Matchmaker, Matchmaker: How FinTechs and Nonprofits Can Swipe Into Great Partnerships
By Kate Griffin and Josh Sledge, Guest Contributor on 11/09/2016 @ 11:00 AM
Imagine two people meeting for the first time. Both are looking for a relationship and hoping to meet “the one.” The conversation starts slow; neither seems to be the other’s usual type. But they stumble upon a common interest or two, and even though they aren’t a lot alike, they’re intrigued by the things that make them different. The first meeting ends and they part ways...but they felt a connection and are eager to meet again to see where things go.
No, this isn’t the voiceover to a Match.com commercial. It’s what can happen when FinTech startups and nonprofit organizations meet to explore partnerships.
We see tremendous potential in these types of partnerships given the relative strengths of the two types of organizations. Many nonprofits work directly with the financially underserved, building trusted relationships and becoming partners in addressing their clients’ financial challenges. At the same time, FinTech providers are leveraging mobile and online technology to create new products and tools to help users more easily manage their financial lives. Put them together and you have a powerful combination: innovative technology tools complemented by ongoing relationships with trusted community partners -- all with the goal of building financial health.
But the mere potential for a great relationship isn’t enough to guarantee a match made in heaven. For many nonprofits, a partnership with a FinTech provider would be a first and it may take many conversations before a commitment. For FinTech providers, particularly start-ups, speed and customer acquisition are top priorities, and they may perceive nonprofits as being slow to adopt new things.
Squaring these two cultures was at the heart of a conversation held during CFED’s Assets Learning Conference (ALC) in September. CFSI, CFED and JPMorgan Chase & Co. collaborated on a session titled “A FinTech and a Nonprofit Walk Into a Bar” exploring nonprofit-FinTech partnerships. The session was well-attended and a general theme emerged from the conversation: Many nonprofits were interested in exploring how FinTech offerings might help their clients succeed, but are unsure how to assess a potential partnership.
A cautious approach is the right one to take, particularly for nonprofits that are just dipping their toe into the FinTech waters. In recent years, we’ve seen a wave of FinTech startups emerging with solutions ranging from basic spending trackers to digital currency platforms and robo-advisors. And it’s not just for-profit start-ups roaming the FinTech frontier. Enterprising nonprofit organizations like Commonwealth, EARN and Neighborhood Trust are leveraging their insights and experience to build tech-driven tools and platforms to advance financial health. This year alone, CFSI received over 350 applications from FinTech providers to its Financial Solutions Lab, a five-year initiative with JPMorgan Chase to identify, test and bring to scale financial innovations that substantially improve the lives of hard-working Americans. These applicants range considerably in their focus, approach and maturity. To learn more about the wide range of FinTech innovation just represented by the FinLab applicant pool, one needs to look no further than the 2016 FinLab Snapshot.
With so many options to choose from, where do nonprofits start to assess viable partners? During the ALC session, attendees heard from Catalyst Miami, a leading nonprofit working with FinTech solutions, about their experiences. This generated discussion on four key questions nonprofits should ask themselves:
- Do I build, buy or partner? You see your clients facing a key financial challenge and want to find a new solution to solve it. Is this a specific challenge which an existing product doesn’t solve? Build it. Does a vendor offer a plug-and-play solution that can be incorporated into existing programming? Buy it. Is there a provider offering a customer-facing product or service that would meet your clients’ needs? Partner to bring the solution to your clients.
- How do I vet potential partners? You probably wouldn’t marry someone you just met (unless things got out of hand in Las Vegas). You’d want to get to know them first. The same goes for FinTech partnerships. How do you know that the product being offered is a good fit for your clients? How do you know you can trust the company to do right by them? How does it make money and how will that affect business decisions over time? For early-stage providers, how do you know they’ll even be around in a year’s time? What happens if they sell to a larger company?
- How does a FinTech offering fit into my program? A good FinTech partnership will complement the services a nonprofit provides, not replace them. This requires careful thinking about how a FinTech offering will fit into existing operations and the client experience. When will the offering be introduced to clients? How will enrollment work? What kind of training is required to get frontline staff bought in and comfortable discussing the product with clients?
- How do I measure impact? The goal of a FinTech partnership is to increase the impact a nonprofit can have on its clients’ financial health and well-being. How does a nonprofit assess whether this goal is met? How do you measure a FinTech offering’s impact on engagement and client outcomes?
To see more fruitful partnerships emerge, we see a need to help nonprofits ask these tough questions and make sense of the answers. Greater visibility into emerging FinTech solutions and a decision guide might help organizations identify tools and products that would be a good fit for their clients. An assessment guide for vetting providers and a platform for nonprofits to share their experiences with different providers would inform nonprofits during the “getting to know you” phase of partnership exploration. Finally, an overview of best practices for integrating FinTech offerings into existing programs and a common set of impact metrics could help nonprofits implement a partnership and gauge if it’s working.
We see great potential in matchmaking between the FinTech and nonprofit communities. While we can’t guarantee that every partnership will convert on the potential we see, we are certain of one thing: Fintech providers and nonprofits should go on more first dates.
The Brand Lab Is Working to Change the Face of an Industry
By Danielle Fox on 09/12/2016 @ 03:00 PM
We see it on TV all the time. The same face, same voice, same American ideal peddling another product that really serves everybody regardless of demographic. But this isn’t new; the advertising and marketing industries have traditionally shied away from including diverse faces and voices in favor of appealing to the greatest common denominator. With ever-growing diversity the forefront of discussion in this country, people are beginning to hold these industries accountable for representing those whose demographics have traditionally been left out of the target audience.
The students with the Brand Lab took this mission to heart and are working to inject some much needed diversity into the marketing and advertising industries with the idea that “homogeneity simply breeds homogeneity” and that different backgrounds bring new perspectives and ideas that lead to innovation. On their SoundCloud, students have the opportunity to speak with industry leaders from various backgrounds and trades about what race means to them and what diversity would look like.
Check out their SoundCloud here to see hear these interviews and more!
The Work Continues: Building Support for CSA Programs in Michigan
By Megan Kursik, Guest Contributor on 09/06/2016 @ 02:00 PM
In early August, the Community Economic Development Association of Michigan (CEDAM) invited CFED staff to Michigan to present a full-day, intensive training on developing Children’s Savings Account (CSA) programs. Our intent was to make CFED’s design guide for CSAs, Investing in Dreams, come alive through an interactive session for our members so they can customize programs for their local communities.
With participants hailing from Detroit to New Buffalo and representing nonprofits, universities, banks, community foundations and housing corporations, our crowd showed the breadth and diversity of individuals and organizations who are invested in the hope and promise of CSAs.
We learned, however, that along with this hope, organizations have concerns about securing the resources – money, expertise, staffing, and leadership – to effectively launch and maintain scaled-up CSAs in their communities. Places where these four critical resources have coalesced have set the bar for the CSA movement. From San Francisco to Maine, as well as Lansing and Barry County, Michigan, CSAs have launched because of the right mix of powerful political and community leaders, boots-on-the-ground staff support, financial resources and help from field experts. And in places where family savings rates have been high – Wabash County, Indiana for example – the ability to mobilize a broad base of local champions has emerged as a fifth critical resource.
We are still trying to understand what will bring us to a tipping point with widespread support of CSAs throughout the state of Michigan. How can CSAs become a strategy employed by communities across Michigan (and the US), and not just a product of very special local circumstances and resources? Further, how can the operational efficiencies found in statewide CSA programs combine with the personal touch and relevance of small town efforts where children, their parents and the community at large understand, support, and engage with the program? We have to break down barriers to entry without losing the ability to impact children and their families at a very personal level.
Thanks to the generous support of the C.S. Mott Foundation, CEDAM was able to provide very high-tech technical assistance to Lansing SAVE and Barry County Kickstart to Career, city and countywide CSA programs that launched in 2015 and 2016, respectively. Moving forward we will have a more “packaged” form of assistance for CSA model replication in Michigan, easing barriers to entry and allowing us to support more programs.
Here’s some of what we’re working on now to get there:
- Engaging the financial services sector to work toward a better fit product. We are looking for account products that have the efficiencies and reach of a 529 account combined with the accessibility of a community bank or credit union savings account.
