Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
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Glenn Hegar
Texas Comptroller of Public Accounts
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A Review of the Texas Economy


High-tech Financial Solutions for Low-income Consumers Financial Technology and Economic Exclusion

by Patrick Graves Published March 2021

Boosted by its oil and gas economy and the presence of numerous Fortune 500 companies, Texas is becoming a mecca for financial technology firms. Nicknamed “fintechs,” they are turning traditional industry practice on its head and prompting collaborations, mergers and acquisitions.

Fintechs provide cutting-edge, often mobile financial services including payment processing, alternative lending, banking, insurance, trading, investment management and personal finance.

They encompass automated processes and operations behind a variety of largely consumer-oriented financial services using algorithms and specialized software.

Many consumers may associate fintech with expediency (think PayPal, which actually is bank based). But fintech also serves small businesses and low- and moderate-income (LMI) customers, like the unbanked, who don’t or can’t access banking and financial services, and the underbanked, who don’t make full use of such services.

“Fintech can play an important role in addressing financial health in an inclusive way, reaching people who are underserved and financially vulnerable,” said Sarah Austrin-Willis, senior director of the Financial Health Network. “Many (LMI) people in America don’t have access to tools and services to improve their financial health because this population has historically been overlooked. Fintech companies can make these tools and services available more easily.”

For aspiring entrepreneurs in Texas’ underserved demographics who don’t have ready access to capital or even a bank account, and perhaps not the best financial track record, Austin-based microlending nonprofit JUST has designed a loan-making process irrespective of a borrower's past. Ninety-seven percent of JUST’s clientele are Latinas.

Technology is used to automate the human process, said JUST Chief Executive Officer Steve Wanta. A tech element corresponds to each of JUST’s three core principles: capital, coaching and community. So, instead of examining credit scores and balance sheets, JUST measures other key factors like goal-setting and networking.

An off-the-shelf tool rebuilt and scaled for Texas drives its decision-making process, Wanta explained. But to meet people where they live, JUST’s mobile system also allows cash payments.

“We couldn’t have done it five to 10 years ago without tech advances, especially in the time of COVID,” Wanta acknowledged. “But human problems affecting the unbanked are not solved by technology alone. You can’t create an app to solve poverty, unfortunately.”

Wanta, a former globe-trotting microloan officer for Whole Planet Foundation, sees the unbanked/underbanked not as the root cause but a symptom of a more complex problem. To overcome systemic exclusion of borrowers, he said JUST has “reshuffled the deck” for Texas to bridge what he calls a “trust gap.”

“We see trust as a process, not an intangible,” Wanta explained. “We’ve built our technology to model that process.”

JUST, also a community development financial institution, offers term loans starting at $750. There’s but one cardinal rule: they must be repaid. To date, Wanta said they’ve lent more than $7 million to more than 800 borrowers with a 99 percent repayment rate, which he calls “astronomical.”

Fintech is as widespread as the internet, Wanta observed, and continues to be driven by technological innovation. Nevertheless, he noted that “fintechs go where the people are,” predicting the next wave will be led by initiatives like Walmart’s prize-linked savings collaboration with Commonwealth.

Wanta says the trust gap cuts across the spectrum of consumers. “We see fintech helping them move into the traditional banking sector,” he said.

“I’ve had a (home and office cleaning) business for many years now, and the loans have allowed me to grow,” said Ana Cazares of Austin. “Thanks to JUST, I was able to set new goals and dream big.”

Fintech also encourages people to save money the old-fashioned way.

JUST’s community director, Isabel Arrellano, is known as the “$5 tycoon” for her unorthodox approach to small business growth. Not long ago, she began a new year with an empowering resolution: to set aside every $5 bill she received. Her kids started encouraging her, she said, and some of her customers paid her in nothing but fivers.

By year’s end, she’d saved $8,500 (that’s 1,700 bills, by the way).

Arrellano now lives her dream of not only owning designer handbags but selling them – out of her dream home.

For her, the path forward is clear: “I’m on my way.”

To learn more about the unbanked/underbanked in Texas, read our article in the March edition of Fiscal Notes.