Joining Forces for Financial Health: Engaging with Fintech
This is the first in a series of blog posts exploring key questions raised by nonprofit practitioners about fintech partnerships and sharing how innovative nonprofits have addressed those issues when building partnerships of their own.
In recent years, the nonprofit sector has shown a growing interest in financial technology (fintech). We’ve seen a small but increasing number of nonprofit organizations offer publicly available fintech tools directly to their clients, partner with fintech providers to increase access and distribution, and in some cases build their own fintech solutions. While this is promising for financially vulnerable communities, there’s still much to learn about effectively integrating fintech with nonprofit programs. Together, Prosperity Now and the Center for Financial Services Innovation (CFSI) are engaging nonprofits to improve these cross-sector collaborations, deepen impact and create sustainable partnerships.
Let’s start at the beginning—what is “fintech”? The term refers to utilizing technology to build and offer tools that help people manage their financial lives. Emerging fintech solutions address specific consumer financial needs including accessing and building credit, smoothing income and saving. By lowering costs, improving transparency and convenience, and providing real-time information to support sound decision-making, fintech products have the potential to improve the financial health of low- and moderate-income (LMI) consumers and communities of color.
As fintech offerings proliferate, nonprofits have an opportunity to partner and share insights with providers to shape their design and delivery, ensuring that tech-enabled tools are more inclusive, equitable and responsive to the economic realities faced by LMI communities. With their knowledge of individual communities, nonprofit partners can also play an important role in working with LMI communities to help them navigate the diverse array of fintech tools and identify safe, affordable and impactful products.
Though opportunity abounds, questions persist. Many of Prosperity Now’s nonprofit partners are interested applying fintech to their work, but they have lingering questions about its potential risks and benefits.
To better understand what nonprofits think about fintech, Prosperity Now and CFSI joined forces to survey Prosperity Now network members and share insights from nonprofits that offer fintech tools to clients. The survey was administered as part of CFSI’s Fintech & Nonprofit Partnership Working Group, an initiative designed to facilitate learning, dialogue and collaboration between fintechs and nonprofits. The Working Group is sponsored by The Financial Solutions Lab—a joint initiative managed by the Center for Financial Services Innovation with founding Lab partner JPMorgan Chase & Co.—with additional support from the Principal Foundation.
The survey, conducted earlier this year, was sent to three groups in the Prosperity Now network, including the Savings Network, the Financial Coaching Network and an unofficial group of youth service organizations. In total, we received 115 responses. Three key themes emerged:
- Curiosity abounds, but so do questions about fintech operating models and product design.
- Nonprofits are concerned about trust and privacy, technology access and pricing.
- There is a desire for guidance to evaluate fintech products and potential partners.
Let’s explore each theme in a bit more detail:
Curiosity Abounds, But So Do Questions About Fintech Operating Models and Product Design
Prosperity Now found widespread interest (85%) among nonprofits in adopting fintech products in some form. Yet, while nonprofits are curious, they are still mostly unfamiliar with fintech. More than that, nearly all (82%) have not collected data on clients to better understand their needs and potential interest in fintech tools, suggesting an opportunity for research on client demand.
Practitioners want to understand how fintech companies operate. One respondent asked, “Who's behind [the company]—[what’s] their motivation—and will they be around in a year or two?” Questions also abound about how fintech providers are designing and delivering products to meet the needs of LMI consumers. For example, 25% of respondents cited product interface and language as barriers for their clients. “How are fintech providers including the voice and needs of the financially underserved in their designs?” and “Are these products improving [clients’] financial health?” are common refrains echoed in the survey findings.
Nonprofits Are Concerned About Trust and Privacy, Technology Access and Pricing
Nonprofits also cited barriers standing in the way of client adoption of fintech tools, including lack of trust and privacy (49%); lack of access to technology (34%); and concerns about pricing (25%). For example, one survey respondent expressed concerns about finding reliable and high-quality fintech tools “that don't harm our participants in any way.” Others noted limited and inconsistent technology challenges faced by LMI consumers, such as “lack of access to high-speed internet, limited or no data plan on a [mobile] phone.”
There is a Desire for Guidance to Evaluate Fintech Products and Potential Partners
Overwhelmingly, we saw respondents ask how they can evaluate fintech products and take steps to adopt and offer them to clients, asking questions such as “what are the right fintech tools to refer since we do not have capacity in-house?” or “how would an organization go about finding a fintech partner?”
Through CFSI’s Fintech & Nonprofit Partnership Working Group, we’ve seen nonprofits engage with some of these challenges and deploy creative models and partnerships to provide fintech to their clients. In the forthcoming posts, we’ll tackle some of the questions raised by practitioners and highlight approaches pioneered by nonprofits offering fintech products.