Payments Innovation

What Do Hillbillies Have To Do With Payments Innovation?

J.D. Vance made “Hillbilly” and “Elegy” a part of our mainstream vocabulary last summer with the publication of his best-selling book, The Hillbilly Elegy. And the working class people he wrote about made their impact known when they drove the outcome of the 2016 U.S. Presidential election. But that isn’t why Karen Webster invited Vance to participate in a fireside chat with her at Innovation Project on March 15. Find out why – and why innovators will want to listen in to their important conversation.

“Elegy” isn’t exactly a household word — or, at least, it wasn’t until June 28, 2016.

That’s when J.D. Vance — Marine, Yale-educated lawyer and venture capitalist — published his memoirs, “Hillbilly Elegy. Vance’s book become the layman’s guide for understanding the psyche of the working class Americans whose votes singlehandedly drove the outcome of the 2016 U.S. presidential election. While Hillary Clinton won the popular vote by a margin of 3 million, it was the collective votes of the roughly 110,000 people in the working class counties in Pennsylvania, Michigan and Wisconsin who turned those blue states, red — and put President Donald J. Trump into the White House.


The dictionary defines “elegy” as a “poem or song to express feelings rather than tell a story” — one that often memorializes the struggles of the basic human condition.

Vance’s elegy describes what it was like to grow up the child of a single mother with a drug problem (and multiple stepdads) in a blue-collar Rust Belt town that had lost its economic, social and moral compass over the years. The local manufacturing jobs that once employed families, which, in turn, once supported local businesses, had disappeared. The shuttered stores on Main Street and empty, boarded-up houses dotting the streets of his town were merely the external signs of the internal despair that Vance said defined this once proud — and proudly patriotic — working class demographic that felt that they’d lost their piece of the American Dream, forever.

Joining the Marine Corps after high school, Vance said, was his escape route to a better future — college, law school and a career in business. Yet, he wrote about his struggle to take the hillbilly out of the boy, even though he managed to take the boy out of the hillbilly (town). A fancy dinner with affluent friends gave him a taste — quite literally — for the first time, of mineral water that he thought was bad and spit out. And it also gave him a taste for what it felt like when those well-heeled colleagues disparaged the military and/or the working class in front of him, not knowing (or imagining, even) that their Yale-educated colleague was a card-carrying member of both.

In his book, Vance offers a stark look inside a complicated facet of our society and hints broadly at some of the social and public policy issues that must be addressed to solve many of the systemic issues that could improve their lot in life. He’s also started a public policy firm recently in Ohio so that he can be a hands-on part of the solution.


As important as that work is, discussing this social and public policy agenda isn’t why I was intrigued by Vance and his book — nor why I asked him to join me on stage on March 15, 2017, at the Innovation Project.

It was my desire to start a conversation with him about what we, as innovators in payments, commerce, retail and financial services, can do to offer the working class — across all races and genders — their fair shot at the American Dream and the working classes of other countries a fair shot at their dreams, too.

Unlike policy issues, which take months and years of debate to get governments at the state and local levels to move even an inch — and decades after that to really know whether or not they’ve worked — our collective genius and passion for making the world (and the people living in it) a better place have the potential to make a difference, right here and right now.

But not just for the working class.

Although the largely blue-collar laborers working in less-skilled manufacturing or services jobs have a particular set of challenges to overcome, there’s a large swath of the American population who, for the same or different reasons, also feel that the American Dream that’s defined our country since the Pilgrims first set foot on our shores in 1620 is more fantasy than reality.

As I wrote recently, it’s the millennials — who are earning 20 percent less than their parents did at the same stages in their lives and aren’t sure anymore. And it’s the middle class largely — who feel the impact of a changing labor force that disadvantages the retail and some services sector jobs that were once a predictable source of a stable income for middle class families but can no longer be counted on for either.


I have to admit to being stunned when I looked at these numbers over the weekend.

In 2015, 50 percent of the tax filers in the U.S. made less than $36,000 a year — 50 percent.

Most of us living and working in our cushy, comfy bubbles in the big cities that dot the East and West Coasts — and who don’t think twice about plunking down $23 for the Organic Grade B 100% Maple Syrup to pour over the gluten-free homemade Belgian waffles topped with organic blueberries that we sit down to for breakfast on Sunday mornings — don’t have any idea what living at that income level even looks or feels like.

