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 III of the series.
Part IV – The Consumer Protection Imperative
Change Machine’s Seal of Inclusivity (SOI) is designed to elevate products that build financial security, highlight harmful and exclusive practices in the fintech space, and equip practitioners to confidently select effective products. Having conveyed our SOI’s vetting standards for products that advance equity, then identified practices and products that harm vulnerable customers, we now share our approach to help practitioners promote equitable, affordable fintech products.
Fintech’s Rising Tide
When it comes to helping participants build financial security, practitioners have thus far remained with their feet planted firmly in the brick-and-mortar space, where financial products and services are well understood. In traditional financial coaching, helping a customer navigate the opening of checking accounts and other savings vehicles is routine. And in that realm, predatory or wealth-stripping products — from payday loans to high-interest credit cards — are easy to identify, flag, and protect against.
Yet the rise of fintech and its more ubiquitous usage demands that practitioners engage with these tools in order to build a truly equitable economy.
As customers have increasingly realized — particularly within our more online-reliant COVID existence — that they can and must move at least some of their financial activities online, many practitioners have expressed a reticence to incorporating tech-based financial products and services in their coaching. According to the annual survey conducted by the fintech company Plaid, 88 percent of US consumers used fintech in 2021, compared with only 58 percent of consumers in 2020. The rising adoption is seen uniformly across consumer segments; a full 96 percent of Hispanic-Americans now use fintech, compared with 62 percent the prior year, and Baby Boomers are the fastest-growing segment.
Practitioner Perception: Grounded in Reality?
The awareness of fintech’s ubiquity, however, does not necessarily assuage practitioners’ legitimate concerns about their customers’ engagement with fintech tools. Some of these concerns relate to customer engagement; practitioners worry about customers’ access, hesitancy to engage with technology or preference for interpersonal contact, confusion around the technology, and their access to free or low-cost products.
On the other hand, practitioners also harbor concerns about the fintech products themselves, which generally fall into four categories:
- Familiarity actually breeds comfort. Practitioners want to familiarize themselves with fintech products before recommending them to customers, but may not feel they have the appropriate benchmarks available to them for vetting.
- Trust must be earned. There are widespread concerns that fintech companies and their tools are, by and large, predatory. While in some cases, these concerns are founded, in others they may be distorted. For example, the notion that neo-banks could be unreliable fiduciary stewards, in fact they are often backed by brick-and-mortar banks with FDIC insurance — protecting customers’ money from loss.
- Tech products need tech support. Practitioners may worry that more time will be spent troubleshooting technology issues on products than advising customers.
- All or nothing at all. Practitioners often want a fintech product to check all the desired boxes — it should be free and easy to use, pose limited enrollment hurdles, and offer immediate positive outcomes. If it doesn’t, practitioners are almost uniformly less interested in recommending it.
Customers’ reasons to buy into fintech tools and apps, however, demand that practitioners pay attention to, and help manage, their concerns — because those reasons correlate directly with their ability to achieve financial security. An overwhelming majority of customers view these products as introducing efficiency and cost-savings into their financial management. They feel they offer greater control and real-time access to their overall financial picture, and peace of mind in knowing where they are relative to their goals. Customer buy-in when it comes to fintech has become so entrenched, 69 percent of people would consider switching banks if their financial institution couldn’t connect them to a fintech app (Plaid). In fact, in our own focus groups, customers in Miami recently confirmed high usage of cell phone apps, including fintech products. “I definitely do everything on the phone,” said one respondent. “I deposit checks, I apply for everything — everything on my phone. Unfortunately, I don’t like waiting.”
Let the SOI Guide
Given customers’ increasing proclivity toward fintech tools, and their potential to be utilized toward the good of financial security, practitioners can and should strive to become a trusted source of information for customers — particularly those in vulnerable communities. With our SOI as a guide, practitioners can familiarize themselves with those tools that are shown to be effective in advancing equity and financial security. Backed by the confidence in the full vetting of those tools they introduce to customers, practitioners can comfortably prioritize helping customers, in turn, become comfortable with using those tools to their benefit.
Change Machine stands ready to help promote equitable, affordable fintech products. To learn more about our efforts to explore the impact of fintech on customers’ financial security, contact Megan Bolado, Assistant Director of Fintech Partnerships.
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 consumers 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.