COVID-19 is changing the way people manage their financial lives. Americans are increasing their use of mobile/online banking, visiting bank branches less, and switching to digital or challenger banks. At the same time, financial insecurity, whether long-standing or due to the COVID crisis, increases the complexity of customers’ financial lives.
Banks and fintechs alike have the opportunity to respond to this moment and deploy digital products that meet the complex needs of customers while building their customer loyalty.
Our latest webinar, How COVID-19 Is Changing Financial Innovation, featured fintech founders and digital banking experts discussing how they are responding to this urgent need.
Panelists Jen Leger, Quber; Brian Gilmore, Commonwealth; Thomaz DeMoura, Digital Credit Union; and Zuben Mathews, Brigit joined Commonwealth Senior Innovation Strategist Zaan Pirani to describe their work to build innovative digital products to meet the specific needs of customers experiencing financial insecurity.
Three Key Takeaways
1. COVID coupled with current events has accelerated innovation in banking with a focus on digital and mobile tools. Now is the time to act and develop solutions that will have a long-term impact on Americans living on low to moderate incomes (LMI).
Thomaz DeMoura from Digital Credit Union pointed out that we knew changes involving a move to digital banking would happen, “but instead of a few years, change happened in a few months.” DCU expedited the build of a chatbot tool to help members in a time where telephone lines are overloaded. These tools and others that have the power to serve Americans living on LMI will still be valuable after this crisis.
Zuben Matthews named the need to continue to build emergency savings products now and down the road. Even though savings rates are currently at the highest they have been in 39 years, “when the world opens up and things get normalized, people’s savings are going to go down. How can we remind them in non-scary ways to continue saving? Using automation to make it super simple, back of mind, and remind them at the right point in time makes it less stressful.”
2. Cross-sector collaboration/partnership is necessary to spur innovation.
As Zaan Pirani reminded the audience, “more partnerships can lead to new findings.” During a time of rapid change and innovation, legacy banks can turn to fintech to improve their efficiency and serve customers effectively. Brigit has been receiving inbound requests from banks to support their need for cash-flow based underwriting. DCU has invested in the DCU Fintech Innovation Center in order to foster innovation: “Every institution should be open to coming up with ways to partner with fintechs. We don’t know it all. We can’t be experts in every topic. The more we can partner with the right folks who do the right jobs the easier it gets.”
Partnerships can also go beyond traditional financial institutions and fintechs. Jen Leger described her cross-sector work at Quber making it easy for nonprofits and employers to offer matched savings to their employees or clients through the platform. These partnerships allow Quber’s solution to reach the people who need help saving.
Commonwealth has a history of partnering across sectors to drive financial innovation, and Brian Gilmore pointed out Commonwealth’s work to put people living on lower incomes at the center of conversations around emerging technology. Commonwealth is researching how emerging technologies could help Americans navigate their financial lives, and he named that there are business incentives for supporting loyal and committed customers that are living paycheck to paycheck.
3. We need to gather insights and listen to people living on LMI in order to build tools that work for everyone. People living on lower incomes must be considered and prioritized when designing new solutions.
As technology progresses and new solutions for banks become available, the needs of people living on LMI need to be kept in mind. Zuben Matthews reminded the audience of the importance of making sure bank incentives and customer needs are aligned. Legacy banks currently receive revenue from overdraft fees, but banks that invest in fintech to increase their efficiency can drive revenue elsewhere and choose to remove fees. Jen Leger described the importance of building flexible solutions that meet customers where they are. With Quber, “there’s something for everyone, even if you can only save $5 a month.”
Finally, our current circumstances have highlighted that financial institutions are able to address financial vulnerability in meaningful ways. Brian Gilmore pointed out that in response to COVID-19, the financial services industry has helped people cope with a financial emergency not of their own making, but the industry can go further: “I’d like to see financial institutions recognize that the majority of financial emergencies are not of people’s own making… They’re due to systemic injustices. Financial institutions can take that into account and create financial products accordingly.”
Players from a variety of sectors can drive innovation effectively when they partner across sectors and keep the needs of people living on LMI at the center. Commonwealth is exploring the solutions that will support Americans through COVID-19 and shape our financial system long after the pandemic.
Commonwealth is continuing to monitor the coronavirus outbreak’s impact on financial security. To stay informed, check out our COVID-19 page for the latest news, insights, and resources; you can also subscribe to our newsletter to receive weekly updates and learn about our upcoming COVID-19 webinar series.
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