Seventy-five percent of tax filers that same year made less than $75,000 a year — that’s salary, bonus and taxable benefits. And since tax filings represent households — which often include more than one income-earner — that implies that there are an even larger number of individuals in the absolute, who, individually, have far less than that to spend each year on goods and services.

These statistics are important because income is a proxy for spending power, and spending power is what makes the payments, commerce and retail innovation wheel go ‘round.

Here’s what that part of this story looks like.

Those earning less than $36,000 a year drive 11 percent of spending — those under $75,000, about a third (32 percent). But unlike the 25 percent of households who earn more than $75,000 annually and have the ability to save some of what they earn, probably 100 percent of the 75 percent are spending just about every penny of what they bring home — and then some.

For some of those individuals, those annual income numbers may be the best it’s ever going to get.

There’s a real difference in the future — and future earnings potential — of a college-educated 23-year-old earning $50,000 as an account rep in a growing company in a growing field and a high school-educated 53-year-old earning $50,000 as a factory worker in a plant that used to pay him twice that and just laid off 30 percent of its workforce.


There are two possible reactions to these stats.

As a profit-maximizing venture, you might say: Why should I care about the 11 percent of people — or even the 32 percent of people — who are income- and spending-challenged and, by the numbers, largely economically irrelevant? Why not live by the 80/20 rule and double down on the 20 percent of the population who can drive 80 percent of my revenues — and weather the inevitable shocks to the financial system?

There’s certainly a lot of innovation directed to those individuals and venture money behind it. Innovations that eliminate the friction of shopping online at luxury retailers, managing their investment accounts via a highly secure yet simple-to-use mobile app or enabling the wire transfer of five-figure deposits on summer vacation rentals — innovations that help the affluent spend, save and manage their money abound. And there’s absolutely nothing wrong with that.

Or you might say, as a profit-maximizing venture: I’m going to care a lot about the 75 percent of the population who need different and better options to maximize that spend and eliminate the friction associated with that spend — and even do what I can to increase their earnings potential.

Fortunately, innovators over the years have actually done a lot to help there, too, blunting the impact of the decades-long stagnating wage reality for many in the working and middle class.

Even though median income grew at an anemic 2.8 percent annually since 1990, prices for goods and services over that period of time declined .01 percent a year.

The Brookings Institute has tracked the impact of innovation on prices and buying power over that period of time, and it said that the glass here is half-full, thanks to innovations in manufacturing, sourcing and the globalization of our economy. The $4,020 that a 25-year-old millennial’s mom spent on a MacBook the year her little bundle of joy was born costs roughly half that today and is far more powerful. It reported that it takes fewer hours of work for a middle-income wage earner to buy a car than at any time in our history. Washers, dryers, refrigerators, irons and toasters have never been cheaper, and less than a few hundred bucks can put a powerful computer — a smartphone — in the hands of just about anyone who wants one. It doesn’t take $2,000 and a MacBook to give people access to the internet anymore. Today, 78 percent of adults have smartphones and forecasts say 90 percent will have one by 2020.

Those smartphones give those consumers access to apps that can help them find the cheapest prices for the things that they want to buy. Access to eTailers, like Amazon and, offer an online destination for the purchase of quality goods at the best possible prices. Access to online savings tools, like Acorns, Seashells and Digit, gamify savings — and work. Mega-retailers, like Walmart and Sam’s Club, offer consumers a one-stop retail and financial services hub that now also includes a savings tools so that those consumers can put money aside for a rainy day.

Entrepreneurs also help the middle and working class find new opportunities to improve their earnings potential.

Marketplaces, like eBay, Etsy or letgo, make it easier to sell used goods online. Sharing economy players, like Uber, Lyft, TaskRabbit and Thumbtack, make it easier for the un- and semi-skilled working and middle class people with supply and capacity to find new buyers — and sources of income. Direct marketers, like Stella & Dot, Beautycounter and Mary Kay, help individuals — mainly women — build their own small businesess and financial independence. And a whole new crop of blue-collar marketplaces, like Job Today, are cropping up to help physical laborers find work.