- Documenting what is working and what we still need to learn about matches and incentives, and sharing this information across programs. Designing specific incentives and matches can feel a bit like a shot in the dark for individual programs. We’d like to help programs make informed decisions about what incentives and matches to try, set up a method for evaluating their impact and facilitate information sharing so programs can learn from each other’s experiences.
- Learning from other fields to better engage kids and their families. While auto-enrollment has solved the problem of low take-up experienced by earlier CSA programs, we would like to get a higher percentage of kids and their families saving in their accounts and participating in other program activities, like financial education. Let’s learn from the experiences of programs that have succeeded in engaging this population, like those focused on college access, youth development and even grassroots community organizing.
- Empowering local leaders to pitch CSAs to their communities. Our training participants all expressed a need for help in designing their pitch and making the case for CSAs to their boards, funders and the community at large. We have strong local leaders making the case for CSAs in Michigan. For example, Bonnie Gettys, who through her work at the Barry Community Foundation, was able to secure full endowments for CSA initial deposits and matching incentives for Barry County’s Kickstart to Career program. Now we need to help others in Michigan develop the leadership skills they’ll need to start CSAs in their communities, with consistent messaging and a clear evidence base to support them.
With continued support of funders and national intermediaries, CEDAM’s ability to offer intensive training to jumpstart new CSA programs and provide ongoing technical assistance for communities designing CSA programs is setting the stage for an even brighter financial and academic future for children in Michigan.
Megan Kursik is the Coordinator of Michigan Communities for Financial Empowerment at the Community Economic Development Association of Michigan.
Meeting (Potential Donors) Where They Are: Online
By Delaney Luna, Graduate Intern on 08/29/2016 @ 12:00 PM
For its most recent campaign in June, the 1:1 Fund made the move to a new online fundraising platform called Classy. This crowdfunding tool allows its users to collaboratively raise money in peer-to-peer campaigns, during which organizations and supporters raise money for one cause using their own networks. Through a platform like Classy, individuals and organizations can create unique fundraising pages to call for donations among their own friends and colleagues. This has allowed the 1:1 Fund and its partners to reach beyond their own networks into their supporters’ networks.
While social media becomes more and more integrated into people’s lives and relationships, crowdfunding platforms have proven to be a critical tool for sharing information and gaining support. Crowdfunding through social media is a way to raise money through both the organization’s connections and their supporters’ connections. By taking advantage of the Classy platform, the 1:1 Fund is adapting the way it engages supporters online. If supporters simply want to donate, they can — but if they want to take on a more active role, individuals and groups can build their own pages and fundraise for a cause they are passionate about. By making these campaigns more participatory, we’re also making them more effective, as highly engaged donors are more likely to donate more — and more often — to the causes they care about the most.
Take crowdfunding platform MobileCause as an example. MobileCause found that individual fundraisers contributing to a campaign will raise and average of $568 in donations from an average of eight donors who might not have given in the absence of the platform. This is especially important as we work to engage millennials, a particularly important demographic in these campaigns. Because 90% of young adults (18-29) use social media, and members of this generation are especially likely to participate in nonprofit fundraisers, tapping into these donors by meeting them where they are is essential. MobileCause’s study found that 71% of Millennials have fundraised for a nonprofit. Furthermore, 62% of donors reached through crowdfunding are new, meaning online, peer-focused donor engagement platforms are incredibly important for garnering donations and expanding reach.
As an industry, crowdfunding has experienced immense growth over the last few years. In 2015, crowdfunding in North America grew by 82%, and the total global industry’s worth rose past $34 billion. Rewards and donations, including nonprofit donation campaigns, make up $5.5 billion of this worldwide total. This rapid growth is expected to continue, and nonprofits are sure to benefit from easier transactions and wider reach to generate support for their causes. By participating early on in this growing industry, efforts like the 1:1 Fund can keep up with innovations and constantly improve their campaigns.
When it comes to our quest to make kids’ college dreams a reality, we’ve already seen promising results. The 1:1 Fund experienced its second-most successful campaign after we switched to Classy, and the feedback from our children’s savings partners has been overwhelmingly positive. We will continue to use crowdfunding in our upcoming back-to-school campaign in September, with the goal of getting our supporters more engaged than ever before. Using peer-to-peer fundraising has helped the 1:1 Fund enhance public engagement, widen our networks and adapt social technology innovations to expand the reach of children’s savings. We look forward to sharing with you just how far these moves can help the children’s savings movement grow!
New Bipartisan Bill Boosts Financial Security at Tax Time
By Ezra Levin on 04/13/2016 @ 04:00 PM
Millions of Americans are poised to get a big opportunity to move their financial lives forward if Congress acts on a bold new policy proposal. We are excited to share the news that Senators Cory Booker (D-NJ) and Jerry Moran (R-KS) have introduced the Refund to Rainy Day Savings Act today!
This bipartisan bill, built on years of research and lessons from the asset-building field, will empower Americans to use the tax-time moment to save for emergencies and foster innovation within the Assets for Independence (AFI) program, the nation’s largest asset-building initiative. Specifically, the bill will:
- Allow tax filers to set aside a portion of their refund as emergency savings for later in the year. Tax filers receiving a direct deposit tax refund may defer 20% of their refund by opting into the Rainy Day Savings Program on their 1040 tax form. This savings will accumulate interest before being transferred to the tax filer’s account six months after deferral. Tax filers may also opt to withdrawal their funds early, any time after thirty days from filing.
- Establish a pilot program to evaluate savings matches for lower-income tax filers. This pilot will explore the impact of using matching funds to incentivize the establishment of emergency savings at tax time through the deferral. In this pilot, lower-income tax filers will be able to receive a match ion their 20% deferral at the end of the six-month period. Community organizations, such as those operating VITA sites, will apply for grants to administer this match to their participants and help them build savings and financial capability skills.
- Amend the Assets for Independence grant program. The bill will greatly expand the flexibility of the program by:
The introduction of this bill is a huge step forward for financially vulnerable Americans. Its passage would create a new tool — the Rainy Day Savings Program — to help low-income tax filers save for the inevitable financial emergencies that can occur at any time. With this new savings tool, participants will be less likely to need to reach for a credit card or payday loan when a surprise medical bill or car repair busts the monthly budget. Additionally, the amendments to the AFI program reflect the lessons learned from two decades of Individual Development Account (IDA) implementation and the understanding that practitioners and participants need greater flexibility to maximize the wealth creation potential of the program. Both of these features, with the help of practitioners, will allow Americans to move towards financial security. We urge Congress to take swift action on this legislation to give Americans the opportunity to build a more financially secure future for themselves and their families.
CFED is proud to have worked closely with Senators Booker and Moran on this legislation. This was a very collaborative effort, and we were very pleased to see a large group of leaders weigh in with their own expertise and endorse the final bill. This group includes:
- Aspen Institute Financial Security Program
- Asset Building Program, New America
- Center on Budget and Policy Priorities
- Center for Global Policy Solutions
- First Focus Campaign for Children
- The Housing and Community Development Network of NJ
- New Jersey Policy Perspective
- Young Invincibles
The Future of Saving — Even Without a Savings Account
By Melissa Goldberg, Guest Contributor on 03/09/2016 @ 01:00 PM
Meet Ben, a 22-year-old who has never had a traditional checking account. He uses prepaid debit cards and like many Americans, accesses the internet mainly through his phone. Ben’s older sister just gave birth to his first niece, Sophie, and Ben really wants to give the newborn a gift that matters. He thinks back to his own childhood and remembers receiving U.S. Saving Bonds from his aunt. He thinks about how nice it would be to give his niece a savings bond to support her future through savings — a gift that will grow with her. When Ben heads to his local pharmacy to buy his niece a greeting card, he picks up an 'It's a girl!' savings bond gift card off the rack — the same display where he typically buys his prepaid cards. He funds the bond gift card at the cash register and is all set to pass the gift of savings along to his niece. Even though he chose to fund this gift at the point-of-sale, Ben could have instead chosen to complete the transaction through the app associated with this current prepaid card. He would have had the option to 'gift savings', select a fun-patterned virtual bond, fund it from his prepaid card and send it straight to his sister's smartphone.
