Hope Is The Strategy
Happy Friday, Fintech Takers!
I trust you’ve had a good week, and you are getting ready to take a bit of a break towards the end of the year.
I think we all deserve it!
I’m in the midst of wrapping up 2025, and it didn’t feel right to end the year without writing one more essay on a topic I have become extremely passionate about over the last 12 months.
- Alex
P.S. — Go Bobcats!!!!!
Hope Is The StrategyCopy anchor linkCopied
A million years ago, I had a boss who was fond of saying, “Hope is not a strategy.”
Every time he asked us about our goals and our progress towards them, and we said something like, “Well, we will hopefully see that result soon,” he would interrupt (often by yelling), “HOPE IS NOT A STRATEGY!”
I knew why he was doing it — he wanted to hold us accountable to our goals and force us to be realistic about our plans — but still, it was deeply annoying (even mildly traumatic, at times).
More importantly, for our purposes today, I think it’s a very bad way of thinking if you work in B2C financial services.
Because you know what?
The thing that consumers, particularly young consumers, need most right now is hope.
The Cost of Giving UpCopy anchor linkCopied
Last month, a group of researchers published an outstanding paper called “Giving Up”: The Impact of Decreasing Housing Affordability on Consumption, Work Effort, and Investment, which analyzes how declining housing affordability impacts the economic decisions and long-term financial outcomes of younger generations.
The central finding of the paper is the concept of the "giving up" effect, where sharply declining housing affordability leads younger generations to abandon the prospect of homeownership, which triggers significant, systematic shifts in their economic behavior that ultimately exacerbate wealth inequality.
Specifically, the authors project that the cohort of U.S. citizens born in the 1990s will reach retirement with a homeownership rate approximately 9.6 percentage points lower than that of their parents' generation. That decline will be driven by an increase in the number of households that perceive, increasingly early in life, that the probability of ever attaining homeownership is effectively zero, and adjust their financial decision-making accordingly.
The consequences of crossing this “giving up” threshold are both specific and quite dire:
- Reduced Work Effort. When the aspirational goal of homeownership is removed, the incentive to work extra hours or seek higher-paying but more demanding jobs is reduced. According to the paper, renters with a net worth below $300,000 (i.e., those most likely feel homeownership is out of reach) are nearly twice as likely to say that "working hard is not important" compared to comparable homeowners.
- Increased Consumption. Without a large down payment to save for, the incentive to defer consumption is reduced. According to the paper, discouraged renters consume roughly 10% more on credit cards than homeowners with the same net worth.
- Riskier Investing. Given that their current wealth is insufficient to achieve the primary wealth-building goal (homeownership), discouraged renters are willing to take larger gambles in an attempt to reach the threshold, or simply because they have less to lose. According to the paper, renters with relatively low wealth show significantly higher participation in volatile, high-variance assets like cryptocurrency compared to comparable homeowners. The pattern is most pronounced among those with assets between $50,000 and $300,000 (i.e., those with some disposable income, but not enough to be motivated to save for a down payment).
Those last two consequences — spending more and making riskier investments — are obviously highly relevant to any financial services company (bank, credit union, fintech) that works with consumers.
And they show up in other datasets too!
My friends at MX gave me a sneak peek of their newest research report on sports betting (Editor’s Note — shoutout to the folks on the MX data team! I see you and I appreciate you!), and what do you know? It turns out that these two variables — overspending and excessive risk-taking — are correlated:
Perhaps unsurprisingly, more money means more gambling. Regardless of spending behavior, our data shows a steady increase in gambling participation as income increases.
However, that’s not the whole story. At every income level, those with poorer spending habits are more likely to participate in gambling.
Consumers that outspend their income (those in our poor spend behavior group) also consistently spend nearly twice as much on gambling. And, among our lower-income group, those who participate in gambling increase nearly a full percentage point among those with poor spending habits.
It’s easy to connect the dots here. The less money you make, the more likely you are to feel like common, long-term financial goals like homeownership are out of reach. The more nihilistic you are about your financial future, the more likely you are to spend more money than you make and engage in risky behaviors that can, if you squint, be thought of as “investments.”
Or, as Frank Rotman (who has been hard at work trying to solve financial nihilism) says, “When p(win)=0 consumers change the rules, seek alternative games, or embrace strategies that might look nonsensical to outside observers.”
It’s really important to note that while the researchers who wrote the “Giving Up” paper approached the question by looking at the causal relationship between affordability and giving up unidirectionally (i.e., consumers realize that homeownership is out of reach and then decide to spend more, work less, and take bigger risks), that relationship is, of course, bidirectional.
Overspending and excessive risk-taking — especially when introduced to consumers at a young age — can cause consumers to feel that homeownership and other long-term financial aspirations are out of reach, thereby increasing the likelihood that they will overspend and engage in excessive risk-taking even more.
