The next wave of consumer finance innovation might surprise you.

Predatory consumer finance products continue to proliferate, as they have for all of history. What’s changed, is the recent emergence and now, market validation, for products that are actually good for the U.S. consumer’s financial wellbeing. We discuss early-stage companies to watch here.

BNPL (Buy Now Pay Later) products have proven to be the latest grease on the wheels of consumerism, offering people simple ways to buy what they cannot afford. Survey data indicates that of the Americans that have used BNPL (56% of Americans as of March 2021), 38% reported missing at least one payment, and 72% of those respondents saw a decrease in their credit scores. That’s because BNPL companies don’t typically report on-time payments to credit bureaus, but some do report missed payments. While this may be changing with some much-needed regulatory oversight, today, BNPL is a lending product that can only hurt, not help, your credit score. All of these tools accelerate the separation of people from their money, and have left a wake of mistrust. Just like balance consolidation for credit cards in the 1990s and no cash down mortgages in the early 2000s, too many of today’s products help people spend impulsively and invest speculatively. For consumer fintech products to regain trust, they will have to imbed healthy financial behavior.

Today, millennials hold 65% of their assets in cash instead of putting their money to work. An effort to re-engage these consumers started with neobanks (Chime, Dave), where we have seen strong market validation. We’re now excited to see a next generation of tools emerge that treat a consumer’s financial health more comprehensively and incentivize financial participation – tools such as automatic billpay, passive investment platforms to build savings, and tax-efficient planning tools for hourly workers.

Here are some companies in our portfolio that we believe will help transform Fintech:

1. Cushion automatically identifies and negotiates bank overdraft fees. US banks collected $9B in overdraft-related revenue in 2020, and $6.13B in the first nine months of 2021. Just 18% of account holders pay 91% of these overdraft fees, and these individuals are disproportionately low-income; consumers making less than $30,000 a year are twice as likely to incur an overdraft fee than those making more. Cushion’s product uses AI to automatically scan a consumer’s bank account, and then negotiate different types of fees with the customer’s financial institution. The company has refunded almost $13M of fees in the past 24 months. It currently has 100,000 customers. Cushion is now working on launching a second product that automatically identifies, organizes, and pays recurring bills to avoid future overdraft events. Bill payment constitutes more than 30% of a households’ annual expenditures, and the lack of a streamlined and centralized bill pay process drives preventable overdrafting, late fees, and financing charges.

2. Finhabits is an anti-Robinhood for the Latinx community, helping users auto-invest in a pre-allocated brokerage account based on users’ ability to take on risk. There are 60 million Latinos (18.5% of the U.S. population) that reside in the U.S., with a $50k median annual household income and median age of 29 years. Yet, ~40% of this population does not have any retirement savings, and less than 10% of U.S. Latinos have investments in stocks, bonds or mutual funds. Distrust is a main driver, given that banks have historically disproportionately disenfranchised people of color. Finhabits is a bilingual Spanish-English app that teaches Latinas and Latinos how to invest for their future, build healthy financial habits, and sign up for affordable health insurance. They have ~50,000 active investment accounts today, 75% of which are owned by Latinos who are traditionally banked, but who haven’t been using their banks to invest, due to lack of trust.

3. Alice saves thousands of dollars for hourly workers through pretax spending benefits. 80M American workers are paid hourly, and have access to up to $26,750 in pretax spending benefits annually, (larger than 401(k) savings) but struggle to utilize the various benefits because they are hard to understand. Workers most often follow the path of least resistance, and will choose to do nothing and leave money on the table, rather than opt into a hard-to-understand benefit that could save them money. The solution here, then, lies in automating employee benefits as much as possible, which is exactly what Alice does. Alice automatically detects eligible pretax spending expenses (e.g., transportation, FSA, dependent care) and deducts them from an hourly employee’s paycheck, with no need for employer HR teams to independently validate receipts and pretax spending claims. As an example, an employee might take public transportation to work, which is a tax-deductible expense. Alice will then automatically deduct this expense from the worker’s pre-tax income, which will in turn lower the employer’s payroll taxes as well. It’s a seamless process, and a win-win for both the worker and employer, tapping into one of the largest existing tax benefits for low-income earners.

We are energized by a new generation of fintech tools that help consumers save money, take home more of what they earn, and use those savings to build wealth. We need these tools more than ever – there are 43 million student borrowers in debt, millennial homeownership is at an all-time low, and income and capital inequality is growing. For TSEF, fintech means finding scalable models that define their competitive advantage by imbedding financial hygiene at the core of their product.

About TSEF

The Social Entrepreneurs' Fund is a venture capital fund focused on early-stage investments in Fintech, HealthTech and Future of work. We believe that putting the needs of low to moderate income Americans first is more than a moral imperative – it’s a compelling business opportunity. We invest in a diverse array of entrepreneurs committed to improving lives in the communities we serve, within our three sectors of focus. We provide hands-on support through deep experience and networks to support our founders; and target market-rate financial returns, alongside measurable positive social and environmental impact.


The one thing that doesn’t abide by majority rule is a person’s conscience.
Harper Lee, To Kill a Mockingbird

In the classic novel set in fictional Maycomb County, Alabama, Lee’s story sparked conversations about equity that still resonate today. Inspired by this classic novel on social justice, Maycomb Capital aspires to continue a dialogue around social investing, bringing innovative ideas to light through action.