Financial Health Still A Struggle For Many—More Financial Innovation Needed [Forbes]

Financial Health Still A Struggle For Many—More Financial Innovation Needed [Forbes]

Originally posted on Forbes

Recent research highlights the ongoing struggle many Americans have when it comes to financial health—underscoring the need for more financial innovation to meet these needs.

Venture investors, technology partners and government bodies need to work together to improve financial health for a broader percentage of the population, says Emmalyn Shaw, managing partner at Flourish, a global venture capital firm that focuses on early-stage fintech investments that enhance financial health.

“It’s going to take all constituents to meaningfully provide a solution here,” Shaw told Forbes following the release of The Financial Health Network’s U.S. Financial Health Pulse 2020 Trends Report. The survey, which reveals an uneven impact to financial health over the last year, shows that two-thirds of respondents remain financially coping or vulnerable, and underscores persistent inequities and challenges undoubtedly made worse by the pandemic.

The survey, now in its third year, looks at eight indicators of financial health — spending, bill payment, short-term and long-term savings, debt load, credit score, insurance coverage, and planning — to assess whether a person is “financially healthy,” “financially coping,” or “financially vulnerable.” It was done in partnership with Flourish, MetLife Foundation, and AARP.

Specifically, the survey found that 33% of people in America are financially healthy, an increase which can likely be attributed to short-term recovery efforts and changes in consumer behavior amid the pandemic.

But, of course, there’s still a big disparity between the haves and have-nots. Not surprisingly, the average financial health of people with household incomes above $100,000 improved the most over the past year, while people making less than $30,000 did not see any average improvements. Here’s another disturbing finding: As of August 2020, only 15% of Black people and 24% of Latinx people were financially healthy, according to the survey, compared with 39% of white people and 39% of Asian Americans.

The gap in financial health between men and women is also notable, with 40% of men vs 28% of women financially healthy. One hopeful indicator is that women showed greater overall improvements in financial health since 2019.

Shaw tells Forbes she’s pleased that pandemic-related governmental stimulus provided some safety net for Americans. But in the absence of a second stimulus, she is very nervous about the effects on people who are struggling the most. “That is my greatest concern at this point,” she says.

According to Shaw, fintech needs to continue to play a role in helping people better manage their financial lives and well-being. Her firm’s portfolio includes challenger banks, insurtech, debt management, and personal finance companies that provide financial innovations to help financially struggling consumers find solutions that work for them.

It’s about “thinking outside the box on how we can use financial technology differently to enhance financial health,” Shaw says. In the last downturn, financial institutions broke the trust of many Americans. Financial innovators have “an opportunity to rebuild that trust, she says.