But who would want to do that? Who would have an incentive to push consumers’ state of mind from reasonably concerned (Houses are expensive. What do I do?) to existentially depressed (I’m completely fucked. I might as well gamble.)?
Allow me to introduce you to the Horrible 7: Robinhood, Coinbase, Kalshi, Polymarket, DraftKings, FanDuel, and Crypto.com.
I wrote about most of these companies (and why banks should think of them as competitors) in a newsletter earlier this year, so I won’t rehash all the details here. I just want to point out that all of these companies benefit, financially, from the volume of speculative activity they facilitate, rather than the long-term financial outcomes they deliver for their customers.
And this motivates them to do two things.
First, they try to proactively convince consumers (particularly young consumers) that they are all unavoidably screwed by exposing them to some of the darkest and most depressing advertising you will ever see. Take a look at this 2023 commercial from Coinbase, which made me want to walk out into traffic. Or this 2025 commercial from Coinbase, made for UK consumers, which was so bad it was banned by British regulators.
Second, they work to blur the lines between “investing” and “gambling” in order to further weaken the resistance that consumers might have to putting their money into speculative products like zero-day options, memecoins, and same-game parlays. Robinhood is an obvious example, saying things like, “Options trading can be an important financial tool that can help provide a valuable risk mitigation strategy and income. We believe that options should be available to investors of all socioeconomic backgrounds.” However, I think prediction markets are an even more egregious example, as they are deeply incentivized (due to their ongoing regulatory arbitrage strategy) to discuss all of their offerings — including and especially sports betting — not as gambling, but rather as “event trading”. Their power users will go even further, comparing the “riskless” returns on certain event contracts to the interest rates offered by bank savings accounts, which, to state the obvious, is like comparing apples to sticks of dynamite.
This has resulted in me having conversations with young people in my life, where they will sincerely say things like, “I have mostly been invested in private tech stocks and memecoins, but I am starting to diversify into sports betting.”
That quote (which is 100% real) may strike you as ridiculous, but as the writer John Mortimer observed, "farce is tragedy played at a thousand revolutions per minute,” and, over the last 5-10 years, the memestock/crypto/sports betting/prediction market industry has been evolving FAST.
That rapid evolution is producing a generation of financial services consumers who are *this close* to permanently giving up on their financial dreams.
So, what do we do about it?Copy anchor linkCopied
Most banks and B2C fintech companies make very little revenue from facilitating financial speculation. They sell savings accounts and auto loans and small business loans and mortgages and 401ks. They make money through net interest margin and assets under management. Their business models require customers who are thinking about tomorrow, not just today. And that means that their businesses require customers who have hope.
Hope is the strategy.Copy anchor linkCopied
If you work for one of these companies, your most important job in 2026 is to convince your customers that, despite growing affordability challenges, their long-term financial dreams are obtainable; that making sacrifices in the short-term will benefit them long-term.
If they give up, you lose.
So, how do you ensure that they don’t give up? How do you fight financial nihilism and strengthen customers’ hope for the future?
I have a few ideas, which I will organize loosely into five categories.
#1: Do Not Facilitate Gambling! Copy anchor linkCopied
This one is obvious, but I just needed to say it. If you don’t already offer memestock investing or memecoin investing or embedded prediction market event contracts, don’t start!
I’ve always admired Chime’s steadfast refusal to launch crypto investing, despite working with low-income consumers who may be more inclined towards feelings of financial nihilism. It’s an example we should all follow.
If you do want to offer certain investing options that you think are on the right side of the investment/gambling line, such as bitcoin or fractional stock investing, make sure to implement them in a way that emphasizes long-term outcomes.
(Editor’s Note — Coinbase, to its credit, strongly encourages dollar-cost averaging, which is a sound investment technique for delivering positive long-term outcomes. If they would just knock it off with the memecoins and the bullshit TV commercials, they could make the Horrible 7 the Horrible 6.)
#2: Help Customers Reflect on and Better Manage their Decisions Copy anchor linkCopied
As the MX research demonstrates, it’s very easy to spot problematic spending and gambling behavior by analyzing customers’ bank transaction data. The question isn’t, “Can we spot early signs of financially unhealthy or nihilistic behavior?” The question is, “What do we do once we spot it?”
How do you tell a customer that you think they may have a problem?
In researching this essay, I spoke with a number of experts in the fields of financial counseling, mental health, and addiction treatment, and they all told me that this is a very difficult challenge. When confronted with the bad or risky decisions that they’ve made, people will often shut down or disengage out of shame, which is especially easy when your interaction with them is digital, rather than face-to-face.
The key to keeping customers engaged in a healthy ongoing dialogue is a light touch. Make your communications and interventions helpful and not judgmental. Rather than telling them not to gamble, offer them tools and advice that can mitigate the most negative consequences.
