EquiFinance

In the US, people of color are more likely to be denied credit or to be charged higher interest rates compared to their white counterparts, even when controlling for creditworthiness. This is a result of a variety of factors, including discriminatory lending practices, credit scoring models that may unintentionally penalize borrowers from disadvantaged communities, and a lack of financial institutions in minority neighborhoods.

Banks violate UDAAP through practices such as aggressive marketing, offering complex products without clear explanations, charging hidden fees, or engaging in predatory lending. These practices can mislead consumers, trap them in debt, and undermine their financial stability.

TILA violations often involve inaccuracies in disclosing terms and conditions, interest rates, or total costs of loans. This lack of transparency prevents consumers from making fully informed decisions and can lead to them accepting loans they can't afford.

These violations disproportionately impact vulnerable populations, including those with low financial literacy and the underbanked. They contribute to a cycle of debt and economic disadvantage that is difficult to break.

To ensure compliance with regulations such as the Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) and the Truth in Lending Act (TILA), EquiFinance promotes inclusive growth by providing transparency, financial literacy and early detection of bias. Equifinance will be a marketplace/hub for offering financial products to unbanked/underserved populations while ensuring to protect these populations against bias using its proprietary AI models. Equifinance will create its proprietary alternate credit score for the traditionally excluded borrowers with following features :

1. AI-Powered Credit Scoring: EquiFinance uses generative AI to create alternative credit scores based on diverse data sources, helping individuals and MSMEs without traditional credit history or with low credit scores. This includes data points such as rent payments, utility bills, educational background, and even behavioral factors and social media monitoring.

2. Bias Detection and Mitigation: EquiFinance's AI models would be built with fairness as a key parameter. This involves using algorithms that can detect and mitigate biases in lending decisions, thereby ensuring equitable access to credit. Regular audits would be conducted to identify any inadvertent biases in the model's output, and the model would be adjusted accordingly.

3. Transparent AI: EquiFinance would practice transparency in its AI models. This includes explaining the factors that the model considers when assessing creditworthiness or suggesting financial products, which helps ensure that users are not deceived about how their data is being used or how decisions are being made.

4. Predatory Lending Protection: EquiFinance utilizes AI to monitor loan terms and flag potential predatory lending practices. Users are alerted if the terms of a loan are identified as potentially harmful or unfair
   

5. User Consent and Privacy Protection: EquiFinance would ensure users give informed consent about their data usage. It would adhere to strict privacy and security standards to protect user data, including anonymizing data used in AI models and employing robust encryption methods.

6. User Education: EquiFinance would provide resources to educate users about their rights under UDAAP and TILA. It would also clearly communicate the terms and conditions of its products and services, including interest rates, fees, and the user's rights and responsibilities.

7. Complaint Handling and Redressal: EquiFinance would have an efficient complaint handling and redressal system. If a user feels they have been treated unfairly, they can easily file a complaint and the issue would be promptly addressed.

8. Regulatory Compliance: EquiFinance would employ a team of legal and compliance experts to ensure that its operations, products, and services comply with all relevant regulations, including UDAAP and TILA

EquiFinance is focused on serving minority communities in the United States, particularly Black and Hispanic populations, who are currently underbanked or unbanked. These individuals and small business owners often face systemic barriers that limit their access to traditional banking services, and as a result, they are more likely to rely on costly alternative financial services.

Furthermore, EquiFinance's platform includes a predatory lending protection feature, which uses AI to identify and alert users of potential predatory lending practices. The platform also offers personalized financial advice to help users manage their finances, save, invest, and build wealth, thereby promoting financial inclusion and economic growth within these underserved communities.

By providing these services, EquiFinance aims to bridge the financial divide and foster economic empowerment among minority communities in the United States. 

Consumer Persona: "Latasha"

Background Latasha is a 30-year-old African-American woman living in an underserved urban neighborhood in Detroit. She is a single mother of two children and works full-time at a local community center. She has a high school diploma and has taken some community college courses.

Financial Situation Latasha has been underbanked for several years. She has a checking account, but she often relies on alternative financial services like check cashing services and payday loans due to their convenience and because she's been denied credit in the past. She doesn't have a credit card, and her credit score is low due to a few missed payments from a few years ago.

Goals Latasha wants to improve her financial situation. She's interested in building her credit score, saving for her children's education, and possibly starting a small business in the future.

Challenges Latasha faces several barriers to achieving her financial goals. Traditional banks have denied her credit due to her low credit score, and she's wary of the high interest rates and fees associated with alternative financial services. She also lacks the time and resources to improve her financial literacy.

How EquiFinance can help ? EquiFinance's AI-driven platform can help Latasha in several ways. By using alternative data points, EquiFinance can assess her creditworthiness more holistically, potentially granting her access to credit that she was previously denied. The platform's predatory lending protection can help her avoid high-interest loans, and its personalized financial advice can guide her in making better financial decisions. By using EquiFinance, Latasha can move towards achieving her financial goals and improving her economic stability.

Our team is uniquely positioned to design and deliver the EquiFinance solution due to  passion for financial inclusion, and personal experiences of close family members with the challenges faced by underbanked and unbanked communities.

For instance, I am a minority owned business owner for city of New York for past 10 years serving various city agencies like NYCHA, DFS and Department for the aging where I witness first handedly the problems faced by minorities and underserved population. I also work closely with SoBro (South Bronx economic development unit) to mentor minority business owners for economically depressed regions of New York.This provides a unique perspective and also a leverage to get direct feedback from our target users of this community. 

The rest of our team also brings a wealth of experience from fields like finance, data science, technology and social work, creating a diverse and knowledgeable group that can tackle the problem from all angles. 

To understand the needs of the communities we serve, we are actively engaging with them in multiple ways. We have conducted extensive surveys and focus groups to get a first-hand understanding of their financial challenges and needs. We also have ongoing partnerships with local community organizations like economic development units in south bronx, which provide valuable insights and feedback.

We are committed to a co-design approach for our solution, meaning the communities' input, ideas, and agendas guide our work. We also have an anticipated commitment from  community representatives on our advisory board, who will play a key role in shaping our strategic direction.

Lastly, we are committed to continuous learning and improvement. We will  regularly review our progress, learn from our successes and failures, and adjust our approach as needed to ensure we are effectively serving our target population.

We firmly believe that our personal connection to the cause, our diverse and experienced team, and our deep commitment to engaging with and learning from the communities we serve make us the right people to deliver the EquiFinance solution

The solution is early stage currently in ideation phase. But the rough TAM estimate is  would be about 23.47 million individuals (5.3 million unbanked and 18.15 million underbanked)

Applying to MIT Solve is a strategic decision for EquiFinance for several reasons:

1. Network and Partnership Opportunities: MIT Solve brings together a diverse group of innovators, entrepreneurs, social impact leaders, and change-makers from around the world. By participating, we would have the opportunity to connect with potential partners, collaborators, and investors who could help us scale our solution.

2. Expert Mentorship and Support: MIT Solve provides access to expert mentorship and strategic advice from experienced professionals. This guidance could help us refine our business model, improve our technology, and navigate challenges as we grow.
3. Visibility and Recognition: Being part of MIT Solve would increase our visibility and lend credibility to our work. This recognition could help us attract more users, garner media attention, and secure additional funding.
4. Alignment with Mission: MIT Solve's focus on solving global challenges aligns perfectly with our mission of promoting financial inclusion. We believe that being part of this community would inspire us, challenge us, and amplify our impact.
5. Funding Opportunity: MIT Solve offers significant grant funding to its selected Solver teams. This funding could provide crucial financial support as we work to expand our services and reach more people.