In the 21st century, saving money should be an experience that reflects the ease and pace of the rest of our lives. Savings stories like Ben’s can soon become a reality. The necessary tools and infrastructure of the U.S. Savings Bond already exists. Backed by the federal government and administered by the U.S. Department of the Treasury, savings bonds are a general purpose savings tool that serves a unique and critical gap in the private sector market: secure, low-balance, giftable savings.
Additionally, the infrastructure backing Treasury's Tax Time Savings Bond Program, which allows consumers to purchase bonds with their tax refunds via IRS Form 8888, provides a uniquely simple access point for savings. By filling out two lines of text, a tax filer can purchase a bond for herself or a loved one with no other action or information needed. At a time when nearly half of American families lack a basic savings safety net, these types of easy-to-use saving tools are more necessary than ever.
With a strong core product and the building blocks of an engaging and accessible infrastructure, Treasury has the opportunity to ring in a new era of civic savings in the United States by reimagining the distribution and sale of bonds. To do this, Treasury must protect the Tax Time Savings Bond Program, invest in the 21st century technology driving innovation in the fin tech industry and encourage the development of savings tools that leverage core Treasury platforms.
Protecting the Tax Time Bond Program and Its Infrastructure
Financially vulnerable Americans need a variety of high-quality savings options at tax-time. While there is no silver bullet for financial insecurity, U.S. Savings Bonds have proven to be a key part of the arsenal, despite significant hurdles. Since the Tax Time Program began in 2010, over $100 million has been saved through 200,000 bond purchases. These numbers are especially impressive considering that $0 has been spent on marketing the bonds. As consumers continue to demand these valuable savings products, Treasury should maintain this program and explore ways to utilize its infrastructure to improve the future of bond buying (and other retail securities). The bipartisan SAVINGS Act, which has now been introduced in the House and the Senate, would help protect this valuable program for the future.
Investing in 21st Century Technology
Treasury does not need to go about building the “bond of the future” on its own. By partnering with financial service providers and FinTech entrepreneurs, Treasury can expand innovative access points to bonds without incurring increased costs. To facilitate these partnerships, Treasury should build secure APIs, which would allow innovators to “plug in” to its legacy systems and fundamentally change how Americans buy bonds in a consumer-friendly and cost-efficient way.
APIs are commonplace in the innovation and tech economy and are growing strongly in the financial services space. In fact, the use of APIs in the private financial sector increased more than seven-fold between 2009 and 2013. APIs facilitate the data sharing necessary to enable the payment and budgeting apps that permeate the market. By creating secure APIs and engaging in public-private partnerships, Treasury can open the door for the creation of new distribution channels to meet the unique needs of consumers, while innovators focus on consumer-friendly design and usability to target their tools and solutions to specific consumer segments.
Encouraging Civic Savings Innovations
As Treasury updates its systems and explores distribution opportunities, it must look to today’s consumer needs. Treasury should push towards a smartphone-optimized system for bond buying. Its current system, TreasuryDirect.gov, is not clearly accessible on modern mobile devices, which 19% of Americans depend on to some degree for Internet access. Treasury should also consider the potential to partner with, or even issue national challenges to, app developers who create mobile solutions to encourage bond buying. With 57% of smartphone users using their phone to do online banking, there is great opportunity to engage consumers through native mobile tools.
A final market to consider is the $120 billion gift card industry. There are over 47,000 retail locations across the country where one can purchase a variety of gift cards. By partnering with companies who could put a bond gift card next to those for movie theaters and restaurants, Treasury could capitalize on the unique giftability that has been associated with bonds for decades. All of these and countless other innovations in distribution could be unleashed by the creation of secure APIs for trusted partners.
Building a Strong Savings Future
For Ben and his niece Sophie, the future of civic savings is now. Today, 62% of savings accounts in the United States hold less than $1,000, and over 15 million lower-income households are in the market for small-dollar savings vehicles. The vision for Ben’s point-of-sale and mobile savings experience is at our fingertips. We can ensure that future generations have access to the long history of civic savings charted by U.S. Savings Bonds. Treasury has a tremendously valuable financial product that fills a market need for small-dollar general purpose savings. When paired with the innovation and distribution power of the private sector, savings bonds have the potential to greatly expand the savings landscape in the US. The time is ripe for Treasury to expand access to savings bonds and create a strong platform for innovation in retail securities to come.
Melissa Goldberg is a Senior Innovation Strategist at D2D Fund, where she concentrates her efforts on mobile technology, savings bonds, and tax-time savings.
New Research Explores What Business Owners Want in Financial Capability Solutions
By Lauren Williams on 02/08/2016 @ 12:00 PM
Most entrepreneurs launch their businesses because they have a passion or skill to share with the world and a desire to make a meaningful living. But all too often, they struggle to master the financial management knowledge, skills and behaviors needed to succeed in the long-run.
That's why, in 2015, CFED launched the Microbusiness Solutions Learning Cluster to help three business development organizations better understand their clients’ needs and build solutions that enhance their financial capability. Today, we’re excited to share major outcomes from this project that can inform your efforts to design creative, client-focused products and services.
In Finding Common Threads, we explore a set of themes about the desires, values and behaviors shared by financially vulnerable entrepreneurs. To learn more, join us for a webinar on Wednesday, February 10 from 2-3 pm EST! You’ll hear directly from each organization about the client insights they uncovered, the methods that generated these new understandings and the ways in which these insights influenced their solutions.
Over the past year, each organization dedicated time, energy and resources to gather insights about their clients’ challenges and needs, create solutions to address them and collect feedback to validate and improve their solutions by testing them with clients. Through this process, CAMBA redesigned an in-person workshop series on using mobile technology to manage business finances, Northern Initiatives enhanced its online training system and WESST designed a mobile app to make its in-person financial management training more accessible on-demand. The findings from these experiences are captured in greater detail in the following briefs:
Questions? Contact Lauren Williams at email@example.com or 202-207-0131.
Could the "Money Pool" Model Help Low-Income Families Reach Their Savings Goals?
By Luis Cervera, Guest Contributor on 09/08/2015 @ 05:00 PM
Since the late 1990’s, Individual Development Accounts (IDAs) have been linked to programs that have been offered by agencies across the country to help low-income families reach savings goals. And although the model is sound, participant completion rates have notoriously been low.
It has been speculated that the reason for these low completion rates are threefold: the lack of structure and accountability placed on the participant, easy access to saved funds and the protracted completion date, which is often several years after the participant enters the program.
Most IDA participants must take part in an extended program—some as long as five years—during which expectations can be set very low and, above all, the finish line appears light years away. The result is that the participants’ motivation wanes over time, while unexpected expenses appear, making the partially-saved funds an easy target for early withdrawal.
With eMoneyPool’s community finance tool, a technologically-updated version of a traditional money pool (you might know them as a Tanda, Cundina or Susu), we have been able to remove the challenges of traditional IDA programs, resulting in a 99% program completion rate.
The best part is that the tool is free for agency partners from all sectors, including nonprofits. They are not required to register and can use eMoneyPool easily and effectively. Most importantly, it’s scalable, so anyone offering IDAs across the country can tap into this tool with little to no training and reap the benefits of a 99% completion rate.
First, a quick review of how a traditional money pool works. A group of 10 people agree to contribute a fixed amount of money (say $100) on a fixed interval (say monthly). Every time the group pools the money together, one member of the group receives those funds to spend on anything they need. The next month, the same 10 people again make their contribution and the $1,000 is taken by the next member in the circle. This continues until everyone in the group has received their lump sum of money.
By design, eMoneyPool’s model creates a short-term, structured plan, which locks participants into the dates of their expected savings contributions. Also, by nature of working in a group of people who are all depending upon each participant’s monthly contribution, a high level of accountability, or “social pressure,” is placed upon the participant to make payments on time. Finally, there is no access to the funds until the specified payout date, which removes the issue of participants “dipping” into saved funds.
To prove the validity of the concept, eMoneyPool partnered with a local non-profit, Local First Arizona, which offers an IDA program to aspiring small business owners, known as the Business Accelerator Program. The participants must take part in a six-month program, which includes a curriculum covering topics such as Creating a Business Plan, Marketing and Tax Preparation.
