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Tuesday, November 5, 2024

Nonprofit Offers Free Access to Data, Networking, and Resources to Help Fintech Startups Thrive

Nonprofit Offers Fintech Startups Free Data Access
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Mike Senecal

Mike Senecal, Staff Writer

Mike Senecal draws on more than 20 years of editorial experience to update CardRates.com readers on industry trends, business news, and best practices in budgeting and credit use. Mike has worked for decades in academic and trade publishing, including roles as managing editor and technical editor at the University of Florida and as contributor to finance industry publications, including Surety Bond Quarterly and Independent Agent, among others. Mike holds bachelor’s and master’s degrees from the University of South Carolina, and he enjoys bringing his years of academic and industry expertise online to help consumers of diverse financial backgrounds.

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In a Nutshell: Financial technology startups need access to data to build and test their products. But purchasing access from one or more providers is expensive, and new firms aren’t able to earn significant revenue because they don’t have anything to sell. Fintech Sandbox is an industry-backed nonprofit that offers carefully vetted fintech startups up to six months of free data access, along with the tools and resources necessary to enter the market and succeed. Since 2014, Fintech Sandbox has helped more than 360 global startups save more than $50 million on the data they need to get up and running.

Traditional banks and credit unions have a storied history in financial services, but that hasn’t stopped newfangled financial technology firms from stepping into their territory. Not just in banking but across financial services, digital and mobile convergence has led to more opportunities than ever for consumers to take advantage of competition and innovation.

But as we justifiably celebrate the many options we have, we should remember that fintech firms — like all businesses — must overcome many barriers to bring their ideas to market. One is gaining access to the data they need to build and test their data-centric products.

The problem is that data is expensive. The many enterprise suppliers out in the market today naturally tend to focus on the institutional clients who can make them the most money, not on small teams with big dreams and little else.

Fintech Sandbox logo

Fortunately, a group of investors and entrepreneurs with deep ties to the fintech ecosystem saw this problem as the fintech industry coalesced in the early 2010s. They founded the nonprofit Fintech Sandbox in 2014 to make tapping into just the right feeds much more manageable for more than 360 global startups.

Fintech Sandbox partners with more than 40 providers to offer free data access — and the tools and resources needed to optimize it — to more than 360 global startups that have used it to take the next step forward. Kelly Fryer joined in 2020 as executive director.

“Not only was it hard for fintech entrepreneurs to access the data, even when they were able to, it could easily cost $100,000 a year, if not more,” Fryer said. “Many great fintech products weren’t getting to market because the founders couldn’t afford it.”

Data Access Residency Fosters Innovation

Think about the weather data on your phone’s home screen — it has to come from somewhere. In fact, some data associated with personal finance apps, investing tools, AI models, and other fintech and fintech-related apps may not even have anything related to finance.

Apps that tap the capital markets may require access to securities filings, macroeconomic patterns, price ticks, earnings estimates, sentiment analysis, news reports, and more. Lending apps are in the market for some of that info, plus they need transaction data and anonymized credit profiles to help them understand product-market fit.

Kelly Fryer
Kelly Fryer is Executive Director of Fintech Sandbox.

Paying $100,000 or more for that info could quickly put you out of business if you’re a bootstrapping entrepreneur earning minuscule revenue.

Fintech Sandbox’s Data Access Residency is its vehicle for free data and service delivery. The team interviews and accepts startups on a rolling basis, working with companies from all over the world, not just in the U.S. It reaches across all areas of fintech, financial services, and even enterprise tech that could be applicable to the financial services industry.

Fryer said startups that are a good fit usually apply when they’re pre-Series A in terms of funding. At the very least, they need to have built an alpha product and be in a position to leverage Fintech Sandbox data. On the other end of the spectrum, the partners start to think founders can afford to pay on their own once they reach $1 million in annual recurring revenue.

The interview process allows Fintech Sandbox to assess the startup, the product-market fit, and the business trajectory. After onboarding, teams go through an orientation where Fintech Sandbox sits down and talks more specifically about data needs.

“From there, we introduce you to our providers,” Fryer said. “Fintech Sandbox has essentially already prenegotiated six months of free access on each startup’s behalf.”

Boston Fintech Week Celebrates Tech Entrepreneurship

Fintech Sandbox typically works with about 50 or 60 startups at any given time. Provider partners see the value and opportunity in providing free premium datasets to vetted startups.

They see their partnership with Fintech Sandbox as a business development opportunity. Working with startups introduces them to exciting and innovative use cases that they may then package into other products. They also see it as an excellent opportunity for deal flow, whether through mergers or investments.

As a 501(c)(3) nonprofit, Fintech Sandbox also counts on generous support from corporate sponsors.

Boston Fintech Week
Every fall, thousands of fintech stakeholders gather at Boston Fintech Week.

“We have a number of great institutions that have been with us for years — folks like MassMutual, Ernst & Young, Global Atlantic, Fidelity, and others who support Fintech Sandbox year-round,” Fryer said.

The value-add for sponsors is more involvement in fintech and directly with Fintech Sandbox startups.

They also see value in sponsor-specific events Fintech Sandbox hosts annually, including Demo Day each spring and Boston Fintech Week, which occurs every fall.

Demo Day is an opportunity for Data Access Residency startups to showcase what they do. Since the pandemic, the event has transformed into virtual demos and pitches so people all around the world can tune in and give the startups broad exposure.

Boston Fintech Week is Fintech Sandbox’s biggest event of the year, held in Fintech Sandbox’s hometown of Boston at the Federal Reserve Bank of Boston. Purchasing an event ticket gives you full access to the Fintech Sandbox Innovation Forum, the nonprofit’s two-day main-stage conference.

“Honestly, it started as a grassroots event — a chance to bring together a few folks and talk about fintech,” Fryer said. “Now it’s a 4,000-plus person conference that involves a ton of community- and partner-led events throughout the entire week.”

Lowering Barriers to Make Fintech Better for Everyone

In-person networking is also essential. Fintech Sandbox participates in New York FinTech Week and hosts frequent dinners, meetups, and other networking opportunities for startups and sponsors.

The effect is to bolster the community and create a sort of synergy to build more and better consumer financial technology products. It’s one of those cases where the term “ecosystem” really does describe what’s going on.

“We hear from sponsors that it’s like getting a front-row seat to the earliest stages of innovation,” Fryer said. “They get to see things that maybe aren’t trends yet but are coming down the pipeline.”

Networking is a benefit because Fintech Sandbox is so well-connected. Startups introduce ideas to the community that partners and sponsors leverage in many ways. And as the ecosystem has matured, it’s also grown more diverse.

Fintech Sandbox works with all firms it thinks can move the needle forward on financial services. Many startups live at the intersection of financial services and data or financial services and infrastructure.

“We do very much accept companies that you wouldn’t think of as clear-cut or obvious fintechs,” Fryer said.

Startups simply sign free data license agreements with their data providers, and then they’re off and running, building, testing, and introducing new features. After six months, it’s up to the startup whether they want to continue with a commercial license agreement. Many take that route, with most Fintech Sandbox clients active in the system for up to a year.

Then, it’s time for them to make their contribution to the industry as a whole. Fintech Sandbox values startup partners who want to be active, engaged members of the fintech community.

“We love seeing them at our Fintech Sandbox events and networking opportunities and just generally being great citizens of the fintech ecosystem,” Fryer said.