For example, if you know that a customer does most of his gambling during the football season (the MX research found that gambling rose by as much as 40% during football season), you could offer to automatically set some money aside during the offseason, so that this “entertainment expense” doesn’t submarine their overall budget or take away from their other saving and investment goals.
Simply giving customers more opportunities to think about the decisions they are making (and reflect on the value those decisions are or aren’t producing) can make a big difference. From a behavioral design perspective, it’s not dissimilar to scam prevention, which is an area that banks and fintech companies have gotten a lot of experience dealing with in recent years.
#3: Help Customers Who Want to Quit Quit Copy anchor linkCopied
When customers get to the point where they want to stop gambling or engaging in other financially damaging behaviors, HELP THEM!
We’ve built very sophisticated payments capabilities (virtual cards and accounts, card controls, etc.) over the last 20 years. This is a perfect use case for those capabilities!
When a customer wants to “self-exclude” (Editor’s Note — This is the term they use in gambling to describe an individual with a gambling problem requesting to be banned from legalized gaming activities), why do we require them to do so on an app-by-app basis? Instead of logging into FanDuel, DraftKings, and Kalshi individually, and enabling timeouts or trading limits, why not allow the consumer to set those restrictions upstream, at the bank account?
The beauty of doing this at the bank account-level is that it would empower consumers to go far beyond the apps and services where these features are already present (gaming operators are generally required by law to offer these responsible gaming features) and to voluntarily restrict themselves from funding any addictive third-party app or service they designate.
(Editor’s Note — Given how difficult it is to manage gambling addiction in the age of smartphones and self-custody wallets, we may need to get even more creative. It would be interesting to explore how we could make self-exclusion lists, managed at the state level by gaming control boards and lottery commissions, accessible, with consumer permission, to banks and other service providers to provide a more comprehensive approach to blocking access to gambling and speculation. Food for thought.)
#4: Design for Multi-Player, Not Single-Player Copy anchor linkCopied
As I wrote about a few years ago, the most important problems that financial services customers face aren’t money problems. They are money-adjacent problems.
In B2B, it’s inefficient and annoying back-office workflows.
In B2C, it’s relationships:
Money plays a foundationally important role in many different types of relationships. It causes couples to fight. It stresses out parents who don’t feel that they’re adequately preparing their children to go out into the world. And it creates a lot of awkward silences between adults and their elderly parents.
What’s weird is that there aren’t any traditional bank products specifically designed to solve these money-adjacent relationship challenges.
A joint checking account will allow both people in a couple to deposit and spend their money, but it won’t help them have productive conversations about their shared financial goals and priorities.
Parents can open a custodial or joint checking account with their teenage child, but that account won’t give them any guidance on how to talk to their teen about money or teach them the financial literacy skills they’ll need later in life.
Combatting financial nihilism is a multi-player problem.
As banks and B2C fintech companies build out multi-player financial software solutions for different relationships — parents and teenagers, new couples, adults and their aging parents — they need to ensure that those solutions are equipped to help all players navigate the emotionally-charged problems caused by gambling addiction and other destructive financial behaviors.
Today, those problems — a parent talking to their 20-year-old child about their sports betting or a newly-married adult telling their spouse about their crypto losses — feel insurmountably huge.
#5: Help Make Future Financial Goals Feel Achievable Copy anchor linkCopied
There’s not much that banks and B2C fintech companies can do about home prices. That’s a problem for policymakers and YIMBY advocates.
However, we can do A LOT more to help consumers feel less intimidated in planning for future financial milestones, like homeownership.
The fact of the matter is that most consumers don’t know where to start when it comes to the homeownership journey.
Everything in the real estate market — brokers, real estate agents, lenders, etc. — is set up to help consumers once they are ready to buy a house. For consumers who aren’t ready yet, who may not know exactly where and when they want to buy or have enough money saved for a down payment or don’t have a credit score sufficient to qualify for an affordable mortgage, there aren’t a lot of solutions out there.
In other words, there aren’t a lot of good homeownership on-ramps.
But banks and fintech companies can build them! They can demystify the homeownership journey and encourage customers to pursue it by building homeownership-specific savings accounts and planning tools (take a look at what Foyer is doing, as an example).
Financial nihilism is not inevitable. It’s a choice.
If we want consumers to make a different choice, to choose hope, we have to give them the tools necessary to reach (and to feel confident that they can reach) the future they want.
MORE QUESTIONS TO PONDER TOGETHER
Big news for the endlessly curious (yes, you): I’m collecting your fintech questions on a rolling basis.
What’s keeping you up at night? What great mysteries in financial services beg to be unraveled? Think of it this way, if a stranger is a friend you just haven't met yet, your question is a Fintech Takes conversation waiting to happen.
One that could headline a Friday newsletter or be answered in an upcoming Fintech Office Hours event.
Drop your question here, whenever inspiration strikes
Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
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