Since 2013, the program has also required that participants join a money pool in order to meet their IDA savings goal and qualify for their one-to-one savings match. This specific accelerator program requires the participants make bi-monthly payments over five months, but the money pool platform can be offered in a variety of options, such as monthly payments of about $50.
As of this writing, five classes, or 60 individuals, have participated in the program and despite some of the participant’s concerns about their ability to successfully manage the payment schedule, have demonstrated a 99% completion rate.
As one of our participants, barber Benjamin Carrillo said, “At first I was concerned about being able to make my payments on time, but I knew the group was counting on me. I was able to make adjustments to my expenses and it was easy to save. I’m going to do it again.”
By applying technology to an age old practice, used all over the world due to its ability to create a mix of forced discipline and peer pressure, we stumbled upon one potential solution to the IDA puzzle.
For more information or questions, contact Luis Cervera at firstname.lastname@example.org.
Luis Cervera is President and Co-Founder of eMoneyPool, an online community finance tool based on the lending circle or ROSCA. eMoneyPool has perfected the traditional model known around the world by applying technology in order to make it easier, safer and more efficient while guaranteeing the entire process. The eMoneyPool platform helps individuals reach their short-term financial goals while building a positive payment history which is accepted by its lender partners.
How Neighborhood Partnerships is Helping Oregon Integrate Financial Capability Services
By Jill Winsor, Guest Contributor on 07/16/2015 @ 03:00 PM
When families experience financial vulnerability, many of them seek out community services to help meet their immediate needs, such as finding a job, securing an affordable place to live or accessing health care. But without the tools and skills to effectively manage their financial resources, many families still struggle to create lasting economic security.
It turns out that there is a promising solution to this problem: integrating financial capability services into existing social service programs. With integration, clients who come in to community organizations looking for things like child care or energy assistance will also have access to services like credit counseling, free tax prep or financial coaching that can make it easier for clients to get control of their financial lives.
The initial results from this innovative approach have shown better outcomes and improved financial capability for participants in these integrated service programs. So what will it take to help more service providers to integrate financial capability programming?
That was exactly the question on our minds last month, when organizations committed to increasing the financial capability of Oregonians joined Neighborhood Partnerships and CFED at the Salem Convention Center to explore the new financial capability integration guide, Building Financial Capability. Attendees worked together to identify the many opportunities that can be used to open up a conversation about financial capability with the people they serve. We had representatives of city and county governments, social service providers, tax prep providers and organizations dedicated to financial inclusion.
CFED led the group through several activities designed to identify outcomes that are meaningful to the various populations served by our partners and ways to connect financial capability to the many services provided by our partners. Maggie Underwood, from Community Services Consortium, the Community Action Agency that serves Linn, Benton and Lincoln counties, gamely stepped forward to work through the touchpoints – from intake to exit – of their workforce development program. With CFED’s facilitation, the group was able to identify all the opportunities for introducing clients to financial capability that could be harnessed by Maggie’s program.
It was encouraging to see that many of the partners in the room were already working hard to increase financial capability among the communities they serve. Several are offering financial education and coaching along with their other services. Others are connecting clients to credit counseling, free tax preparation assistance, and access to safe and affordable financial products.
It was also really exciting to watch the networking that took place during the workshop. CFED helped the group identify the wealth of resources shared amongst our partners across the state and identify potential linkages between these programs. Our partners are already providing quite a bit of financial capability services in-house and they know where to send people for further assistance. By spending time in the room together, partners had an opportunity to strengthen their referral networks and identify new connections and resources.
It was clear that our partners are excited to find ways to further integrate financial capability into their programs and that they think that the integration guide will be a great resource for them. At the end of the day, partners reflected that financial capability integration is well worth the effort and several stated that they plan to take the integration guide forward and do this work in their own organizations and with each other. This is one more step toward setting all families on the path to economic security.
Jill Winsor is the Engagement and Development Coordinator at Neighborhood Partnerships. Jill helps to connect community members to the policy decisions that shape their lives. After spending several years working on the front lines of social service provision, Jill is excited to make the move into policy advocacy because she believes that when communities are able to actively participate in policy change, great things can happen. Her time spent working with people experiencing homelessness, survivors of domestic violence and recent immigrants has served to reinforce her belief that access to affordable housing and economic opportunity is essential for the health and well-being of our communities. Jill holds a Master of Public Health and Master of Social Work from Portland State University.
A New Approach to Teaching and Learning
By Kori Hattemer on 06/19/2015 @ 12:00 PM
Here at CFED, we have a lot of great partners. We couldn’t do our work of increasing Americans’ financial security without them. And a lot of what we do involves sharing resources and facilitating learning opportunities to help our partners expand their work to serve even more people.
That’s exactly what we’ve been doing over the past two months with the Family Financial Empowerment Initiative (FFEI), a series of workshops on financial capability services integration (adding services like financial coaching and free tax preparation into existing social services, such as job placement, child care or housing programs).
But we all know what it’s like to sit through a seemingly endless workshop, listening to a presenter drone on and on. Those kinds of experiences aren’t engaging, and you can’t make new connections or learn much. So when we were envisioning this series, we knew we wanted to use a different approach in order to make the experience as beneficial as possible.
Using what we learned about facilitating effective learning opportunities, these workshops were specially designed with seven of our Assets & Opportunity (A&O) Network Lead Organizations to meet the unique needs of each community. We shared tools, resources and lessons (such as the recently released Building Financial Capability: A Planning Guide for Integrated Services) that would really add value to participants as they work to develop or expand their local financial capability integration initiatives.
So how did these workshops…work? Here’s a behind-the-scenes look at our process:
- Work with our awesome A&O Network Lead Organizations to select participants. In order to allow for dialogue, we limited registration to around 30 participants per workshop. We carefully selected organizations that were best positioned to turn the lessons they learned from the workshop into better services for their clients. For example, the invitation list in Washington included representatives from 16 local asset building coalition leaders and 1-2 organizations invited by each local coalition leader. In Idaho, on the other hand, there was a heavy focus on including an even mix of social service organizations and experienced asset-building providers so that organizations could explore new partnership opportunities.
- Ask participants what they want to do and learn. We conducted an online survey and a focus group call with workshop participants months before each workshop to find out what their organizations were already doing to integrate financial capability services, and what topics and activities at the workshop would improve their ability to integrate.
- Develop an engaging workshop agenda. Through a combination of interactive learning activities, the workshops gave participants time to apply what they were learning, network with other attendees and reflect on how they can use this information at their organizations.
- Find out what worked—and what didn’t. We put a lot of effort into preparing for each workshop so that it would be valuable to each attendee. But we know there is always room to improve, and participant feedback is essential to that improvement. We asked attendees at each workshop for feedback and suggestions, and we incorporated their feedback into the later workshops and will continue to incorporate them into our future learning events.
So far, we’ve gotten great feedback on this model. Participants have reported that they found the variety of activities on the agenda engaging and that they appreciated the time for networking with the other attendees. We expect that the connections made and conversations started during these workshops will be just the beginning of fruitful partnerships that will allow participants to deepen their financial capability integration work.
Next week, the A&O Network Lead Organizations and CFED will wrap up the final workshop in the FFEI series. In July, we’ll publish highlights from the workshops on the CFED blog and preview the next phase of the Initiative. So stay tuned!
For more information about financial capability services integration, contact Kori Hattemer. To find out about joining the Assets & Opportunity Network, click here. You can also read more about our successful Idaho workshop here.
This is What it’s Like to Pay Your Bills Without a Bank Account
By Alicia Atkinson on 06/17/2015 @ 05:00 PM
Last week, a few CFEDers braved the heat to attend Center for Financial Services Innovation (CFSI)’s EMERGE conference in Austin, Texas. The two-day conference was packed with learning about innovative products, the financial health of consumers and insights into groundbreaking research that can help financial institutions, non-profits and other organizations serve consumers better.
