Now more than ever, people and companies are turning towards savings to help them manage the impact of COVID-19. What’s missing is a lack of low- or no-minimum balance savings accounts that allow Americans to build, use, and rebuild their emergency savings over time. These accounts allow for liquidity and easy access. Recordkeepers and core banking systems have an important role in addressing this challenge.
As part of our broader partnership as the social impact partner for MassChallenge FinTech (MCFT), Commonwealth and MCFT brought together major players in financial services to discuss these issues at How Is Financial Services Addressing the Savings Crisis During COVID-19? Webinar panelists Jack Barry, VP, Head of Strategy and Transformation, John Hancock Retirement Plan Services; Zhivago Velasco, VP, Head Of Strategic Product Innovation, MassMutual; and Lindsay Lockhart, Co-Founder and Chief of Staff, Neocova joined Commonwealth Senior Vice President Nick Maynard to explore how financial services and fintech are adapting their priorities in light of the clear need for emergency savings.
Three Key Takeaways
1. The COVID-19 crisis has underscored the importance of financial security for banks, recordkeepers, and plan sponsors.
John Hancock and MassMutual panelists kicked things off by noting that emergency savings has been an identified need for employees for a long time prior to COVID-19. While some progress had already been made around offering expanded digital access to banking and emergency savings solutions, the current crisis has exacerbated the need for these innovations. There is increased consumer demand for highly liquid savings products and for banking services to be available online. Panelist Lindsay Lockhart from Neocova pointed out that even as spending is down for most Americans, people are continuing to save and invest. Banks and financial services that had already begun offering consumer-centric, easily accessible products are now reaping the benefits; meanwhile, banks without strong digital infrastructure are struggling to keep up. Both MassMutual and John Hancock have recently launched emergency savings products and are seeing increased interest from plan participants and plan sponsors as the need for emergency savings becomes even more clear.
2. The CARES Act and recent changes to Regulation D serve to equip Americans with the liquidity they need, but financial services can step in to help prepare Americans for future emergencies.
The Federal Reserve’s recent changes to Regulation D removed the withdrawal limit on savings accounts, but banks can do more to embrace technology and make building and accessing emergency savings streamlined and easy for customers. Likewise, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows plan participants to make penalty-free withdrawals from their retirement accounts to cover their short-term needs.
As Nick Maynard from Commonwealth mentioned, the legislation reveals a lack of accessible short-term savings options offered by financial services: “It seems like a statement that the CARES Act turned to retirement accounts to solve a liquidity problem, when there should be liquid savings solutions.”
Zhivago Velasco from MassMutual described the CARES Act changes as the right thing to do as a last resort, but called on the financial services industry as a whole to set people up better with both short- and long-term savings options so that they don’t have to make these tough choices in the future.
3. Technology enables financial services to meet people where they are.
As Lindsay Lockhart reminded the group, “It’s an exciting time to bring value to customers.” A modern core processor can allow banks to be responsive to their customers’ financial situations, tailor their products, and offer relevant messaging to clients at the moment of their financial need. Additionally, banks and recordkeepers have access to an incredible amount of data that can be used to provide clients and plan participants with necessary resources.
Jack Barry from John Hancock echoed this idea from the perspective of a recordkeeper, and pointed out that “It starts with being personal and being relevant. With data, try to deliver the one next best step for any participant at any point in time.”
Players across the financial services industry have a role to play in offering innovative, accessible emergency savings products. We look forward to seeing how recordkeepers, core providers, and banks will use their data and resources to help Americans plan for current and future emergencies.
Commonwealth is a Gold level sponsor of MassChallenge Fintech. John Hancock and MassMutual are both Diamond Partners of the program.
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.