However, this article won’t discuss the benefits of going through the YC program, as that is already well-established. Instead, it focuses on the advantages of merely applying to YC, and going through the application process regardless of whether you are accepted or not. 

As a mentor to YC applicants, I have observed these benefits firsthand while helping candidates improve their applications and pitches. Here are my thoughts.

What is YCombinator and how did it become an important tech startup incubator?

For anyone unfamiliar, YCombinator (YC) is a startup accelerator and seed-stage venture capital firm based in Silicon Valley. Founded in March 2005 by Paul Graham, Robert Morris, Trevor Blackwell, and Jessica Livingston, it has become one of the world's most well-known and successful startup accelerators. 

Over the years, YC has helped launch over 4000 companies, including some of the most successful and innovative in the tech industry. These include Airbnb, Eventbrite, Stripe, Reddit, Twitch, DoorDash, and many others. Indeed, many YC companies have gone on to become unicorns, meaning they are valued at over $1 billion.

Unsurprisingly, the YC program has gained immense popularity and influence, receiving thousands of applications worldwide each year despite being an intensive process. The program lasts for three months, during which founders concentrate on improving their product, refining their business model, and building their team. YC also provides mentorship to help participants develop essential skills, such as how to scale their business and market their products successfully. 

At the end of the program, startups showcase their progress to a group of investors at a “Demo Day” event. Founders receive investment in their company and gain access to the powerful YC alumni network of over 6000 members, which provides ongoing support to those founders throughout the lifespan of their company and beyond.

So, why should you apply for YC even if you don’t get in?

If you're an early-stage tech startup founder, applying for YC can offer a range of benefits, even if your company is not ultimately accepted into the program. Only about 1.5% to 2% of over 40,000 startup applicants are chosen annually. But that doesn’t mean there’s nothing to learn. 

Here are two key benefits that are helpful for every company going through the application process.

1) It can help you clarify and refine your business model

In order to apply for YC, you have to develop a detailed business plan that outlines your company's mission, target market, revenue model, and growth strategy. Going through this process can help you identify areas where your business plan needs improvement so you can refine your messaging to be more impactful and effective. 

YC specifically looks for companies with new insight and have taken time to interact with their customer base, encouraging founders to have real conversations with their users or clients.

2) it can help co-founders come to a clearer understanding of their company's vision and messaging

Often, co-founders have slightly different ideas about the direction of their company but haven't taken the time to articulate these differences clearly. Without a clear vision and brand message, companies risk losing focus, confusing customers and can fail to differentiate themselves from their competitors.

The YC application process forces co-founders to sit down and discuss their vision for the company going forward, which can help avoid conflicts and ensure everyone is on the same page. Like any partnership, learning how to communicate goals and differences effectively can take time, so the YC application process can help you get there. YC is also looking closely to see if the startup has a well-balanced team that is synced together, an important goal for anyone startup whether you are accepted or not.

Some parting thoughts

As a YC alumn, I can attest to the transformative experience it offers. Not every company is suitable, but even if your startup is not accepted into the program, the application process can be an incredibly valuable learning experience. 

There is no recipe for startup success, but by helping you clarify your business model and messaging, the YC application process can help set your startup up for long-term growth. Plus, there is always a chance that you may be accepted. I hope this advice benefits all the YC hopefuls out there—best of luck!

This electronic funds transfer system connects more than 25,000 financial institutions across the United States and revolutionized online payments making it so large volumes of transactions could be processed at once for the first time.

In this article, I wanted to delve deeper and explore precisely what ACH payment is, how it got started, some of its shortcomings, and the FinTech business models filling a need within the current payment system. Let’s dive in.

What is ACH and how did it get started?

The ACH system, one of the oldest payment systems in the US, is a way to transfer money from one bank account to another without needing to use paper checks, wire transfers, or cash. Also known as direct deposit or direct pay it is used in the US today for many automated payment services, including payroll, direct deposits, mortgage and credit card bills, and tax-related payments.

ACH was developed in 1968 when a group of bankers in California became concerned about the growing volume of paper checks and whether the technology and equipment used to clear them would be able to keep up with the increased demand. This coincided with a sponsored study commissioned by the American Bankers Association looking for ways of improving the nation’s payment system.

