Breaking Down Financial Barriers with Embedded Finance

Marcus Lobendahn
Date Published
March 18, 2021
Read Time

Marcus shares his experience about explaining embedded finance to his parents and his children - aiming to break the barriers and stigma around gatekeeping in finance.

Anyone get the question from their parents, “So what do you do for work?”

Two months ago, I got a call from my dad. He had opened an investment account, started buying stocks with a debit card and was incredibly excited to tell me about this company he found called Stash. He continued to educate me about this growing industry called FinTech and advised me to get into it. Noted, Dad!  

Up until that point, my parents had never bought a stock themselves or owned a stock portfolio outside of the accounts I'd set up for them. Even then, my four years at Goldman Sachs made that portfolio and those holdings all but inevitable. With a son working in finance, the odds were I'd help push them a little closer to the world of modern finance and investing. But, years later, here was my dad calling me to say that he didn't need that push; he had taken that step himself.

I was incredibly excited for them, but equally curious as to what their investments might have looked like if some easy, passive investment tool like Stash had existed when my dad was in college back in 1986.

Napkin math

Doing some back of the napkin math, if my dad started with an account balance of $1,000 and made a $100 contribution every month, he would have close to $300,000 today. That's all without a costly money manager, without a bunch of large contributions and without algorithms. This is just a passive, monthly investment strategy.

There are so many factors that can keep us from making that phone call to let a family member know you're making a big step in your financial well-being. Talking about money and the ins and outs of managing that money isn't typically part of our conversational palette. It could be the perceived complexity of getting involved in finance or it could be the sensitivity of the subject. Those factors are constantly changing but the themes that bind them together remain the same.

When you hear "bullish stock" or "unicorn," your ears perk up. That might not be the case when you hear "serialized, structured investment" and "long-term impact." But, it's hard to understate the value of a rock-solid investment strategy that's insulated from trash of the market. Still, there are so many logistical hurdles to simply get that strategy started — and it's easy to lose momentum when those hurdles stand in between you and a possible investment.

Looking back on the barriers to entry

Let's say my dad opened an investment account back in 1986. What would that process have looked like? He would have had to go to the bank in person, with all his documents and identification in hand, waited on a bank clerk to see him, waited for the account to be opened and waited on a piece of mail to make it official. That might seem arduous now because of all the in-person steps and the fact that the entire experience was non-digital. But, this experience hasn't changed too much today; it's just moved entirely online.

Opening up a traditional investment account is not exactly a walk in the park. There are good reasons why you can't rush in and open a new bank account or line of credit. Regulations like FINRA requirements, KYB and KYC are all there to keep our money and the market safe. But, the act of actually buying a stock back then was incredibly difficult...and it's not a piece of cake today either.

The companies that represent the future of investment and the future of finance combine slick UX with stalwart security, giving users an easy way to get started while also remaining informed and compliant as a company.

Take the Stash App for example. It's an app that lets you invest in the stock market with a low financial barrier to entry. You may recognize Stash app from your phone's home screen or maybe from Business Insider's front page when Stash announced recently that they secured $125 million in funding to fuel their growth.

While you have to jump through similar FINRA hoops when it came to buying a stock, all my dad had to do to get started with Stash was swipe a credit or debit card. The process of swiping a card was something so familiar to my dad that it triggered more than just an intrigue into the platform. Seeing how simple it was, he started digging through the app more, reading up more and becoming more actively involved.

He's no Warren Buffet. But, for someone who had never owned stocks before the age of 65, this was a critical hurdle to participate in the financial market. But, the revolution that investment apps are sowing isn't limited to future investments; it's changing the way we make purchases now.

Buying sneakers (and sneaker stocks)

Late last year, I spent a weekend in Portland with my two older kids. We drove over to Nike HQ in Beaverton to check out Nike gear and see what the epicenter of sneaker-obsession looks like. As a sneakerhead myself, I was curious, too. After touring the Nike campus (and picking up a pair of shoes), I told my kids that they could be a part of Nike. Or rather, they could own a part of Nike, a business they clearly loved. So, we bought Nike stock on the CashApp. The same app I use to send money to a friend we could use to vote with our dollars and express confidence in a company.

Once my kids saw how easy that was, we looked at a few additional companies. Unsurprisingly, their picks centered around the things they like rather than an incredibly detailed analysis of the company's books. We picked Activision for Call of Duty, Apple for their beloved iPads and Amazon for obvious reasons.

This is their 1986 moment; this is when they decided to get involved. I'm glad the barriers to entry in finance are decreasing with every decade. And I hope that their stock picks are on the rise.