The Financial Health Network has watched the fintech industry transform since initiating its inaugural Financial Solutions Lab cohort in 2015. Now in its third year of a $30 million, five-year partnership with JPMorgan Chase, the Financial Solutions Lab continues to support the development and growth of fintech solutions for underserved consumers. But this year, the program has rounded a corner in terms of the level of sophistication being applied to new technologies. “We are seeing people take on products that are very complex,” says Ryan Falvey, Managing Director at the Financial Health Network.
With thousands of tools in the fintech marketplace, there is no shortage of products and services being offered to consumers. Considering that more than half of American households report that they struggle with financial health, according to Federal Reserve data, the challenge becomes not just offering a broader array of fintech tools, but making sure those tools solve the specific needs of consumers.
This year, instead of taking a global approach to financial problem solving, Financial Solutions Lab companies have shown they can have the biggest impact by focusing on particular populations and challenges those consumers face, rather than building a one-size-fits-all solution. “By designing solutions for underrepresented populations, we can support niche products tailored to the needs of people who may have been overlooked in the past,” says Colleen Briggs, Executive Director of Community Innovation for the Office of Corporate Responsibility and Global Philanthropy at JPMorgan Chase.
This year’s cohort includes technologies designed to meet the needs of specific high-risk populations including low-income bus transit riders, the aging, and newly arrived immigrants. “We are seeing more sophistication of business models and much more specific problems businesses are solving,” says Falvey. “That specialization is a sign that the industry is getting more sophisticated.”
With increasing complexity come other crucial developments helping push the fintech industry to new levels–not just in serving specific populations but also in offering actionable steps for consumers to take, partnering with influential stakeholders, and innovating in areas that haven’t benefited from new technology in decades. Here’s a closer look at the exciting takeaways from this year’s lab and financial services technology as a whole.
Creating Complex Solutions For Niche Populations
Solving problems for very specific segments of the population has become a particularly effective approach for fintech startups to take. For example, the startup EverSafe, which offers identity theft protection, was designed specifically for seniors and their family members in an effort to help the 18.5 million financial caregivers in the U.S. prevent the rampant financial fraud targeting elder populations. With seniors who face financial fraud averaging a loss of $120,000 each according to AARP data, honing in on elder abuse in particular targets a niche population of vulnerable consumers and their families.
Similarly, Token Transit, which offers mobile access to public transit passes, is working to create a way for low-income riders to decrease transportation costs and access tickets more easily. While big players like Uber and Lyft have created a more elegant car service experience, technology has been slow to adapt for lower-income commuters who can’t afford to call a car and rely instead on public transit.
“For low-income consumers, this is a huge pain point. How do you get to work? How do you live your life?” says Falvey. “Bus transit is a part of the economy that historically hasn’t seen a lot of innovation.”
Reinventing the Way Systems Work
For many of the Financial Solutions Lab companies this year, coming up with a simple solution to a persistent financial challenge has required an incredibly complex process of developing partnerships spanning the country or in some cases, the world. For Token Transit, for example, that meant developing relationships directly with public transit offices across U.S. cities, working one city at a time to develop a sea change distribution model for how bus passes are distributed.
For the founders of Nova, which offers a global credit service that standardizes consumers’ credit history from around the world to fit U.S. regulations, that means literally traveling the globe, working with credit bureaus in different countries to obtain credit reports and then translating them to meet U.S. standards. Starting with Mexico and India, Nova is working to grow the business one country at a time.
Others, like Blueprint Income–which offers a personal pension plan to consumers who either lost their company pension or can’t afford the cost of buying an annuity–there’s an effort to rethink how people save for retirement by creating new, more affordable distribution models. “They are trying to reinstate how retirement products work,” says Falvey.
Similarly, Point, which enables homeowners to sell equity stakes in their home to investors in exchange for access to capital, is aiming to create a new asset class that taps into the $17 trillion of equity tied up in people’s homes. “If we unlock even a fraction of that, even 1%, that’s $170 billion sitting in people’s homes,” says Point founder Eddie Lim. “It’s an interesting way to think about how you jumpstart the economy.”
Going Beyond Advice to Action-Based Solutions
And rather than simply educating consumers on smart financial practices or offering suggestions on financial health, fintech startups are increasingly aiming to build actionable solutions right into their applications for immediate financial results. Many of this year’s startups have tackled the question: How can elegant design and technology transform experiences that have historically been complicated for consumers?
Tomorrow, an app that allows users to draft a legal will in a matter of minutes on their smartphone using a 36-question survey, is looking to create a simple solution for the more than three-quarters of Americans over the age of 40 living without a legal will in place. To do this, the company had to collaborate with 65 attorneys across the country as well as regulators to create a streamlined mobile-friendly alternative that doesn’t just teach people how to write a will, but does it for them. “We wanted to make it completely visual and controllable in the palm of your hand,” says Tomorrow founder Dave Hanley.
In the realm of financial planning, Grove is connecting long-term improvements in financial health to short-term actions. The product gives users specific steps to take with their investments and finances, and is building the capability to directly take those actions on behalf of users. To enable this level of engagement, Grove’s founders use Certified Financial Planners, or CFPs, to build one-on-one customer experiences that leverage technology to help consumers manage their financial lives.
Finally, the app Dave, which helps users avoid overdraft bank fees, doesn’t just notify consumers when their balance gets low, it actually connects directly with users’ checking accounts and looks for recurring trends in user spending and income through a set of predictive algorithms to stay ahead of a user’s finances. When someone’s balance looks to be nearing a potential overdraft, they are given the option to front part of their paycheck or borrow money from Dave to avoid paying penalty fees.
“With all of these solutions, it’s no longer about offering consumers passive financial information. It’s more about delivering action-oriented tools to help consumers actively improve their financial health,” says Briggs. “Fintech entrepreneurs are really building that approach into the design of their solutions.”
Getting Products into the Right Hands as Efficiently as Possible
As the fintech industry matures, there continues to be a decrease in barriers to adoption, making them more accessible to consumers who need them most. And this year’s Financial Solutions Lab is a strong indicator of the increased efforts on the part of fintech applications to find their way into the hands of the most at-risk consumers, says Briggs.
For example, this year the lab partnered with the World Disability Institute in an effort to help think about distribution and design from the perspective of the underserved disabled community. With the support of JPMorgan Chase, the Financial Solutions Lab also launched its first Nonprofit Fintech Working Group in an attempt to help connect leaders in fintech with leaders in the nonprofit world to share ideas and collaborate. “Nonprofits bring a lot of expertise about particular communities to inform the design of the products,” says Briggs. “They can also provide a trusted source of distribution to increase access to these products.”
In the spirit of the Financial Health Network’s mission to reach underserved communities in need of financial tools, the new Nonprofit Fintech Working Group helps broaden the connection between financial tech and those consumers who need it most. “Fintech companies can learn from the needs that nonprofits see and nonprofits can potentially find new tools to serve their customers,” says Falvey. “This is all part of our mission to answer the questions: ‘How do we get more people to develop these types of solutions and how do we continue to push the industry forward so that more Americans can achieve financial health?’”