This series documents the development and early implementation of Change Machine’s fintech assessment and recommendation process. It also marks the launch of #TechForEquity with our community of practice — a movement of practitioners wielding fintech to build financial security with their participants, and holding the fintech sector accountable to their success.
If you haven’t already, access Part I of the series.
Part II – Insights Through Implementation: The SOI at Work
Change Machine’s Seal of Inclusivity (SOI) is designed with the insights and needs of our customers — Black and Brown women navigating financial insecurity — front of mind. The implementation of our SOI has demonstrated important lessons about how fintech leaders can meaningfully improve financial security, shedding light on what works for customers, which products are recommended, and what products are used most frequently.
Change Machine’s SOI Vetting Standards
Having established the SOI’s four pillars, we recognized that the integrity of their implementation depended on the creation of measurable, quantifiable vetting standards. In addition to advancing the intended goals of the SOI, these standards enabled us to hold ourselves and others accountable to the quality of the product recommendation process.
We took two steps toward establishing the standards to support our SOI’s four pillars in implementation:
First, to ensure transparency and objectivity, we created prerequisites that fintech products must have in order to be evaluated by the SOI.
- Product/service must be customer-facing
- Product/service must be accessible remotely or online
- Product/service must be readily accessible by the customer without third-party assistance
Products that do not meet these prerequisites are not evaluated by the SOI.
For those products that qualify for evaluation, we developed a fintech vetting rubric to assess products by asking key questions related to all four pillars. Based on answers to those questions, the rubric applies a 0-3 scoring system and designates a minimum standard for the SOI.
For example, the following criterion would be evaluated based on the scoring system below: “Company demonstrates a passion or commitment to providing a product that builds financial security.”
- 3 = All criteria are successfully met
- 2 = Most, but not all, of the criteria are addressed and successfully met
- 1 = Evidence of meeting the criteria is weak
- 0 = The fintech provider cannot or will not show evidence to show how they meet our criteria, or there are additional, extenuating circumstances that make this product not suitable
Findings From the Field
By implementing and testing our SOI, we had the opportunity to speak with practitioners, customers, and fintech leaders to more fully appreciate the needs of marginalized people and communities. Equipped with these inputs, we assessed our SOI against these customer needs, with particular attention to those who may be most in need of fintech services.
Ease of Use Is Essential
Fintech companies should be developing products that meet people’s needs, and — at the most basic level — products cannot meet customers’ needs if they’re too difficult to use. Indeed, across implementation, we’ve found that ease of use is the greatest barrier to effective use of fintech products.
Indeed, across implementation, we’ve found that ease of use is the greatest barrier to effective use of fintech products.
This finding is aligned with the collection of ample data over the past 10 years that demonstrate increased demand for customer choice and convenience as the rate of banked households has steadily increased. According to the FDIC Survey of Household Use of Banking and Financial Services, between 2017 and 2019, the unbanked rate fell by 1.1 percentage points, bringing 1.5 million banked households into the realm of potential fintech customers.
Those potential customers continue to place emphasis on the importance of ease. In one study by EY, a third of all fintech users cited ease of use as the most important driver for adoption when setting up an account. Ease of use is an even more important factor than digital versus physical banking; the 2019 Consumer Banking Digital Survey concluded that customer choice and convenience should govern companies’ strategies.
At the same time, data also appears to give fintech a competitive advantage over physical banking when it comes to ease of use. EY also found that customers are drawn to fintech services “because propositions are simpler, more convenient, more transparent and more readily personalized.”
Our own initial data support these findings. In a 2019 survey and focus groups, characteristics that comprise “ease of use” — convenience, time-saving, and automation — emerged as customers’ top concerns. They are eager to access fintech tools that can readily help them manage their financial activities with ease and efficiency compared with standard methods.
Thus, our SOI’s emphasis on ensuring products have a low barrier to entry and that they’re easy to use is a pillar aligned with helping customers achieve the greatest benefit from fintech products.
Accessibility Is Another Priority
In addition to ease of use, accessibility is prioritized by customers across all categories of fintech. Learning tools, customer service, and support are important features frequently cited, especially in building overall financial knowledge and security. Further, customers are interested in engaging with products that redefine customer service to include more holistic or “wrap-around” support. Such support is particularly important when catering to customers with lower technological literacy.
