and a wide range of corporate sponsors. It has now worked with over 290 startups from all over the United States, Canada, the United Kingdom, continental Europe, Africa, India, and Latin America.
Sarah also designed the curriculum for a graduate level course on the evolution of Financial Technology at Brandeis University and taught in the first program in the U.S to confer a Master of Science in Fintech degree.
Fintech Sandbox is a nonprofit that provides a leg-up for entrepreneurs around the world by providing free access to critical datasets and resources to build their early-stage fintech products through its Data Access Residency. Fintech Sandbox startups, in return, collaborate with current and past residents, sharing learnings and advancements that benefit the ecosystem. Participating startups – more than 290 thus far – pay no fees and no equity is taken. Boston Fintech Week and Mass Fintech Hub – a public-private partnership dedicated to making the Commonwealth a global leader in fintech – are initiatives under the Fintech Sandbox umbrella.
