We’re all underbanked. A lion-share of Americans aren’t “making bank.” Most of us simply don’t earn enough to support a basic standard of living. Yes, there is a big part of our population that poorly utilizes banks and therefore over-utilizes expensive solutions that leave most of their customers poorer. The larger reality is that the “99%” are underbanked, when you look at the bigger picture. Ask President Obama, who has made the “Middle Class Economy” his legacy policy priority. Or, if you prefer, ask Jeb Bush, Mitt Romney or Chris Christie – all prominent Republicans who acknowledge the implications of both income- and mobility divide.
And indeed income inequality is staggering. The top 0.1% earned 12% of all pre-tax income. Wage growth was basically flat in the past decade. The median household income is flat since the 1980s. 23% of young college grads are unemployed. 60% of mid-wage jobs were lost in the Great Recession and represent only 22% of post-Recession jobs.
The mobility gap is staggering. The bottom quintile of the US is worth $2,700, which is far worse off then their parents’ generation (compare that with the top quintile median net worth of $630,000 vs their parents’ $500,000). 55% of households have less than a month of savings in the bank. 75% of Americans are not confident they could secure $2,000 within a month if necessary. The top 20% spend more on housing than the lower 60% spend on housing, food and transport combined. Healthcare costs are the number one source of bankruptcy and have increased three times as fast as wages since 2002.
The reality is a new normal for most people. Confidence in banks is at a 30 year low. People report they trust tech brands, like Google and Apple, more than the big banks with their money. And people aspire to economic stability – no longer economic mobility.
At the heart of it, people need better paying jobs. The private sector needs to step up. The public sector needs to step up. We need to reinvent education and vocational skills training. And the financial services industry – both startups and incumbents – need to create tools that help us retain more of our money, leverage our ability to earn more money, create dynamic financial services that fit our dynamic reality, invest in our own and our kids’ future, and protect us from life’s increasing and inevitable pot-holes.
Oh, and did I mention that our portfolio company, Oportun (formerly Progreso Financiero), which is targeting the core of this issue in a way that’s both mission driven and commercially thriving, closed on $90 million equity financing in a growth round? Fidelity, Institutional Venture Partners and an unidentified institutional investor led the round.