While at EMERGE, I was lucky enough to be a part of the pre-conference half-day workshop--FinX: Connecting with the Consumer Financial Experience--and had a truly eye-opening experience. The workshop allows participants to have an opportunity to gain valuable firsthand insights into complex challenges many consumers face every day in accessing financial services. The goal for the workshop seemed simple (especially for a team of four adults): complete a number of household money-related errands during our hypothetical lunch break. In practice, there was nothing simple about it.
At the end of the experience we were asked to describe how it felt, in one word—I would have to go with “overwhelmed.” If I were allowed a second, I would go with “frustrated.” The 90 minutes spent trying to cash our two checks, buy a pre-paid card, activate the pre-paid card, pay a bill and send a money order, was like entering a world where there was a process for everything, and we were learning them on the fly. Here are some takeaways:
- Fees, fees and more fees: Everything costs money. It costs money to get your money, send your money, use your pre-paid card—even talk to someone about using your pre-paid card. Right from the start, we immediately got hit with a $10 fee to cash our $30 personal check and throughout the rest of the day we faced more fees—from 89 cents to send a bill to $2.00 every time we went to use our pre-paid card. When you think about how many transactions people need to make monthly between cashing paychecks and paying bills, these somewhat small fees add up fast.
- Lost in translation: Our first stop to cash our check was the “Cash Store,” figuring that was our safest bet to getting our payroll check cashed quickly and perhaps with the least amount of fees. However, the “Cash Store” did not actually cash checks; rather, they were looking to provide consumers with “auto-title” loans. The second store we tried refused to cash our check. Finally, the third place we tried was able to process the check (with a fee, of course). Since all of us primarily used online banking products, the process and language around trying to cash our payroll check and make bill payments was new and confusing. We often didn’t know if we were getting charged a high fee or a reasonable fee.
- Cumbersome, long and at times frustrating transactions: As they say, time is money and making financial transactions in-person, with long wait times and cumbersome processes, was not saving us any. At times, things did move quickly, but there always seemed to be a line wherever we went. Throughout the experience, I felt that the processes were tedious and unnecessarily time-consuming. For example, I was on the phone for over 25 minutes trying to activate our pre-paid card. Without the ability to use our pre-paid card, we were not able to complete other transactions on our list. Additionally, we were about 10 minutes late back to the hotel, which might have cost us our job if we were late after a lunch break.
- Cutting corners on food and gifts: On our list of “to-dos” was to buy four snacks and a gift for our (fictional) niece. With only $110 dollars to work from, and many transactions complete, our team (like most), identified this as a place where we could cut corners. Many teams came back with sugary drinks, and very cheap presents; however, this is easy to do when you don’t have to actually eat the snacks or gift the present. It became clear that after paying for multiple financial transactions, buying high-quality food or a generous present quickly took a backseat.
All and all, I found the FinX workshop extremely valuable. It allowed me to experience a small amount of the stress, anxiety and high costs that underserved consumers go through every day. Whether it be making trade-offs due to time or money, or the lengthy processes to make basic financial transactions that I take for granted, the brief experience of being an unbanked and underserved consumer will stick with me for a long time.
How to Use Behavioral Science to Help End Poverty
By Jonathan Hayes, Guest Contributor on 05/22/2015 @ 02:00 PM
“If you don’t have money, if you don’t come from money, then your whole life is a struggle.”
Though Mark* said this with a smile, you could sense his exhaustion. He spoke lovingly of his 3-year-old daughter and 1-year-old son, but explained that it was difficult to balance looking after his family with complicated work schedules. Mark typically has several jobs at a time and spends a lot of time traveling from one workplace to another.
This also means that, despite his hard work, the family’s income fluctuates greatly. Most months, they barely break even. A few days before ideas42 spoke to Mark, the family car had broken down and needed $1,800 worth of repairs. He said that he and his girlfriend had hoped to put away a large chunk of his most recent paycheck for the future, but now every spare cent would be used to fix the car.
Mark is just one of the 25 parents from across the US that ideas42 spoke to as part of the Poverty Interrupted (PI) initiative. Through these interviews, and working with experts and practitioners, their goal was to learn about how living in poverty shapes the context of peoples’ lives and what effect it has on their decisions and actions. Each parent shared their own version of the struggle Mark described: getting around on unreliable public transportation, keeping track of the requirements for various benefit programs and looking for work when there is none around. But above all they talked about the challenges they face in trying to ensure a brighter future for their children.
One mother the team spoke to in Tulsa bluntly described her fears: “I have anxiety about being a single parent in a poor area…statistically, my kids shouldn’t succeed.”
The real tragedy is that her fears are warranted: more than six in 10 children born into the lowest income group will not earn enough as adults to enter the middle class.
Poverty Interrupted aims to change this. It is a radical venture that aims to improve the life path of these families by using insights from behavioral science to increase the impact of more traditional anti-poverty efforts.
In a new white paper, ideas42 outlines a new perspective on poverty—as a unique context that elicits a predictable set of responses, rather than a result of personal failure or character defects—and charts a path forward based on cutting-edge research in the behavioral sciences.
This path begins with three design principles and includes concrete recommendations that range from small nudges to overhauls of existing support services that can be tailored to fit the needs (and budgets) of a wide range of communities, organizations and programs.
- First, successful policies and programs should identify, and then cut the many different types of costs imposed on families with low incomes—temporally, financially, and cognitively. This can be done by reducing the barriers to entry for programs like subsidized childcare or job training. A more radical innovation would be a “Common Application” for public benefits. So instead of applying separately for food, rent and home heating assistance, Mark’s family could fill out one set of paperwork to access a wide range of services.
- Second, programs and organizations should create slack for families who often have no safety net when a shock like Mark’s car trouble arises. This could be extra income or extra time. If a program valued time as money and supported Mark with credits for a laundry service, he’d have a few more hours each week to spend with his kids or to pick up an additional shift at work to replenish his savings.
- Finally, policy-makers and providers should reframe programs in ways that empower clients rather than reinforce stigma. Treating parents as experts on their own lives and including them in key decisions, such as the type of support they receive and the goals they’d like to set for their families, is one way to give control back to parents.
These ideas are just a few of the recommendations laid out in ideas42’s new white paper. They hope that this paper catalyzes a movement to apply behavioral science and design to efforts to reduce poverty. Over the coming months, they’ll be seeking additional funding and hoping to work with direct service organizations to design, prototype and test specific behaviorally-informed interventions.
With this new approach, ideas42 wants to ensure that although Mark’s life (and the lives of millions of other parents) has been a struggle, his children’s needn’t be.
To learn more or get involved, please contact ideas42 Vice President Anthony Barrows: Anthony@ideas42.org
*Not his real name
Jonathan Hayes is a Senior Associate at ideas42 currently working on poverty alleviation and economic mobility. He previously served as a Teach For America corps member and taught tenth grade global history in Brooklyn, NY. Jonathan earned a BS in Psychology and a BA in Sociology from the University of Utah. He also holds an MPA with a certificate in Urban Policy and Planning from Princeton University’s Woodrow Wilson School.
Demystifying “Discovery Site Visits”
By Lauren Williams on 04/14/2015 @ 03:00 PM
This blog post is part of a series focused on the Microbusiness Solutions Learning Cluster, a year-long engagement during which CFED will work closely with WESST, CAMBA and Northern Initiatives to understand a unique design challenge, create an intervention or programmatic tweak to address it, and then pilot that intervention to assess its impact.
At CFED, we’re well aware that the details of what we do often end up muddled amid a minefield of jargon-filled, acronym-laden descriptions of our work. Even after five years at CFED, my mom still tells family and friends that I’m an economist and I’ve just stopped trying to correct her to explain what it is I actually do. Not even Vox’s technology-inspired, ill-defined job title generator could help make sense of my work!
The often unnecessarily and complex nature of our work is why sometimes pictures (or words plus pictures) are simply better than words alone to shed a little light on the mystery of what we do at CFED. Case in point: the Discovery Site Visits we recently completed for our Microbusiness Solutions Learning Cluster.
What on earth is a Learning Cluster, you ask? Well, a Learning Cluster is just a way we like to organize groups of community-based partners to learn, both from CFED and each other. As one of our participants recently remarked, “You’re giving us money and helping us solve problems?!” That pretty much sums it up. In this particular Learning Cluster, participating organizations have a problem to solve that’s preventing their clients—low- or moderate-income business owners—from achieving their financial goals. We just got started in January, but one of our first steps was traveling to Albuquerque, Brooklyn and Marquette on Discovery Site Visits to each participating organization.
