Joining Forces for Financial Health: Vetting Fintech Tools and Partners

Editor’s Note: This is the second in a series of blog posts that shares how innovative nonprofits have addressed key questions raised by nonprofit practitioners about fintech partnerships. In the last post, we shared survey results of the concerns nonprofits have with fintech design and how fintech companies operate. 

Fintech offers a huge opportunity for nonprofits to better serve their clients, but the results of our recent survey with the Center for Financial Services Innovation show that a lack of trust, concerns about pricing and client technology access prevent nonprofits from incorporating fintech into their services. How can we guide organizations to identify and evaluate fintech tools that are safe, high-quality and affordable? 

Proper vetting can help determine whether fintech is a good fit for a nonprofit and vice versa. The process lays the groundwork for adopting a product that can augment the impact of a nonprofit program and support clients’ financial health. While vetting can consist of many elements, we’ll discuss two key steps of the process: nonprofits’ assessment of their own readiness for fintech and evaluating providers and products. 

While the space is evolving, we have seen nonprofits develop effective approaches and processes to vet, and ultimately adopt, high-quality and safe fintech tools. Examples in this post highlight partnerships from CFSI’s Fintech & Nonprofit Partnerships Working Group, which is part of the Financial Solutions Lab—a joint initiative managed by CFSI with founding Lab partner JPMorgan Chase & Co.—with additional support from the Principal Foundation.

Evaluating Internal Readiness

A fintech partnership should complement the services a nonprofit provides. This requires careful evaluation of how a fintech offering will fit into existing operations and the client experience. As a starting point, nonprofits beginning to explore these options should consider the following types of questions:

  • What problem is the organization trying to address? Are fintech tools a way to tackle that problem? 
  • How does the fintech offering fit within the organization’s overall mission? How would a fintech tool improve the way the organization serves its clients?
  • Does the organization have the capacity (time, resources, staff and knowledge) needed to embed fintech into its programming?

For organizations ready to take the next step, conducting research on client needs can help to narrow down what type of fintech tool to offer. Our survey of Prosperity Now network members earlier this year found that almost all respondents (82 percent) have not collected data on clients to better understand their needs and preferences. 

The National Urban League (NUL), which serves over 20,000 low- to moderate-income clients in African American communities, conducted a financial health survey at a few affiliate locations to diagnose and identify which client financial challenges and needs to address. The survey provided a useful base of knowledge and unearthed a few surprising insights. For instance, NUL found that older clients tended to rely heavily on smartphones, finding them more affordable and easier to use than personal computers. Using information from the survey, the Urban League could identify savings as a clear need for clients who were comfortable using technology. The organization sought out known high-quality savings fintech tools that were available in the market, including organizations supported by the Financial Solutions Lab. 

Evaluating the Fintech Product and Fintech Organization

Nonprofits articulated concerns about product design in our previous survey, with 25 percent of respondents citing product interface and language as barriers for their clients. One way to address this concern is to include frontline staff, such as coaches and counselors, in the vetting process to provide their analysis. Before recommending fintech tools to clients, Catalyst Miami, a nonprofit organization that serves low-income individuals and families in South Florida, including a large number of immigrants, has its financial coaches test and use each product to assess functionality, interface, ease of use and other criteria. Coaches have also talked directly with fintech companies as part of the evaluation process.

Neighborhood Trust Financial Partners (Neighborhood Trust), a nonprofit  fintech provider serving low- and moderate-income workers across the country, has developed formalized criteria and a process to evaluate fintech products and partners:

  • Identify fintech products that are easily available and accessible by consumers. For example, given their work with employers in different geographies, Neighborhood Trust focuses on products with national reach.
  • Group and prioritize products based on client need. Categories can range from traditional options, like a checking or savings account, to tools that help with income smoothing or cash flow visibility. Some products might fit in multiple categories to address numerous client financial needs.
  • Compare products on features, functionality and rates. Neighborhood Trust looks at product criteria, such as fair and transparent rates and fees, ease of use, ability to automate or incentivize desired behavior, accessibility, customer service and availability of physical branches. 

After identifying the best options, Neighborhood Trust then assesses the company that offers the fintech products, to ensure that there's also a partnership fit. It assesses a fintech company by looking at:

  • Mission alignment
  • Commitment to working together
  • Proven track record and reputation
  • Strong leadership

Nonprofits also need to examine how a fintech partner generates revenue and assess its sustainability model. Because fintech organizations are subject to a complex funding environment, there are real concerns about their sustainability and ability to serve as long-term partners. Nonprofits will want to understand how a potential fintech partner’s operating model works—including pricing of products, fee structures for consumers and the kind of revenue-sharing or funding model that would make sense for the partnership. By analyzing fintech business models and identifying a shared commitment to offering solutions that ultimately improve people’s financial lives, nonprofit organizations can more clearly evaluate a fintech partner. 

Finding a fintech tool and partner can be time consuming and nonprofits might need to evaluate a few products and companies to eventually get the right fit. Careful vetting will help nonprofits take advantage of new partnership possibilities in a meaningful way. Through the Fintech & Nonprofit Partnerships Working Group, we’ve seen nonprofits successfully vet and engage in partnerships to provide fintech to their clients. In the last post of the series, we’ll look at the nuts and bolts of how nonprofits have actually structured their partnerships and moved from concept to implementation.

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