Hi, fintech fam! 💜

As we get closer to the first-ever Fintech Is Femme Leadership Summit, the words of the queen, Beyoncé, are echoing in my head.

Being an innovator means having big dreams, and working through the struggles of executing on those dreams. The thing about being innovators is that you will be faced with criticism along the way for challenging the status quo.

When I first set out to build a fintech summit with an all-female speaker faculty of experts, I knew it had never been done before. But as an innovator, you must possess the vision to see what others deem impossible.

Putting together the Fintech Is Femme Leadership Summit has been a labor of love, meticulously crafted with utmost dedication and passion.

Don't miss out on this incredible opportunity and be sure to share it with your friends. We are on the verge of selling out, and your support in achieving the milestone means so much and keeps this work going. Secure your spot, here.

Now, let's delve into the latest traditional finance product that I am confidently bullish about revolutionizing with fintech.

YOU’RE INVITED

Watch this promo video I made to get you excited for the Fintech Is Femme Leadership Summit! See you on April 8 in New York City!

INNOVATION

How Digital Lending Insurance Can Boost Economic Equity

Embracing risks has long been recognized as a pathway to unlocking new business opportunities.

Yet, one significant barrier often stands in the way: access to capital.

The lending practices of the insurance industry can be transformed by technology, making capital more accessible to a wider range of people.

"Insurance is not just a product of protection but a product that enables rational risk-taking and allows people to make choices," said Danielle Sesko, the Director of Product Management and Innovation at TruStage^TM , in an interview. "It enables people and empowers them to live their best lives." 

To innovate insurance beyond traditional norms, TruStage created Payment Guard Insurance, a first-of-kind digital lending solution and the first product within the company's Digital Lending Insurance (DLI) category. 

It is designed to increase lenders' and borrowers' financial decision-making capacity. TruStage says Payment Guard is already safeguarding close to $385 million in loan balances.¹  

The product’s edge lies in alleviating borrowers' loan repayment burden during unforeseen circumstances. It is entirely lender-paid and provided at no cost to the consumer, giving the product broader significance in society. 

Why It Matters 

The issues with traditional lending insurance are systemic: many financial institutions, hungry for non-interest income, have grown reliant on the commission revenue generated from selling insurance, thus becoming dependent on its margins.

This has made traditional lending insurance products notorious for their complexity and high costs. Agents, loan officers, or financial advisors often market insurance alongside loan origination or credit offers.

The friction they introduce into the credit process is substantial, leading modern consumers—who value their autonomy—to dismiss such offerings outright due to their inconvenience and lack of transparency.

Sesko's passion for insurance stems from her deep-seated belief in its power to address these societal challenges. 

During our interview, she told me about her encounters with individuals struggling to access credit due to traditional underwriting constraints. 

"I spoke to people over my career who just needed a small dollar loan so that they could pay for their kid's school pictures, and they couldn't get that,” she shared. “Or they wanted to get a house that they could afford, but had $100,000 downpayment on the home and couldn't get a mortgage because they were new to the country and had a thin credit file.”

Sesko explains TruStage's mission with Payment Guard is to spread risk across large populations, allowing banks and lenders to make more loans and credit more accessible.

By acting as a portfolio wrapper, Payment Guard shields lenders from potential defaults, bolstering their confidence in extending credit to a broader pool of borrowers.  

By mitigating the impact of common causes of defaults, such as job loss and disability, Payment Guard is designed to reduce default rates by about 23%, providing lenders greater capital flexibility and the potential to expand their underwriting aperture. 

"Where a lender may have previously said no to someone deemed high credit risk," Sesko said. "They can now say yes and help that person access cash."

Plus, lenders can improve conversion rates and reduce client acquisition costs. TruStage is already seeing a 300bps improvement with some of its lenders. 

In an industry that typically does more to protect the status quo instead of economically empowering more people, products like Payment Guard are necessary. The benefits extend beyond lenders, too. 

Unlike traditional deferment programs, Payment Guard offers consumers a lifeline by paying off loan balances directly in the event of job loss or disability, sparing individuals from the crippling consequences of default. 

Examples like TruStage show us how technology redefines insurance as a financial inclusion catalyst.

But, historically, that has not been the case. 

Barriers To Entry

Traditional insurance models have frequently drawn criticism for their complexity, high costs, and barriers to entry. 

Income inequality worsens insurance coverage accessibility. This is particularly evident in advanced economies, where inequality has only increased over the years, leading to a stall in expanding insurance coverage. 

Research has shown that if income distribution reflected 1990s levels, households would have an additional $252 billion in insurance coverage, as the Swiss Re Institute reported. 

However, due to the widening income inequality from 1990 to 2019, the gap in natural catastrophe protection has also widened by 2.5%. This suggests that an additional $1.7 trillion worth of assets could have been protected against natural disasters if income inequality had not increased.

There's a silver lining. 

Affordable insurance can stimulate economic activity by aiding individuals in managing risks and navigating challenging circumstances. 

Shifting Paradigms 

Lending and insurance are evolving together. However, legacy lending insurance is not designed to transition to the digital world. 

Most insurance plans were cooked up in a time when face-to-face interactions were the norm. Back during the days when loan officers and financial advisors would try to upsell you on extra coverage, often making the whole process slow, confusing, and frustrating. 

And let's be honest, that's just not cutting it anymore. 

Modern digital consumers are burned out from the misaligned incentives of some insurance providers, who are more concerned with their profits than consumers' financial well-being. 