But, you still have no idea what a Discovery Site Visit is. So, here are some things about Discovery Site Visits that should help make them sound a little less fantastical. If you’re still dying to see more photo evidence of our site visits, download our Discovery Site Visit summary for the full experience!
First things first: “Discovery” is how we refer to our process of figuring out if we’ve defined the right problem to solve. The comic strip pictured here illustrates the value of discovery best. It depicts the many different ways in which a customer’s desired product—in this case, a tire swing—can be interpreted and misinterpreted by the stakeholders involved in creating it. Many times, discovery helps us uncover these gaps in interpretation: organizations may think they know what clients want, but as that desire gets translated from the client to the many stakeholders involved in bringing it to fruition, the ultimate solution may end up looking very different from what they actually need.
Step 1: Logic Modeling. Using hundreds of sticky notes and our partner organization’s knowledge of their programs, we helped them create a logic model. Logic models are visual tools that help tell the story of an entire program. In this case, we used logic models to show how resources are used to implement their programs and articulate how those programs help clients achieve financial capability outcomes.
Step 2: Customer Journey Mapping. With even more sticky notes, we helped each organization create a customer journey map to illustrate their clients’ experience with their service. We asked staff to dictate—and in some cases, act out—every action and decision their clients must make as they experience their service and document it visually in a flowchart.
Step 3: Drafting Logic Model & Customer Journey Map Flow Charts. After collaboratively creating the logic model and customer journey map, CFED staff would retire to our hotels and turn the sticky notes and drawings on flip charts into flow charts using a software called Lucidchart.
Step 4: Interviews & Observations with Staff and Key Partners. The next day, CFED staff would embark on a marathon session of interviews and observations with the organization’s staff, clients and partners to compile a well-rounded picture of the problem at hand.
Step 5: Synthesis. We’d round out each visit with a synthesis session to make meaning out of the things we learned from our interviews and observations. We discussed the results of each interview and figured out if the new information we had received required us to make edits to the customer journey map, logic model or design challenge.
Step 6: Homework. The Discovery Site Visit was just a starting point. Each organization was left with a series of homework assignments and is now in the midst of interviewing clients to continue refining their understanding of clients’ experience and validating (or uncovering new insights) about the problem they think they need to solve.
Stay tuned for more from the Learning Cluster! Next week, Kathy Leone (Business Financial Coach at Northern Initiatives) will share her reflections on the Discovery Site Visit.
Out of the Classroom: Five Ways to Improve Financial Capability Ideas
By Chris Bernal on 11/10/2014 @ 03:25 PM
Our recent “Out of the Classroom” contest, made possible thanks to the generosity of MetLife Foundation, gave us the chance to read through hundreds of fresh ideas for financial capability. Innovative organizations from around the country submitted proposals, and we were unfortunately unable to highlight all of them. As much as this project has been about celebrating our finalists, we also wanted to use the contest to identify ways for all programs to improve their programs. Toward these ends, we’re sharing the five most common pitfalls we found facing “Out of the Classroom” applicants, as these made the difference between great and outstanding applications, and may prove to be helpful insights for those programs applying for funding in the future.
- Financial coaching is essential, but it is not an innovation. Most funders wish they had more funding to make implementation of financial coaching available to more organizations. But, simply offering financial coaching is no longer an innovation in the field, and financial coaching programs require special characteristics to help them stand out for those reviewing grant applications. If you’re looking to integrate financial coaching into your existing programs, we recommend some resources from the recent 2014 Assets Learning Conference Financial Coaching Intensive, as well as some of the research that shows that financial coaching can have significant impact. And, if you’d like to make financial coaching easier to implement across the country, be sure to read CFED’s recent financial coaching federal policy proposal. Similarly, there may be promising programs that you want to start at your organization that are new to your community, but not so new to the financial capability field. Is there a new spin that you can bring to your program to make it truly innovative, while still meeting needs in your community? If so, funders will see the value your approach brings to the table.
- Make the case that the people in your organization are the right ones to innovate. Make it clear how and why your team is positioned to become a leader in the field and push forward your innovation during the application process. Don’t just offer your idea; share your vision and explain why you’re the right one for the task. Often, organizations will oversell their idea and undersell their team, leading to an imbalance that weighs negatively on a grant application.
- Be realistic with the scope of your work, and what the grant would allow you to do. While we appreciate and encourage great ideas that tackle the great challenges your clients face on a regular basis, we found ourselves turning down ideas that go beyond the scope of the project. Having a more realistic plan that matches the grant award amount allows us to better evaluate the feasibility of an innovation, and to better decide which organizations can honestly achieve their goals within the grant opportunity.
- Proofread your application! It should go without saying, but spelling and grammatical errors are distracting! It is harder to appropriately assess your application if the funder has a hard time following it. Working through hundreds of submissions, the clearer and easier your proposal is to read, the more likely the funder is to understand your vision and move you to the next round.
- Research potential partners and models. Which other organizations are doing something similar? What can you learn from partners that have launched initiatives similar to yours in the past? How can you strengthen your current model by approaching partners around the country? An application that (briefly) mentions the existing knowledge base and partners they can approach will stand out and be better positioned to drive an innovation forward. Knowing contacts can also prepare you for the hardest part of the grant: developing your innovation once the funds have been awarded.
Some handy resources to get a feel for what other organizations are doing include the Assets & Opportunity Network, the IDA listserv and the CSA network. Those discussion spaces can also serve as a good stress-test for your ideas before you submit your application.
Good luck! We wish you the best in seeking funding for your innovation.
How Crowdfunding Expands and Enriches Communities
By Diana Greenwald on 09/23/2014 @ 02:00 PM
In 1990, the University of Chicago economist Robert Lucas published the article “Why Doesn’t Capital Flow from Rich to Poor Countries?” in the American Economic Review. In what has since been dubbed the “Lucas Paradox,” Lucas observed that, according to neoclassical economic theory, capital should flow from rich countries with diminishing returns on investment to poor countries where capital is scare and should have high return on investment. In reality, this does not happen—that is why it is a “paradox.” Rich countries invest in rich countries, and poor countries stay poor. Why is this the case? There are a number of explanations, but one of the most common and compelling is that investments in poor countries are riskier than those in rich ones. Because of unstable government, weak institutions and uneven past debt repayment, it is riskier to invest in a poor place than a rich one.
While Lucas deals only with lending and investment between countries, there are analogues to his paradox on the individual level. Lending to capital poor people or businesses (like poor countries) is risker than lending to capital rich ones. Poor people have less or no collateral and potentially uneven credit histories. To make capital flow from rich to poor—whether it is from rich country to poor country or rich person to poor person—we need to decrease the risk of lending. Enter the idea of crowdfunding, a topic discussed at the 2014 Assets Learning Conference in the session “Crowdfunding and Community Development”. In a crowdfunding model, risk is spread among hundreds of lenders of small amounts of money who are not counting on a particular percentage—or even any—return on investment.
While a bank looking to loan has a clear set of criteria that must be satisfied in order to authorize lending, a successful crowdfunding campaign demands the ability to appeal to the amorphous expectations distant online lenders’ hearts and wallets. The speakers at the workshop attempted to define and discuss these expectations. The goal of the session was not to debate the success of crowdfunding as part of the global micro-lending and fundraising universe, but rather to show the gathered asset-building professionals how to use crowdfunding for their own organizations and those organizations’ beneficiaries.
The most general and perhaps comprehensive guidance came from Michael Gale of the crowdfunding platform GlobalGiving. He used an acronym—SMART—to describe what the goals of every crowdfunding campaign should be: specific, measurable, realistic, and time-bound. An insistence on having a clear and succinct campaign pitch was a recurrent theme in the speakers’ talks. A compelling but quick story as to why an individual or an organization needs funds is essential to a successful campaign.