At the same time, payments innovators, like Hyperwallet, have recognized the growing need for these “gig” workers to be paid sooner — instantly or same-day — and enabled that on behalf of the marketplaces they serve. Our work with Hyperwallet on the Gig Economy Index reveals that 40 percent of the U.S. population is engaged in a “gig” job, and 10 percent (and rising) rely on it for their only source of income.

Financial services players that run the gamut from PayPal, to Green Dot, to Walmart, to digital-only banks, like Chime, to alternative lenders, like Marcus and Affirm, democratize access to more traditional banking and credit services for working and middle class consumers.


All of this is helping — but it isn’t enough. Maximizing consumer spending power — across the board — is also about reducing the costs that consume a larger and larger chunk of their paychecks, particularly those paychecks that aren’t increasing.

Health care, education and child care costs, Brookings said, is where the glass is half-full.

Those costs, it said, have increased 200 times the rate of the median income at the very same time that the quality of that service is slipping. The cost of public education in this country is massive, but it is producing generations of graduates ill-equipped to compete for the jobs that are driving the future of the economy. The cost of health care is skyrocketing at the same time that payments to service providers pegged to fixed insurance reimbursements constrain the time and quality of the treatment they deliver to their patients.

So, it’s everyone’s problem when more and more of the discretionary income of an already constrained working and middle class consumer is being spent on the things that, in the end, don’t improve their overall quality of life.

For sure, there’s no easy answer, no quick fix to the problems that directly and indirectly impact the future of payments, commerce, retail and everyone operating in them.

And that’s what I want to explore with J.D. Vance about on March 15: What is our collective responsibility to make a difference in the lives of the working and middle class? And how far outside of our “traditional” payments and commerce ecosystem should we look to create partnerships that help solve some of these problems?

Should the Ubers and Googles of the world, who are investing in driverless car technology, for example, also invest in retraining the working and middle class truck drivers and maintenance workers to help support this new transportation paradigm?

Should the marketplaces powering the gig economy — which serve as their “virtual employer” — do more to provide access to the services that any other employer would provide: health care at a group cost, help with tax withholdings, savings plans, access to professional development?

Do we really understand what kind of financial services, payments and commerce innovation these 75 percenters need, and are we putting enough muscle behind solving those problems — or even diagnosing them in the first place?

Will the traditional business and delivery models suffice?


What we are seeing now unfold in the U.S. isn’t all that new — nor anything we haven’t worked through and survived on the other side. Sixty miles south of where I am sitting today is the town of New Bedford — the wealthiest town in the entire U.S. in 1846. That year, whaling was the fifth-largest segment of the economy, and New Bedford was ground zero for innovations in whaling — better ships, better gear, an innovative compensation model for paying crew. Fifty years later, 90 percent of that industry had evaporated, for many of the same reasons our manufacturing jobs are on the decline — innovation delivered a new way of doing things. Electricity eliminated the need for whale oil to light homes, and crews trained to hunt whales weren’t able to find other work. It took the towns that depended on whaling decades to recover, and some towns have never seen that kind of prosperity again. Nantucket has become a playground for the .1 percenters. New Bedford continues to struggle with an average household income that is half the average of Massachusetts as a whole.

So, then, why should we really care, you might say? This is just the natural cycle of innovation — old industries give way to new ones, and some of the workforce just won’t fit.

Well, maybe that’s true — and there’s no point in me being preachy and telling everyone it’s the right thing to do. So, let me just be pragmatic instead.

Businesses thrive in a more certain political environment — ours seems uncertain now. It’s hard to have a happy stable society when so many people don’t think its working for them and when the numbers speak pretty loudly that it isn’t.

I think that innovators can be part of the problem or part of the solution.

J.D. and I will be joined by Daniel Eckert, SVP for Walmart Services, on March 15 — who sees 100 million of these consumers walk through its doors every week. I can’t guarantee that we’ll end our conversation by having all of the answers or even surfacing all of the problems.

But I will guarantee that we will give you a lot to think about as you fine-tune your strategies and plans for the year — and contemplate how to be part of the solution in the years ahead.

Click here if you’d like to be in on the conversation.

I hope you do.

“We hillbillies need to wake the hell up.”

As do the rest of us.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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