This piece was written in response to Nik Milanović’s January 31st piece in This Week in Finance titled “Why is there so much idea recycling in fintech?”.

Where is that magical bot that manages our money and makes us rich while we sit on the beach? In a world where technological advancements and GenAI-everything copilots have most of us dreaming of possibilities, one might wonder why fintech is still struggling to create the ultimate solution for personal financial planning and budgeting.  

Turns out we’re not the only ones wondering why folks are still struggling with the same fundamental issues. In his January 31 post Signals: Why is there so much idea recycling in fintech?, Nik Milanović discussed how many foundational product ideas in fintech (e.g. automated cash flow management) have been attempted repeatedly–and often, unsuccessfully–by multiple companies over the past decade (TL;DR: All ankle-biter fintech apps end their VC pitch with a slide that says: “and then we'll get full share of wallet…”). He argues that none have achieved this end state because there are often “deeper underlying structural issues” to be solved first before consumer-facing products can work as intended, and many founders try building obvious solutions without fully understanding why previous attempts failed. 

Agreed. And we want to take it one step further. These “deeper underlying structural issues” boil down to a fundamental lack of understanding of one common denominator: human behavior.

Over the past 11 years, Irrational Labs has worked with fintechs and financial institutions, from Grove, Charlie, MoneyMap, and Xero to Digit, DoubleNet Pay, Simple, Varo, Chime, Dave, Clarity, and of course Mint. We’ve come to deeply appreciate just how difficult succeeding in this space can be. And it’s time to spread the wealth. Here’s our take on the top 3 behavioral hurdles innovators in fintech will have to overcome if they want to dream up the next great idea that sticks. 

1. The burden of upfront work

Fintech's dream of putting finances on autopilot (or co-pilot??) has a common stumbling block - the substantial upfront work demanded of users. In behavioral science, we talk about a phenomenon called “the intention-action gap”. More colloquially, this “say-do” ratio means that even when there's a collective demand and genuine desire for personal finance management tools and budgeting apps, the reality is that individuals may not ever get around to using them if it’s effortful to do so. We're biased toward the present, and it's very hard to get us to do something that will ultimately benefit us in the future at the expense of what feels good right now–namely, NOT working on our budgets and say, watching Netflix instead. 

Having just recently signed up for Rocket Money–one of the easier tools out there–we can personally attest to how painful signing up can be. To onboard, you must first:

• Search for each financial institution you have a relationship with, one by one. 
• Once you find the right entity, you need to log in. Though Plaid has simplified and unified the approach for many fintechs, you STILL need to remember your credentials. 
• 2FA is also often required, which is extra annoying if your bank requires a phone call for validation like mine does (RIP First Republic). 
• You then have to specify which accounts at that organization you’d like to link. 
• And THEN you can hit submit. 

One down, and if you’re anything like us and our fragmented financial pictures, approximately 15 more to go. Phew. 

This is sadly the reality that most users will face. From inputting utility bills to setting up direct deposits, the “nirvana’”of a unified personal finance management tool requires significant user commitment to extract any value.