It is not, however, all about the narrative. Jonny Price of Kiva Zip pointed out that choosing the right photograph—a colorful shot of the borrower engaging in the business or charitable activity that he or she is raising funds for—is essential. This emphasis on the choice of photograph is not dissimilar from conclusions that the staff at online dating sight OkCupid have discussed in their fascinating blog OkTrends. Whether it is finding a lender or finding a partner, the ability to market oneself visually is essential for any online interaction.
Crowdfunding platforms are designed to raise funds from individuals around the world. For example, Price showed a map of Kiva Zip donors to a single campaign that stretched from Australia, to China and to Alaska. Though this geographic breadth of financial contribution is impressive, all of the speakers emphasized the continued importance of in-person communities. Whether it was for kicking off a campaign with a strong start or ensuring that a funded project succeeds, crowdfunding cannot replace engagement with real human communities—it can just expand and potentially enrich those communities, just as speaker Chris Avila Hübschmann’s crowdfunded initiatives at Credit Do have.
Exactly how much is crowdfunding able to expand and enrich communities? The answer to this question is not clear. One attendee representing a larger organization asked (approximately): is there anyway to increase the scale of the giving? $10,000 is a lot of money, but for some organizations it is not enough to justify the work that has to go into a successful campaign. This question brings back the Lucas Paradox. If the strength of crowdfunding is the ability to spread risk by recruiting hundreds of people giving small amounts, will those small amounts ever add up to enough capital to make a lasting and permanent change to borrowers and their communities? On this relatively new financial frontier, only time will tell.
Saving for the Next Generation: How Save to Win is Impacting Financially Vulnerable Families
By Amanda Hahnel, Guest Contributor on 03/26/2014 @ 11:15 AM
Creating savings is hard, especially for low-to-moderate income populations. Saving for financial emergencies such as unexpected trips to the doctor and expected costs such as yearly school supplies may seem out of reach. Saving for longer-term goals like retirement or future educational costs can feel impossible to realize for many families living on the financial edge. As the cost of raising children continues to climb, the financial burden for families only grows. Yet, the benefits of savings are clear.
To help shift the rewards of saving from the future to the present, Doorways to Dreams (D2D) Fund has been exploring prize-linked savings (PLS) products. At the most basic level, PLS products encourage savings by making it fun. By rewarding smart savings behavior with chances to win prizes, they can motivate individuals to start to save and save over time. Importantly, this can help consumers experience the benefits of saving for the future in the present as they begin to set aside savings and aspire to more financially secure futures.
Save to Win™ (STW), the nation’s first large-scale PLS product, launched five years ago in Michigan. STW is a balance-building share certificate (i.e., certificate of deposit) in which every $25 saved is an entry to win a prize. Accountholders are committing to build savings for a year-long term with deposits for the chance to win monthly prizes. It has now been used by more than 70,000 Americans who have saved more than $40 million in the accounts.
Excitingly, as D2D has continued to evaluate the success of STW since its launch, it has become clear that it is effective at encouraging savings and reaching underserved populations. Importantly, Save to Win has impacted financially vulnerable families in four primary ways: (1) Increasing membership at credit unions through the STW account and inspiring use of committed savings products, (2) Providing a product geared to help start and build financial reserves, (3) Helping families take action to reach their financial aspirations of long-term investments in their children and (4) Providing a financial cushion to draw on when financial emergencies threaten financial security.
Incredibly, of the over 70,000 STW accountholders since 2009, approximately one-third have children. D2D estimates that about 23,000 families have opened a prize-linked savings product since Save to Win launched. As D2D has previously detailed, the majority of Save to Win members report having some aspect of financial vulnerability (they may be asset poor, low- or moderate-income, or non-savers). In 2013, this percentage ranged from 62% (Nebraska) to 81% (Washington). Families with Save to Win accounts are no exception. Here are the numbers broken down by state:
- Overall, 66-85% of families with Save to Win accounts were financially vulnerable, which accounts for 21-29% of all accountholders.
- In Michigan, 66% of families are financially vulnerable.
- In Nebraska, 76% of families are financially vulnerable.
- In North Carolina, 79% of families are financially vulnerable.
- In Washington, 85% of families are financially vulnerable.
- If we expand the definition of financial vulnerability to include high debt and insufficient emergency savings, a full 100% of families in Nebraska are financially vulnerable.
If we use the most conservative estimate above, that about 66% of families are financially vulnerable, over 15,000 families have moved towards financial security through building savings in their Save to Win accounts. They have done this without guarantees of a match or additional resources and yet have been able to set aside savings in a committed savings vehicle.
While prize-linked savings has been effective at bringing consumers into financial institutions, approximately 10% of Save to Win members have said they joined their credit union because of Save to Win. Even more excitingly, between 14-26% of these members are financially vulnerable families. Creating a new relationship with a financial institution based on savings can be an important step towards financial security. Participating credit unions have stated that as members build up savings, they are eligible for lower-cost debt instruments such as secured credit cards. This shift has the potential to have a huge impact on families’ balance sheets.
While opening an account is a crucial first step, the importance of continuing to deposit to it and build financial reserves cannot be understated. While D2D does not track account balances for all members with families, a subset of Michigan accountholders have been tracked since 2009 with several key findings: single parents are able to build accounts year over year with an average 11% increase in account balance from January to December 2012. Additionally, these families stay in accounts at similar rates between years: single parents were just as likely to keep their Save to Win accounts open for an additional year as non-financially vulnerable members (92% for single parents vs. 94% for other members).
That Save to Win is attracting significant numbers of financially vulnerable families is exciting because of the enormous positive impact savings has been shown to have on children. For example, research done by Pew has shown that among children from low-income families, those with high-saving parents are more likely to experience upward income mobility. Unsurprisingly, families with Save to Win accounts report that their children are a big reason they are saving: approximately half of all STW members with children respond in surveys that they are either saving specifically for their children’s futures or they are saving for educational opportunities.
The combination of aspiration for future needs and access to a financial cushion is an important offering of prize-linked savings products. D2D research has revealed trends in increased withdrawal rates in the summer from single parents. This may mean that they are using their accounts to cover unexpected costs or smooth income consumption, possibly to cover increased childcare costs. Save to Win accounts, in other words, may be a crucial reserve, with huge implications for vulnerable children’s well-being. Recent research shows that reducing the stress associated with not having enough financial slack can have impacts in every facet of a family’s life and that the development of a financial cushion is key to increasing outcomes in many areas.
Financial vulnerability represents a unique challenge for families: building both emergency savings and long-term reserves are important for families’ health and welfare, yet the ability to build those savings is often compromised by pressing day-to-day concerns. It is exciting to see evidence that Save to Win can help bring the rewards of creating saving to the present through strategic use of prizes and product design with important results. Families are opening committed savings products, joining financial institutions to save, continuing to build savings year over year, actively affirming the importance of the long-term educational opportunities of their children, and using the account when they need financial slack. PLS products are creating opportunities for saving and winning for everyone.
Amanda Hahnel is Innovation Manager at the Doorways to Dreams (D2D) Fund.
Michigan's Save to Win Program Demonstrates Successful Way to Encourage Savings
By Kori Hattemer on 10/10/2013 @ 12:00 PM
In 2009, the Doorways to Dreams (D2D) Fund partnered with eight Michigan credit unions to launch Save to Win ™ (STW), the first large-scale prize-linked savings product in the nation. Accountholders who save using the special balance building 12-month certificates of deposit (CDs) are entered into raffles for cash prizes with each deposit of $25 or more. Four years later, 58 credit unions in Michigan now participate in the program and 40,000 unique accountholders across the state have saved $72.2 million from 2009-2012.
D2D has been tracking the program in Michigan since its inception and recently published highlights from 2012, which emphasize the importance of developing innovative ways to encourage financially vulnerable households to save. Highlights from Year 4 of the program include:
- Accountholders appear to be developing long-term savings habits. Each year, accountholders are given the option to reopen or "rollover" their accounts, and a high percentage of accountholders rolled their accounts over from 2011 to 2012. Ninety-one percent of the accountholders who enrolled in 2009 and were still enrolled in 2011 once again rolled their accounts over in 2012. A high percentage of accountholders who signed up in 2010 (83%) and 2011 (77%) also rolled their accounts over from 2011 to 2012.