These events led to the ACH association forming in California in 1972 which aimed to handle electronic payments. Other regional ACH networks soon appeared, and in 1974 they formed Nacha to administer the ACH Network, leading to the first national ACH Rules being drafted.

In 2021, the ACH Network processed more than 29 billion payments, which marked the seventh consecutive year in which it added more than 1 billion new payments.

When you make a payment to another account using ACH, it always follows the same payment process:

1. A direct deposit or direct payment transaction is made using the ACH network via debit or credit to another bank account.

2. An ACH operator (The Federal Reserve or The Clearing House) will sort the entries into deposits and payments.

3. The ODFI (originating depository financial institution) batches the request with other ACH transactions, to be sent out three times throughout the day.

4. These are received by the RDFI (Receiving Depository Financial Institution) who debits the customer with the value.

5. The transactions are settled between both banks at the end of the day.

As discussed in my previous article, though more modern forms of electronic money transfer — built upon the US system — have become popularized in other parts of the world ACH remains the dominant payment system in the US. This comes with positive aspects and some unique challenges.

What is a particular challenge with ACH?

Because transactions are processed in batches, ACH payments can take several days to deposit into the receiving bank depending on when they were initiated. This differs from more expensive wire transfers which don’t use a batch system so are guaranteed to arrive the same day.

In 2015, NACHA created Same Day ACH, intending to settle transactions within the same day. Though this is a big improvement Same Day ACH is still not real-time and continues to rely on batch processing. This has both positive and negative effects.

One major benefit of the delay of ACH payments is that it helps decrease fraud. By providing a buffer banks can cancel payments if it is found out that there was fraudulent activity On the flip side, there are certainly challenges with ACH.

First of all, there is no confirmation when money is deposited in ACH — the only communication a sender receives is if the money did not reach the account and is returned to the bank for some reason. Additionally, because ACH can take several days, it can delay financial transactions and thus slows down business.

So are there viable solutions to this? Well yes and no. Let’s discuss.

New apps and services that innovate within the ACH framework.

If the US financial system ever moves to RTP — a system that powers multiple bank accounts into a single mobile application, thus offering the efficiency of instant interbank and intrabank transfers — then existing financial institutions will need to innovate their infrastructures. In our previous article, we discussed RTP in greater detail and its advantages and limitations.

The reality is that the move to RTP requires a significant overhaul of the US financial system, and, while steps are being made to that end, the majority of transactions are still carried out via the ACH network. So, to make financial transactions happen more quickly, FinTech companies need to innovate within the bounds of the ACH infrastructure.

An app that is doing just that is Plaid (and Sardine), a platform that processes payments instantly, guaranteeing immediate ACH transfers with no risk. Of course, this only gives the appearance of automatic deposits for the receiver and behind the scenes, the ACH process is still working as usual.

By taking on full liability for chargebacks and returns and offering complete fraud prevention and compliant infrastructure, businesses can offer their customers a faster service without taking on any risk themselves. Sardine is now becoming available as a payment option for a growing number of businesses across the US, filling in the current gap between ACH and RTP.

Looking to the future of FinTech

It is an interesting time within FinTech as we consistently look for faster and more secure ways to transfer money and cryptocurrency while working with current limitations. The US financial industry is understandably complicated, so fundamental change is tough to implement.

But there are already advanced payment processing methods — like RTP — available, so hopefully, change comes sooner rather than later. In the meantime, companies like Sardine will continue to innovate on top of what we already have today because some progress is better than no progress.

Bank of America started out with the premise that everyone deserves the opportunity to access financial services; something we feel has been severely lacking in modern banking. By providing services to immigrants and blue-collar workers, most of whom were unbanked or underbanked, Amadeo Giannini, BoA’s founder, paved the way for one of America’s largest financial institutions.

Let’s explore the origin story of BoA and how that same ethos that made the bank successful in the early days is as important today in 2021.

