In March President Biden signed the $1.9 trillion American Rescue Plan Act (ARPA) into law – another round of long-awaited support and relief from Congress to help Americans deal with the painful economic impact of the COVID-19 pandemic. ARPA is a powerful, unprecedented opportunity to advance financial security and equity. Financial services, employers and benefits industries have a vital role to play.
The passage of this law means $400B has begun to flow into households through early 2022, creating significant opportunities for employers, financial services, and fintechs to support workers and customers to build financial security—and advance racial equity in the process. ARPA’s expanded Child Tax Credit, for instance, represents a first-of-its-kind six month trial of recurring cash infusion for tens of millions of households with children, with potentially life-changing effects.
How can employers make these new funds as impactful for their workforce as possible? What role do FinServe and FinTech play? Despite the legacy of systemic discrimination against women and BIPOC, how can we empower families to take full advantage of these funds?
These were just some of the questions Commonwealth discussed with industry experts Craig J. Lewis, CEO of GigWage, Debra Plousha-Moore, Principal and Founder of Plousha Moore Group, Marcia Chong Rosado, Finance Lead at Village Capital, and Mary Dent, former CEO, Green Dot Bank. Here are three takeaways from our webinar.
Address financial volatility: Employers, fintechs, banks, and others can help address financial volatility. Dent said, “ARPA will help with income, but another important trend in understanding the lives of ordinary people is volatility. Volatility in what you earn, when you earn it and volatility in your expenses. That’s the crux of where the private sector can step in and turbo charge what the government has set in motion.” Every year people pay billions of dollars for late, overdraft, bounced check, and payday/check cashing fees. Overall, 30+ billion dollars is spent on this timing mismatch. Dent also said: “The cost of volatility is both a financial cost and a human cost. “ She encouraged industry experts to think of the following questions: “How do we spread the money the government is providing to make it less volatile? How do we help people self-select in to match the timing of their payments to the expenses they incur so they don’t have to be spending these 30-40 billion dollars on these really expensive ways of dealing with timing mismatches?”
Consider financial health for all. Commonwealth’s Financial Perception Survey found 65% of Americans overall and 81% of Black Americans believe employers have a role to play in offering solutions to increase financial security. Webinar panelists echoed this sentiment and underlined the need for the private sector, from fintechs to payment platforms, to help people start to create savings and spread out the influx of income from ARPA by providing emergency savings, sponsored accounts, and no cost loans. Chong Rosado said, “There’s not just an opportunity to help people survive. With this energy around helping people make ends meet, how do we move toward thriving and helping people flourish like they deserve to?” Plousha-Moore echoed her sentiment. She said, “If employers can connect to the aspirations of their workforce [such as savings] then those aspirations can become a shared issue.”
Innovate payment options for people living on low to moderate incomes (LMI). Matching assets to need will be key for innovators looking to multiply ARPA’s impact. The financial industry stands to benefit from understanding and being mindful of the needs of people living on LMI, including people who are unbanked, college students, gig workers, and more. ARPA presents an opportunity for what access to payments products can look like. As with any innovation, considering longevity is key. Lewis said,“[This] positive momentum serves as a foundation for ongoing strategy to keep momentum going.”
Thank you to the panelists for joining Commonwealth for this webinar. Commonwealth is continuing to monitor ARPA’s role in building financial security for all. If you would like to learn more about how to get involved, please contact us senior innovation manager Jason Ewas at jewas@buildcommonwealth.org and sign up for updates at TaxTimeCrisis.org.