- Accountholders used their savings for a variety of purposes. While many accountholders rolled their accounts over in 2012, accountholders also used their savings to meet short-term needs. Account balances decreased in May and September, so accountholders may have used the funds to pay for summer child care or back to school costs. D2D also found that there is a cyclical dip in account balances during the rollover period each year, which may indicate that accountholders are making planned withdrawals between account years.
- STW continues to positively impact financially vulnerable accountholders. D2D defines financially vulnerable individuals as those who are single parents, asset poor, non-savers, or low-to-moderate income. In 2012, these accountholders had nearly identical rollover rates as their non-financially vulnerable counterparts, demonstrating the importance of STW in helping financially vulnerable individuals save.
As other organizations and financial institutions look for ways to empower financially vulnerable individuals to save, STW provides an innovative model for designing a savings product that is engaging and encourages savings habits. The success of STW in Michigan has motivated other states to launch similar programs, and D2D continues to advance prize-linked savings products as a strategy for helping low- and moderate-income individuals save.
To read more about the success of the STW program in Michigan in D2D's recent report, click here.
To learn more about D2D's pioneering prize-linked savings work, click here.
New Opportunity: CFPB’s Innovations Project
By Sean Luechtefeld on 10/07/2013 @ 12:00 PM
EDITOR’S NOTE: Will Tucker, one of our friends at partner organization ideas42, sent this announcement this morning. It’s about an exciting new opportunity being offered by the Consumer Financial Protection Bureau, and I think it will be of interest to many of our readers.
Ideas42 and its partners, the Doorways to Dreams (D2D) Fund, the Center for Financial Services Innovation (CFSI), and the Corporation for Enterprise Development (CFED), are excited to announce a call for prototyping partners on the CFPB Innovations Project. The project seeks to develop and test prototypes of new approaches for helping consumers overcome common decision-making challenges in managing their finances. We’re seeking innovators, businesses, and other organizations to work with us to prototype innovations and evaluate their effectiveness. Prototyping partners will have input into refining the design features of innovations, and will get the opportunity to be part of a behavioral design process led by ideas42 and its team.
The Innovations Project is being conducted by the Consumer Financial Protection Bureau (CFPB), with ideas42 serving as a CFPB contractor tasked with managing this project. Organizations should indicate their interest by submitting a brief letter of interest describing their interests and capabilities via email to email@example.com. Please include “Innovations Project” in the subject line. Please contact us today if you are interested in this opportunity, and make sure you submit your interest by November 8, 2013.
For more information on the project and criteria selection, see http://ideas42.org/CFPBinnovations and http://www.consumerfinance.gov/blog/were-looking-for-innovative-partners-for-financial-education-research/.
Spotlight on Innovation in Entrepreneurship: Microloan Management System
By Heidi Pickman, Guest Contributor on 09/23/2013 @ 03:00 PM
From 2004 to 2010, the microbusiness sector was responsible for over 90% of all jobs created in the US. Microbusinesses (1-4 employees) created a net of 5.5 million jobs, while large businesses (those with greater than 500 employees) lost 1.8 million jobs during the same period.
Despite their crucial role in the economy, only 0.10% of potential microbusiness borrowers are being served. In California, CAMEO’s microlenders struggle to achieve scale. Microlending is expensive for many lenders to sustain and as a result, some of CAMEO’s lenders have left the microloan market. With funding tighter than ever before and increasing need, microlenders have to deliver the same services as economically as possible. Our 28 member lenders made 1,500 microloans in 2012.
Many challenges exist that lead to inefficiencies and high costs of microlending:
- Finding eligible borrowers is difficult.
- Staff spend time on ineligible inquiries and building the pipeline of borrowers.
- Microbusiness owners need extensive business technical assistance before, during and after the loan.
- Microloans often undergo the same ‘traditional’ underwriting process that is used for large loans (i.e., a very extensive process).
CAMEO, as the effective small business CDFI coalition for California, supports the growth and sustainability of microlending by expanding resources and helping to decrease the cost of providing services. We decided to offer Accion Texas’ Microloan Management System (MMS) platform to members as a way to lower costs of microloans.
Accion Texas’s MMS streamlines the cost of underwriting and frees lenders to focus on recruitment and support. The loan turnaround is much faster. Accion’s automated review system allows instant feedback on borrower capacity and history, and underwriting takes three days instead of three weeks.
CAMEO believes that our member CDFIs will benefit in the following ways:
- Improved loan quality through a standardized process that strengthens the lenders’ portfolio
- CDFI’s can focus on spheres of excellence (e.g., business assistance)
- Cost of screening, assessment and underwriting per loan decreases dramatically
- Lender volume expands by 70-300% and thus increases revenues
- Staff can concentrate on loan/deal development
For this project, CAMEO has bundled smaller lenders together in one license, allowing them to post a limited number of applications for a reduced price. As they scale, they graduate to a full license. CAMEO guides lenders through a complicated, multi-agency on-boarding process, then provides ongoing support (e.g., staff training, peer network calls, one-on-one, technology assistance). We are working with four members for the pilot: California Capital, CDC Small Business Development, TMC Development Working Solutions and Women’s Economic Ventures.
Systems change always presents difficult challenges. Organizational behavior and processes and ingrained staff habits are not easy to change. Roles and duties may need to change. Staff may not be used to the algorithm and may need to learn to trust new system. And the incentives to change are not clear.
This leads many organizations to implement MMS partially, which in turn leads to multiple systems and duplicated efforts and masks the benefits of streamlining, speed and consistency.
To work properly, MMS needs executive leadership and systems change. It requires ‘big picture’ thinking about roles and processes. A few DOs and DON’Ts…
DO: Allow access to be open to everyone. Rely on Auto Review for assessment.
DON’T: Make clients jump through hoops before trying Auto Review.
DO: Use MMS for all loans under $50,000.
DON’T: Run two systems or duplicate activity.
DO: Reassign staff and loan committee duties to new ones, such as building the pipeline.
CAMEO believes that in this fast-paced world, we change or become obsolete! Our role is to help our members adopt essential new technology that will help them compete and increase their lending capacity, serve more microentrepreneurs who will create jobs, and build strong, healthy and stable communities.
15 Innovations for Municipal Leaders
By Sean Luechtefeld on 07/05/2013 @ 01:00 PM
Last month, NYU’s Wagner Graduate School of Public Service released Innovation and the City, an in-depth exploration of 15 municipal-level innovations to help city residents live better. From London to San Francisco and places in between, cities everywhere are doing great work to improve the lives of their citizens. The innovations documented by NYUWagner include:
- Boston & Chicago’s Updating 311
- San Francisco’s Kindergarten to College (K2C)
- Chicago’s Innovation Loan Fund
- Denver’s Peak Academy
- London’s Project Oracle
- London’s Spacehive
- San Francisco’s Zero Waste
- Philadelphia, Providence & Chicago’s Digital Badging
- Chicago’s Budget Savings Commission
- Seattle & San Francisco’s Open Data
- Oakland’s City ID Prepaid Mastercard
- Seattle & Santa Cruz’s Accessory Dwelling Units and Basement Conversions
- Michigan’s Prize-Linked Savings (PLS)*
- Los Angeles & Chicago’s Immigrant Export Initiative
- San Francisco’s Commuter Tax Benefit
Two of these innovations—numbers 2 and 13 above—identify asset-building innovations that have the potential to serve millions of low- and moderate-income families. San Francisco’s K2C program, for example, is a pioneer of the Children’s Savings Account movement and is working to create a college-going culture among families with children who face rising tuition costs against already-tight family budgets. Further, K2C’s visibility has helped pique interest around other initiatives, such as CFED’s very own 1:1 Fund.
Likewise, Michigan’s PLS initiative is a scalable means of giving families a hand up. Piloted in a number of cities across the country based on the exciting work of the Doorways to Dreams (D2D) Fund, PLS is the next generation of savings strategies. In essence, PLS offers incentives—like raffles and cash—for individuals who open savings accounts and make regular deposits into them. Not only does this increase the amount an individual or family saves, but it also brings un- and underbanked residents into the financial mainstream by connecting them with safe financial products.
These innovations and the other 13 listed above are chronicled in detail in NYUWagner’s report, which you should download here.
Currently reading page 1 of 10.