Time for the Financial Industry to Turn Intentions into Action
As US financial institutions seek to regain consumer trust in the aftermath of the 2008 financial crisis, senior executives have increasingly embraced the lexicon of financial health and wellness. According to new research by the Financial Health Network (previously CFSI), at least 69 percent of executives in the industry say improving the financial health of their customers is a strategic priority. That’s the first step. The next step is doing something about it.
In the same survey, only 35 percent of finance executives said they are tracking data on financial health outcomes among their customers. About the same number say their institutions offer a low-cost, entry-level transaction account — one product especially relevant for struggling customers.
This data makes clear just how much work all of us in the financial industry have left to do. Building a financial system that prioritizes improving consumer outcomes for all will take traditional finance institutions, new startups, nonprofits, and policymakers.
What makes financial health so hard? The truth is that over 70 percent of Americans live paycheck-to-paycheck. At Flourish, that is the starting place for all our work in the US. Broad swaths of families–up and down the income spectrum–have a hard time saving, paying off debt, or covering unexpected expenses.
To address this mass market problem, we primarily make seed and Series A investments in fintech startups that help users become more financially resilient and seize opportunity. This includes fee-free banking pioneers like Chime, as well as fast-growing financial health platforms like Propel and Steady. To further move the needle, we also make select grants to organizations like the Financial Health Network and FinRegLab, which work to strengthen the entire financial industry.
The Financial Health Network is the leading authority on US financial health, and in November 2018, we were proud to announce our founding partnership in their groundbreaking US Financial Health Pulse. Tracking the financial health of Americans over time, the Pulse generates annual data to show how households are faring.
Last month, the organization released a companion piece, looking at how senior leaders at financial institutions think about their customers’ financial health–and what actions they are taking to improve outcomes. The survey, “From Buzzword to Business Model: How Industry Executives View Financial Health,” shows that while the industry has recognized the problem, most companies have yet to translate those intentions into action.
The commitment to financial health varies by business segment and size. Executives at larger institutions, retirement companies, and fintechs reported doing more to improve customer health. For example, 81 percent of fintech leaders are incorporating customer financial health into their strategic plans, compared to 49 percent among other respondents.
Together, this survey and the US Financial Health Pulse illuminate where the industry needs to improve and what actions are making an impact. The Financial Health Network continues to gather and release this data, providing a regular drumbeat to shed light on the enormity of these challenges. That’s work we are eager to support.
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