Fintech for Financial Inclusion? Trusted Nonprofit Partnerships Are Key.
Financial technology—or fintech—is all around us. We see push notifications from banks on our phones, new apps for managing expenses and news articles about how data privacy features could impact our money. And encouragingly, we’re hearing more and more fintech leaders – from PayPal CEO Dan Schulman to dozens of start-up founders – articulate a business case for focusing their companies’ efforts on the financial well-being of low- and moderate-income (LMI) consumers. Yet there’s still an uphill climb to build awareness, adoption and continued engagement with these consumers. Our new brief combines research with consumer interviews to identify those challenges and offer solutions.
At Prosperity Now, our human insights work, paired with our deep relationships with nonprofit service providers, is generating important new learning about these big questions. As you can imagine, the answers are nuanced, complex and reveal that we still have more to learn about how consumers leverage technology to manage their financial lives. The good news: We see opportunities to use fintech for positive impact – and a clear emerging theme of the role of trusted community institutions as channels to reach and engage LMI consumers with fintech products.
In a recent brief, Consumer Perspectives on Fintech, we summarized some common themes we’re hearing from LMI consumers. Two insights stand out: First, consumers want technology solutions that facilitate transactions and make them easy to track. This may confirm that consumers find it easier to see the benefit of a fintech product when there is a singular, direct purpose. Second, we heard skepticism about fintech products—data and privacy concerns, which product to trust, etc. But we also heard that messages from trusted sources—like a local nonprofit, employer, or financial institution—helps ease those concerns (check out the full brief for more).
For fintech developers, this means products need to have a clear definition of their target customer and prime purpose. It also means there’s a second customer in the mix to consider in product design: institutions that already have trusted relationships with LMI consumers.
To understand how fintech companies can build better partnerships with nonprofits, Prosperity Now and the Center for Financial Services Innovation (CFSI) surveyed nonprofit members of the Prosperity Now Community about their perspectives on fintech for LMI consumers. The 100 responses revealed two important takeaways: 1) nonprofits are overwhelmingly interested in learning more about fintech, but don’t yet know enough to move forward, and 2) nonprofits are concerned about privacy and potentially harmful products.
If fintech providers want to build “on-ramp” partnerships with nonprofits, the path is clear—they must build awareness and trust among organizations that serve their product’s target population. Sixty-one percent of survey respondents want to partner with a fintech provider or offer a fintech product to clients – but 52% of these say they haven’t identified the right fintech tool for their clients, and 39% say they lack familiarity and knowledge of fintech. Additionally, more than half of those surveyed echo their clients’ skepticism about security and privacy of fintech products.
These nonprofit professionals clearly understand their responsibility to safeguard the trust of their LMI clients. As one respondent shared, “We want to find a fintech solution that doesn't harm our participants in any way.” They know it’s up to them to ask questions like: “Who's really behind it—their motivation—and will they be around in a year or two?”
We look forward to seeing more fintech providers identifying partnerships with institutions—especially nonprofit institutions—as part of their strategy to build strong financial well-being in LMI communities.