As the world went online, the Internet democratized access to goods and services. With this increased access, people began to demand greater personalization. As the world of e-commerce became a world of "me-commerce" as I wrote in Forbes in 2012, long-tail marketplaces of artisans and craftsmen, like Etsy, gained popularity. They enabled people to buy something unique, locally made in limited quantity, something that not everyone had. Platforms like Indegogo and Kickstarter enabled independent designers and manufacturers to pre-measure demand, and in effect "Pre-Tail" their e-tail and retail.
Today technology and psychology are changing access to finance.
The explosion of peer-to-peer lending platforms has ensured that a greater number of companies have access to capital. Banking and credit have always existed out of the need to smooth dislocations in accounts, gaps when businesses need working capital. Many of these spreads exist because of chunky obligations in the form of accounts payable, and the mismatch with accounts receivable. Companies don't always have cash when they need it.
Companies like Nowsta, which grew out of the Harvard Innovation Lab (iLab) by bringing together mobile payments and behavioral economics, are erasing the concept of a two-week pay-cycle and in the process eradicating the payday lending industry. They're creating a powerful logistics platform for companies with distributed workforces, and allowing workers to access their capital on a timeline and schedule that fits their lifestyle.
The atomization of income means in the future you can get paid, or gain access to your income, in real time as you earn it. With the coming advent of programmatic payments, there's no reason your income should come in 15 or 30-day chunks. There exists a smaller unit of payment that still accounts for the cost of the transaction and makes economic sense, and the consumer desire for access to their capital on a much higher frequency.
With the atomization of income is also the atomization of payments. Layaway programs have long existed, but today companies like Affirm -founded by PayPal creator Max Levchin- are providing a platform that enables any e-commerce merchant to extend programs of partial buying over time. And it's not just helping consumers buy high-ticket items over time. Technology is helping democratize basic access to goods and services.
PayJoy, a Silicon Valley software and financial innovation startup, has unique patented intellectual property that allows them to remotely shut down an electronic device. In effect, this allows the device to become collateral. As payments are structured against this device, these loans go from being uncollateralized to being collateralized. As such, the probability of repayment becomes highly predictable, and enables them to offer cheaper rates.
Smartphones are the computers of the future, and they'll power TVs-as-monitors in emerging markets. Putting a smartphone in someone's pocket changes their life. It's no longer a luxury; it's a utility. The World Bank estimates that every 10 percent increase in mobile broadband drives a 1.4 percent increase in GDP for low-to-middle income countries.
Even in America, many depend on their smartphone for Internet access, and 80 million Americans don't have a credit card. Without access to credit, a $600 price tag is hard to muster for many. Having the ability to buy the phone monthly changes someone's access. And while Apple and others have begun to offer "leasing" plans, these require contracts and access to credit, and unlike PayJoy, don't let you buy the phone. You lease it at high interest.
Technology is enabling innovative companies like Nowsta, Affirm, and PayJoy, to alter how they measure and monitor risk, and originate new streams of payments. Many of these streams of payments are framed by psychology, and offer predictable cash flows that are not unlike other debt instruments. Tech bonds may yet be a new asset class.