Change Machine’s data point to high demand for credit products. Such products have the highest conversion rate, or the number of products recommended by the engine and then indicated as a likely good option by the practitioner and customer, as well as the highest enrollment rate, or the number of customers who enroll with a product after discussing the recommendation with their coach. This tells us something important about what customers are looking for and what they need — especially at an economic moment when many are facing economic uncertainty and vulnerability in a way they haven’t before. Customers’ means to build assets through access to credit — key to building wealth — will be critical to address if we hope to help them plan for a stronger financial future.
Customers’ means to build assets through access to credit — key to building wealth — will be critical to address if we hope to help them plan for a stronger financial future.
Additionally, products that meet customers where they are — including products translated into languages other than English or that provide alternative methods of enrollment outside of social security numbers or ChexSystems reports — are frequently raised in conversations between practitioners and customers. Given the changing state of home and work over the course of the pandemic, even products that support customers with multiple sources of income on everything from budgeting to tax preparation to sourcing benefits are frequently cited as desired tools.
Continuous Quality Improvement
Customer priorities play an increasingly important role in the adoption of fintech as the field develops; those fintech companies that emphasize the needs of the customer in parallel with their product development are most likely to achieve competitive advantage. The common, strengths-based features of products that work for low-income customers demonstrate how other fintech companies should be developing their products.
The common, strengths-based features of products that work for low-income customers demonstrate how other fintech companies should be developing their products.
Our SOI was always intended to be developed through an iterative process as we learn more about what low-income customers want and need. Through evaluation of the SOI’s performance over time, we’ve identified further criteria for consideration, including:
Cultural considerations and equity
Customers may choose to engage with a financial product or service if they want to support the mission, even if they don’t see personal direct benefit from its use. We’ve also heard from practitioners that their customers are looking for products that meet their unique needs, such as products that allow for simple, affordable international money transfers or allow them to financially interact with their community (like lending circles or 2Gen models). Thus, our SOI now includes whether products/services are delivered in a way that reflects the personal values and cultural tenets of the customers served.
Certain features such as low-balance alerts or transaction alerts have the potential to help customers maintain stability and limit harm while still giving them control over their finances. This is most easily manifested in investment type products, but could also reflect in budget alerts or limits on the number of loans taken out at a given time. Thus, our SOI now evaluates whether fintech products have supportive features that help customers manage their financial activity while limiting the potential for harmful financial impact.
Financial goals at the center
The SOI uniquely centers the customer and customer goals, compared with other standards and principles. Given the wide range of fintech products available, specifically calling out products that center goal achievement for the customer over other value propositions could better determine whether a product is a simple bandaid — or even potentially harmful. Thus, we have sharpened our existing language in the “Builds Financial Security” and “Fairly Priced” pillars of the SOI to reflect the need for customers’ goals at the center.
Given the wide range of fintech products available, specifically calling out products that center goal achievement for the customer over other value propositions could better determine whether a product is a simple bandaid — or even potentially harmful.
Greater financial inclusion depends on equitable and fair access to a marketplace that is easy to navigate and provides low-income customers with the products and services they need. There is an imperative to help promote transparency in fintech products so that customers can prioritize those that offer them a path toward greater financial security. Our SOI provides a framework and a set of benchmarks to examine progress over time. As we continue to examine trends demonstrating what products work and have the highest conversion rate among customers, we will support practitioners and fintech developers in identifying gaps in the marketplace and areas for potential development.
Change Machine’s Seal of Inclusivity (“SOI”) is a comprehensive, customer-centric framework for the evaluation of consumer fintech products using an equity lens. It’s based on our unique perspective as practitioners and champions of the solutions urgently needed within the marketplace to help Black and Brown women navigate toward financial security. The framework is informed by copious research into previously existing product vetting standards. With defining principles including safety, accessibility, and transparency, the SOI provides, for the first time, a set of standards that not only center the experiences of customers and practitioners but explicitly incorporate financial security as a core principle. These standards provide fuel for fintech practitioners to further #TechForEquity movement-building on behalf of the low-income customers we serve.
To learn more about our efforts to explore the impact of fintech on customers’ financial security, contact Megan Bolado, Assistant Director of Fintech Partnerships.