Consumers jumpstart their savings using FinTech apps

Consumer Action helped 38 consumers and nine non-profit staffers save nearly $22,000 during a five-month period through the use of new FinTech (financial technology) apps/online platforms, including Digit, SaverLife and Self Lender. The savings occurred as part of a financial technology distribution pilot program that Consumer Action conducted with 113 participants between March and November 2018.

“The thousands in savings that consumers achieved through this pilot program represented quite a feat, since four out of 10 U.S. households don’t have $400 saved to cover an unexpected expense,” said Consumer Action’s director of strategic partnerships, Audrey Perrott.

As a member of the Nonprofit-FinTech Exchange (a marketplace for non-profit and FinTech providers to collaborate and build high-impact partnerships), Consumer Action applied for and was awarded a grant to distribute the financial technology tools, as well as educational resources, to its network partners that joined the pilot, including Catholic Charities Dallas, Haven Neighborhood Services, HOPES CAP Inc. and VETS Group. Consumer Action was one of nine grantees in a cohort of pilot partnerships, and our work was featured in the Financial Health Network report “Cross-Sector Solutions: A Guide to Nonprofit-Fintech Partnerships.”

The app Digit automatically puts money into savings for users based on their spending habits, upcoming bills, etc., while SaverLife provides incentives to users who save, and Self Lender offers loans to help users build credit.

“We have had the unique opportunity to provide real-time feedback to financial technology innovators through the Nonprofit-FinTech Exchange,” Perrott explained. “Working with non-profits to make this technology available has made us aware that, as FinTech disrupts the mainstream financial system, it is the job of educators and advocates to teach consumers how to successfully use these new products, and to be vigilant in ensuring that FinTech is not harming their clients through discriminatory or predatory practices.”

Consumer Action created a FinTech fact sheet, measured participants’ financial health, and tracked the outcomes of those consumers who used the provided FinTech tools over a six-month period. Participants were selected from affiliates’ programs that provide volunteer income tax assistance (VITA), housing, credit counseling, workforce development and financial coaching to their clients. All of the participating agencies serve low-to-moderate-income consumers who are also “income vulnerable” (defined as being at greater risk of falling into poverty or experiencing a greater level of poverty), and participants included recent immigrants, veterans and members of other underrepresented consumer groups. These agencies are diverse in size, program budget and program offerings.

Consumer Action used a human-centered approach to select one FinTech app/tool for the participants at each site, based on the common financial needs identified by the participants. Each participating affiliate distributed the app or tool to its clients and staff, collected survey data using financial health survey questions provided by the Financial Health Network, and collected the resulting savings data.

Consumer Action will publicize the pilot program findings in an upcoming report.

“Although Consumer Action’s network partners and their clients achieved successes with the financial technology pilot, there is still a significant amount of research needed to improve financial health for low-to-moderate-income and limited-English-proficient consumers, promote financial inclusion, address areas of limited consumer protection, and increase FinTech adoption rates in underserved communities,” Perrott said.

FinTech, while convenient and helpful for many, may place income-vulnerable and LEP consumers at greater financial risk if they are not properly educated on how to use the tools and informed of any fees associated with their use. And, because the industry is still so new, there are (unfortunately) areas of FinTech that have minimal or limited oversight by financial regulators.

The FinTech pilot project was funded through the Nonprofit-FinTech Exchange, managed by the Financial Health Network with support from the JPMorgan Chase Financial Solutions Lab and the Principal Foundation®. Consumer Action is a member of the Financial Health Network and the Nonprofit-FinTech Exchange.