Amadeo Giannini founded the Bank of Italy

Before there was a Bank of America, there was first the Bank of Italy, which Amadeo Giannini founded in 1904. Twenty-four years later he would merge his bank with a small group of LA banks and found Bank of America.

Giannini, born in San Jose, California in 1870 was the son of Italian immigrants. His father bought a farm and made a living by selling fruits and vegetables; a business which Giannini came to be involved with at a young age after his father was tragically killed in a wage dispute. His mother eventually remarried and he continued to help his step-father, who expanded the business further. This success allowed Amadeo Giannini to attend Heald College but he later dropped out knowing he would find more success by taking an active role in the world of business.

His next big step came after marrying Clorinda Cuneo, the daughter of a San Francisco real estate magnate, and becoming a director of the Columbus Savings & Loan where his father-in-law owned an interest.

He found that he was constantly battling with the other directors as Giannini wanted to serve the increasing immigrant population of San Francisco: a minority group without a bank that was viewed as a credit risk. Frustrated, he quit the board and decided to found his own bank.

Thus, in 1904, Amadeo Giannini founded the Bank of Italy in San Francisco. It was housed in a converted saloon and was marketed as an institution for the “little fellow.” It was the first bank to offer financial services to “the hardworking immigrant's other banks would not serve.” Pioneering the use of advertising to get the bank’s message out, one of his early ads stated “small accounts welcome” and “the small depositor of today becomes the rich man of tomorrow.”

It quickly became the go-to bank for more and more immigrants, laborers and workers, and even women were now able to own accounts, save, and invest at the women’s banking department. The Bank of Italy was immediately successful with deposits totaling $700,000 within a year.

They even offered extended branch hours to fit around customers’ workdays which often went late into the day at construction sites, shipping yards, and other blue-collar job schedules. A true bank of the people.

Innovation in times of crisis: The Bank of Italy opens a makeshift branch to help rebuild San Francisco

Just two years after the Bank of Italy started, in 1906, San Francisco suffered a devastating earthquake and subsequent fires which lasted several days. 80% of the city was destroyed, 400,000 residents were left homeless, and 3000 people lost their lives. It is still considered to be one of the deadliest earthquakes in the history of The United States.

Faced with such widespread devastation, Amadeo Giannini was quick to act, moving all of his customer’s records and money deposits out of the bank before they were destroyed. To do this, without alerting the looters who were running rampant in the city, he borrowed a produce wagon from his stepfather and hid the assets under fruit boxes.

His quick action meant that he was able to operate and provide cash withdrawals in the immediate aftermath of the disaster when other banks could not. He also offered loans to help people rebuild and reestablish their lives with only a handshake as a promise of repayment. His faith in people paid off as every penny was repaid with interest leaving Giannini in a position to expand.

The Bank of Italy becomes the Bank of America

In 1909, legislation passed in California that paved the way for banks to be able to set up branches. Giannini quickly seized the opportunity. Only operating in San Francisco until this point, the first branch of Bank of Italy opened in San Jose in 1909 and by 1916, he had opened several other branches across California.

As Giannini’s banks grew, he set his sights on building a large banking institution to compete with the existing banks of the day. In 1922 he began merging the Bank of Italy with a group of Los Angeles banks known as Bank of America, which created the Bank of America that we know today. By 1929, the rapidly growing bank had over 400 branches in California.

Giannini was famous for taking an interest in each branch, frequently visiting and remembering the name and face of each of his employees. He also continued to invest in California’s prosperity being particularly supportive during The Great Depression.

A few interesting factual tidbits: Giannini financed the first hand-drawn animated film Snow White, loaning money to Walt Disney, and invested in Hewlett-Packard who at that time was operating from a garage. These actions would continue to show that Bank of America, like Bank of Italy, was for the people.

Stilt is bringing back banking opportunities to immigrants and the underserved

Though it seems like a novel idea today, it really struck me how Stilt is actually going back to the roots of today’s successful financial institutions by providing banking opportunities to many of those who feel left out of the modern banking system.

Initially launched as a lender to international students from India, Stilt now provides loans and other banking services to all immigrants in the US, and others underserved or unserved by the banking system, with a modern risk assessment system. Find out how Stilt can help you today.