Is One Of These Companies The Next FinTech Unicorn?
What happens when you take FinTech, one of trendiest sectors out there right now and put it together with the equally popular field of behavioral economics?
You get a new sweet spot in finance that’s attracting more than its share of attention and funding. Just this morning, nine new and developing projects were announced that will receive $250,000 awards in a competition held by the Financial Solutions Lab at the Center for Financial Services Innovation, a nonprofit, network of financial services providers.
They include software designed to streamline health care bills, a robo-advisor that attempts to goose long-term savings and a nonprofit seeking to help low-income families save more for emergencies. The funded projects focused on efforts designed to help Americans weather financial shocks better in light of studies, such as The Pew Charitable Trust’s research showing most of us have insufficient savings set aside to cover financial emergencies. And yet most families face some kind of financial crisis in a year — whether it was an unexpected health care cost, home or car repair or even lost wages.
“We know how destabilizing one of these events can be,” says Colleen Briggs, executive director of financial capability and consumer initiatives with JP Morgan Chase , a founding partner of the program. “From a behavioral economics perspective, why is it that people aren’t prepared?”
Some of the obstacles that get in the way of building emergency reserves include so-called tunneling, or focusing on short-term day to day needs rather than longer-term goals. Another avoidance tactic is ostriching, or the natural impulse to ignore unpleasant information or the more basic problem most of us have of limited bandwidth in time, or resources to confront a problem. The idea is that savings and investing apps and technology may be part of the solution to can overcome those hurdles.
One of the projects, EARN, already knows a lot about how people save. EARN, a San Francisco nonprofit focused on low-income Bay-area families until now, but new technology permits a national reach that began a few months ago and will be further supported by the award, according to CEO Leigh Phillips.
When EARN started savings programs in 2001, it had long-term goals in mind, such as helping families save to buy a home or start a business, Phillips said. But many of the families they were trying to help, with incomes averaging just $21,000, lacked that key financial milestone — basic emergency savings — that hindered long-term savings goals. Over the years, EARN found that setting a small, achievable financial goal gives people confidence they can actually save toward a goal, building their confidence and creating a savings habit. The new national project seeks to help low-income families around the country, earning 80% of the median income in their area, save for short-term emergencies and have incentivized savings. Families who save $20 a month for six months, will receive a reward of $10 a month.
“What we know is if we can help people set small goals and achieve them, what we see is they establish a regular habit of saving,” Phillips says. The next step is, once emergency savings are established, families have created a saving habit and can work toward longer-term goals like saving for a home, to start a business or for education. Phillips sees a growing awareness among fellow nonprofits and even employers that basic financial health is a key part of helping foster stronger communities and families – by reducing financial stress. On the employer side, the Red Tab Foundation, a program created for Levi Strauss employees, began a small pilot program with EARN aimed at helping its retail employees save for financial emergencies.
“The number one reason people can’t save is they have some kind of an emergency – a car repair, something unexpected,” Phillips says. “What we’re looking at now more is behavior change.”
Here’s the list from the announcement:
Albert – Albert is a mobile app that offers practical financial advice and partners with financial institutions — such as banks, lenders, and insurers — to integrate their services through the app.
Bee – Bee partners with Community Financial Services Bank to offer mobile-first alternatives to checking and savings accounts and uses pop-up kiosks and street teams to sign up customers in-person in the neighborhoods where they live and work.
EARN – EARN is a national nonprofit that focuses on helping low-income families save for college, buy a first home, or start a small business. The EARN Starter Savings Program helps these households manage financial shocks by teaching and incentivizing regular savings behavior. The program starts a long-term habit of saving and promotes positive financial behavior through easy-to-use tools backed by small monetary incentives.
EarnUp – EarnUp aims to help people simplify their financial life and save through automating savings.
eCreditHero–eCreditHero helps consumers fix their credit for free.
Everlance– Everlance is an app that allows freelancers to automatically track their business miles and expenses with a goal of using the data to help improve financial decision-making.
Remedy – Remedy attempts to protect consumers from medical bill errors and overcharges. Acting on behalf of the patient, Remedy intercepts every bill, resolves any errors directly with providers and allows patients to pay the correct balance online.
Scratch – Scratch is a loan servicer that aims to help improve consumers’ ability to understand, manage and repay their loans.
WiseBanyan – WiseBanyan, a free financial advisor, builds and manages tailored investment plans to reach financial milestones, such as retirement, creating a rainy-day fund, or purchasing a home.
Source: Forbes