It's a harsh reality for many modern consumers of digital financial services. 

Insurance was initially designed to make our lives easier, but now it often seems like just another way for financial service providers to boost their bottom line. 

Leveraging rising trends, digital lending focused companies can build products that offer higher returns on investment and faster profitability while advancing economic equity.

These trends include: 

#1 The Rise of E-commerce

More transactions are happening online, and this trend became even more pronounced during the pandemic. Global e-commerce sales are expected to total $6.3 trillion in 2024.

Even in asset-heavy purchases such as vehicles, furniture, and electronics—traditionally segments driven by physical retail—consumers are leaping to complete their purchases online. 

#2 Componentization of the Digital Banking Stack

With technological advancements, digital banking products are now easier to launch. 

The BaaS model has enabled companies to assemble their banking systems using pre-built software components, reducing development time and costs without the need to integrate with a bank's core legacy systems. 

Now, a trend has emerged in which the various components of digital lending, such as origination and servicing, are readily available to product teams. 

This has significantly reduced time to market for lenders, neobanks, and widespread consumer platforms like Apple Pay Now to provide credit to their users.

#3 Embedded Lending 

Embedded lending means integrating loans directly into other services or products. You could be offered a loan right when you purchase or sign up for a service online.

Lending is an ideal product category for embedded finance, given how widely software connects various B2C and B2B interactions. Integrating financial services into software systems is easy, creating many new opportunities for B2C and B2B loan products.

Plus, lending-as-a-service (LaaS) platforms are becoming more popular as an alternative to the discrete software components of lending, which require orchestration and integration. 

LaaS offerings abstract the complexity of the lending value chain, making it easier for digital consumer platforms to expand their product footprint by embedding loans powered by these full-service add-ons.

Although LaaS platforms reduce implementation time and make it easier to bring lending products to market, product teams will have to give up some flexibility and control over the user experience. 

However, the benefits of increased stickiness and revenues associated with lending can outweigh this.

Defeating Inequity With Data

Access to previously unavailable data has brought fresh insights into underwriting practices. 

Innovations like account aggregation have empowered a new breed of digital lenders—such as cash advance fintechs and Buy Now, Pay Later (BNPL) platforms—to emerge. 

These lenders leverage alternative data, such as cash flows in and out of checking accounts, to gauge an individual's borrowing capacity. This breakthrough has paved the way for digitally extending credit to a broader spectrum of borrowers, a feat unimaginable offline.

DLI is, ultimately, vital to this contemporary tech landscape.

The advancements in digital lending owe much to integrating API-delivered components developed by tech leaders like Stripe, Plaid, Twilio, and Okta. These components are becoming a standard for delivering new financial products and services. 

Few newcomers to digital banking or lending are developing their technology; instead, they opt for a range of packaged components that accelerate time-to-market, reduce development costs, delegate maintenance, and—with the support of sponsor entities—navigate the complexities of compliance.

According to Sesko, innovating in insurance has historically proven challenging, with limited product innovation observed. However, with a seasoned history building digital insurance products, she’s up for the challenge. 

"Understanding the problem you're solving and connecting with the consumers or business entities affected by those problems fosters empathy throughout the innovation process, building resilience and perseverance," she said. 

As insurance innovation continues to trend in 2024, the key to remaining relevant in today's market is ultimately leveraging empathy to enhance user experience.

We just need the right technology to get us there. 

TruStage^TM Payment Guard Insurance is underwritten by CUMIS Specialty Insurance Company, Inc.  CUMIS Specialty Insurance Company, our excess and surplus lines carrier, underwrites coverages that are not available in the admitted market. Product and features may vary and not be available in all states.  Certain eligibility requirements, conditions, and exclusions may apply.  Please refer to the Group Policy for a full explanation of the terms. The insurance offered is not a deposit, and is not federally insured, sold or guaranteed by any financial institution. Corporate Headquarters 5910 Mineral Point Road, Madison, WI 53705.

The views expressed here are those of the author(s) and do not necessarily represent the views of TruStage. Nicole Casperson may receive compensation from TruStage for this advertisement.

¹TruStage, Internal Data, 2024 

PGI-6515767.1-0324-0326 

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_{I WANT IT, I GOT IT}

• 📚 Today’s Read: How 3 female entrepreneurs are making strides in finance’s male-dominated landscape. Featuring some incredible women who read this newsletter and are a part of this community!

• 👀 Today’s Watch: Beyoncé accepts the Innovator Award at the 2024 iHeartRadio music awards. If you ever need a motivational pep talk, just ask Queen Bey—she knows exactly what to say to keep me aiming high and following the right path!

•  👠 Today’s Fit: For my girls attending the Fintech Is Femme Leadership Summit, don’t forget to check out this mood board I put together to inspire outfits for April 8th! I cannot wait to see you arrive as your best self!

_FINTUNES

🎵 Beyoncé, Miley Cyrus - II MOST WANTED

If you have known me or have read this newsletter for any period of time, you would know that I became emotional when I saw this duet on Cowboy Carter.

I have been in love with both artists for as long as I can remember, and there is something incredibly special about this song in particular — two strong women from completely different backgrounds joining forces and creating something magical together, uplifting each other and everyone around them.

It sounds as beautiful as the message it carries. If there is a song I could dedicate to this community, it would be this one.

I will always be your shotgun rider!

That’s all for now! Stay safe, everyone. Hug your loved ones. See you Thursday!

Love,

Nicole

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