Can FinTech halt elder financial abuse?

FinTech doesn’t always have its roots in disruptive financial trends or groundbreaking new payments methods. Some ideas take root in ground moistened by human tears.

For nearly two decades Elizabeth Loewy served as chief of the Elder Abuse Unit of the Manhattan District Attorney’s office. In her time there she worked many cases, including some that resulted in major headlines because they involved large estates.

But Loewy felt the frustration of the first responder—by the time her unit was involved, a senior citizen had been ripped off.

Elder abuse, she says, “is our nation’s abysmal epidemic.”

She left that job wanting to find a way to stop elder financial abuse at its source.

Howard Tischler’s interest in fighting elder abuse began close to home. His mother, an accountant, retired at 75 as failing eyesight made it impossible to work any longer. In time, the retiree became the victim of persuasive telemarketers who sold her thousands of dollars of services she would never use.

For example, she was no longer able to drive, but was sold a deluxe auto club membership that included regular oil changes. She had been sold coverage for her bills should she lose her job—which she of course had retired from. There was more, all apparently stemming from the initial auto club sale which shifted her over to a telemarketing “sucker list,” identifying her as easy prey for the unscrupulous.

And on top of that remote abuse, says Tischler, a “friend” she brought in to handle her monthly checks managed to find enough in the woman’s accounts to tap in order to cut herself a nice monthly check.

Both Loewy and Tischler now work for EverSafe, creator of an service designed to warn families and other caregivers of the elderly of attempts to abuse their finances. Tischler is CEO and founder and Loewy is general counsel and senior vice-president, industry relations.

Performing daily scans, EverSafe tracks the elderly’s financial accounts and sends alerts to family or other concerned parties who can act to stop actions triggering questionable transaction patterns. For example, an unusual amount of cash withdrawals on debit cards, or simply obtaining a debit card where one wasn’t wanted before, may indicate that something bad is going on.

EverSafe scans for expenditure types that break established patterns as well, such as charges showing up from vendors with no known connection to the account holder. The app also alerts users if deposits that generally occur at a given time are missed—it could mean that systematic incoming funds from family, government, or other sources have been misdirected or misappropriated.

The scans and tracking rely on rules in the app. Some are general rules developed in consultation with experts on the elderly and the risks they face. Others are tailored to the specific person being helped, based on an analysis of their past financial behavior.

EverSafe is looking for banking and other financial partners, and has already secured an alliance agreement with Fidelity Investments and has seven pilots underway with other firms.

FinTech in Gotham

Not every financial technology development will come as close to the heart as EverSafe. But there’s lots of financial innovation coming out of New York. EverSafe is one of seven “graduates” from the fifth annual round of support and mentoring from the New York Fintech Innovation Lab, created by Accenture and the Partnership Fund for New York City.

In late June the seven young technology firms presented their products and concepts to investment bankers, venture capitalists, financial press, and others at New York FinTech Innovation Lab Demo Day. The lab is supported by about two dozen major financial companies, including banks, insurance companies, investment banks, and venture capital firms.

Five years ago, when the lab began, “we had to explain what FinTech was,” says Maria Gotsch, president and CEO of the Partnership Fund for New York City. Now, not only has the joint lab taken off, the city is host to other innovation labs and ventures involving financial technology as well. Gotsch noted that Barclays has started one such operation, the Barclays Accelerator, based in New York and London.

The two dozen alumni companies from FinTech Innovation Labs have raised a total of $176 million in financing since leaving the program, and companies presenting this week often mentioned funding that was underway or recently arranged. (One alumni company was acquired a year ago for $175 million. The lab also has locations in London and Hong Kong.) 

A key part of the process that determines which firms enter the lab’s program is input gathered from the CIOs of participating companies—they are asked what kind of technology they are looking for. Each young firm has a mentor from one of the participating firms—part of the program’s intent is to help them learn how to work with a bank customer/partner.

Gotsch says there have always been predictable hot buttons, but then again there have also been unexpected suggestions. The input from the CIOs isn’t the sole selection source, either. Companies applying for the program may come completely out of left field.

Three strong technologies in the innovation space are analytics, blockchain developments, and cloud computing, three disciplines each in their own point on the curve of evolution, according to Bob Gach, managing director of Accenture Strategy Capital Markets, and co-founder of the Fintech Innovation Lab.

Innovation in multiple shades and styles

The financial services business touches nearly everything in America and that was reflected in the range of companies presenting at the lab’s demo day.

• Digital Asset Holdings, LLC, which made a major presentation at the recent Exponential Finance conference sponsored by Singularity University, CNBC, and Deloitte in early June, is building a “next-generation, cryptographically secured distributed settlement and ledger service.” Building on blockchain technology, the DAH concept is to create ledgers that update simultaneously and securely, eliminating the need to reconcile records across platforms, companies, and other entities.

• MaxMyInterest is a cash management service that enables users—companies or individuals—to spread their deposits across multiple online banking firms. This brings them higher returns than at traditional banks, because online institutions typically pay more, but also breaks up their deposits in amounts that remain under insurance ceilings. MaxMyInterest is a sweep product, and makes its money through a 2-basis-point cut of the increased interest obtained. Its program mentor came from online bank Ally Financial.

• Social Alpha essentially is what you’d have if you gathered 1,000 very smart people in a room watching social media, and bringing you prioritized items and trends instantly. The service scans continuously and extracts data about companies, industries, and other topics that traders need to track for investment opportunities. This is turned into usable prose, in place of the actual social stream that may be full of social media jargon and abbreviations, hash tags, and more. As Prem Melville, CEO and co-founder, points out, if you wait until a social media surge appears on tomorrow’s front page—even the electronic front page—the market will be way ahead of you.

• PYT Funds—which stands for Pay Your Tuition—is devoted to helping low and moderate-income students address the growing gap between college tuition and the ability to pay for it. The service blends funding from multiple sources, including one’s wider family, crowd funding, philanthropic sources, Community Reinvestment Act-related sources, bank student loans that benefit from risk-abatement through the PYT service, and more.

• Ufora—is something of a quant’s dream. Think of it as being a quant without heavy lifting. Ufora’s CEO Braxton McKee says traditional data manipulation methods and technologies don’t cope well with big data. Ufora is designed to learn how to dig into data, doing the data engineering that takes humans so much time, to allow more thinking time to be spent with the results. The service is powered by cloud computing.

• PierceMatrix—takes the concept of sharing cyber threat data and solutions and automates it. Roy Stephan, CEO and founder, says the average company has approximately 17,000 alerts every week. The service taps into security reports and monitoring by 4,000 participating companies, currently, and shares warnings, hackers’ locations, and security recommendations. Part of the idea behind PierceMatrix is processing more alerts in less time.