Originally published in Fast Company on January 8, 2024 by Stephanie Mehta

More than a decade ago, a flurry of apps and services promised to democratize financial services by giving lower-income Americans early access to their paychecks or allowing online shoppers to “buy now, pay later” (BNPL), spreading their payments out over a period of time. Many of these new products, part of the broad category of financial technology, or fintech, proved to be less than consumer friendly. Fast Company likened some of the advance-pay apps, which require “tips” and subscription fees, to payday lenders. Consumer Reports has cautioned that BNPL products can come with unforeseen risks, including unexpected interest rates.

As a result, I was skeptical when a couple of business-to-business fintechs told me in recent months that they’re focused on democratizing finance. One, Broadridge, was founded by payroll giant ADP in 1962 and spun off as an independent public company in 2007. The other, Pagaya, was founded in 2016 and uses artificial intelligence (AI) to help banks make lending decisions. The CEOs of both companies make the argument that by helping reduce friction for big banks, asset managers, or institutional investors, they’re essentially enabling their clients to bring more consumers into the financial services fold.

Democratizing Finance with Fintech

In Broadridge’s case, the company provides technology and infrastructure to the wealth management, investment, and capital markets industries. CEO Tim Gokey says Broadridge’s technology helps its clients simplify their operations, enabling financial services companies to make their products more innovative. “New mutual funds, ETFs, managed accounts, app-based trading, and zero-commission trading” are just some of the offerings that have emerged, Gokey says. “There’s a line of innovation which has made investing more accessible to more people at lower cost.”

And indeed, a record-high 58% of American households owned stock in 2022, according to the Federal Reserve.

Gokey notes that Broadridge is also using technology to increase investor engagement and provide access to information about their holdings, which he sees as an important part of empowering individual investors. The company has enabled something called “pass-through voting,” which enables asset managers to give retail shareholders a say in how they vote on proxies, rather than having the investment manager simply cast a vote on their clients’ behalf. He believes some investors will seek out this kind of capability. “Maybe there are certain topics that you care about, and if it comes up, notify me [because] ‘I want to vote on that,’” he says. “I think that will be a whole area of exploration over the next few years.”

Leveling the Financial Playing Field

The other fintech CEO I recently met, Pagaya cofounder Gal Krubiner, says his firm applies AI to credit attributes and loan data to identify desirable borrowers who might otherwise have been rejected because of, say, a low credit score. For all the talk of algorithmic bias when it comes to race and ethnicity, Krubiner believes that the scale and variety of data Pagaya captures—a top 5 bank is a client along with two dozen more lenders of various sizes—reduces the chances that technology will discriminate in its lending recommendations. “What you figure out as you go deeper into the numbers is that the performance of different ethnic populations is not worse. It’s a bias, which is what happened in the last 100 years in the United States,” he says. “The data definitely tells the story that people are equal, and the performance is comparable.”

Both Pagaya and Broadridge work behind the scenes to empower consumers, and in some ways, they may be able to make a bigger impact than the consumer fintech startups that promise to even the financial playing field. Says Krubiner: “A lot of the fintechs in the early days were like, ‘I’m just becoming another better lender,’ but you’re never going to hit the scale that you need [to make a difference] when you are competing against these banks. So, we said, ‘let’s partner with them.’”