• Dec. 4, 2016, 8:17 am

Financial Solutions Lab aims to improve America’s financial health

Despite living in the world’s most prosperous country, many Americans struggle financially:

♦ More than 40 percent report having a hard time paying bills;

♦ One in three have regular income fluctuations;

♦ More than half would struggle to fund an unexpected $400 bill;

♦ More than 100 million struggle to manage their household cash flow.

America is also a global innovation capitol, and, especially since the recession, more attention has been focused on applying technology to reduce such ironic numbers.

That is the impetus behind the creation of Financial Solutions Lab, a five-year program devoted to enabling emerging fin-tech companies to solve America’s most pressing financial issues. Started with a $30 million grant from JP Morgan Chase and run by the Center for Financial Services Innovation (CFSI), the Financial Solutions Lab identifies, tests, and scales promising innovations designed to help Americans improve their credit rating, build assets and save more.

Sarah Gordon

Sarah Gordon

Vice President Sarah Gordon said CFSI originated 11 years ago in Chicago before expanding to New York City, San Francisco and Washington, D.C., with the aim of leading a network of financial services providers committed to America’s financial health.

“America is a rich nation in terms of tech talent,” Ms. Gordon said. “We see the solutions to these issues partially coming from financial technology.”

Ms. Gordon agreed that now is an ideal time to harness the talents of young entrepreneurs to solve these issues. Many were profoundly affected by the recession as they accumulated student debt and lost investments and homes.

Print“An increasing number are starting to get it,” Ms. Gordon said. “Many are relating on a personal level.”

Because of that personal experience with different pain points, many entrepreneurs working to solve financial problems, and are relishing playing disruptor. They want and need financial services and products but feel many of the traditional products and companies have increasingly less to offer them.

So they are building their own.

But that takes money and guidance, like any industry. Earlier this year the Financial Solutions Lab held its first annual competition, which drew more than 300 entries.

Nine winners each received up to $250,000 in funding, expert mentorship, CFSI and JP Morgan Chase consumer insight and national partnership opportunities.

Ms. Gordon said the organizers were overwhelmed by the response.

“We heard from innovators from across the financial services industry,” Ms. Gordon said. “The problems they are addressing are challenging and complex. They need assistance.”

The assistance they receive comes in many forms, Ms. Gordon explained. Entrepreneurs receive introductions to potential investors and advisors. Financial Solutions Lab has developed a roster of expert firms and advisors that help companies address common problems, she added.

“We shorten the development cycle by helping these companies avoid the mistakes made by earlier ones,” Ms. Gordon said.

The nine winners of the first competition are:

Ascend Consumer Finance – It provides borrowers with improving credit a loan at a fair interest rate with the opportunity to lower that rate if they exhibit financial responsible behavior. They work with borrowers to reduce credit card spending while improving savings.

Digit – Digit is an automated savings tool with an SMS-based UI employing an algorithm that identifies small sums of money that can, based on established spending and income patterns, be moved into an FDIC-insured savings account. More than 2,500 banks and credit unions are supported by the technology.

Even – Even levels the fluctuating incomes of hourly and part-time workers by saving money from larger than average paychecks and using that to boost lower ones.

LendStreet – The marketplace lender helps borrowers restructure and refinance their debt while allowing investors to buy the loans at a discounted rate.

PayGoal by Neighborhood Trust – They provide a mobile workplace tool enabling financially underserved workers to improve their financial health by allocating funds to the most important areas.

Prism – Prism developed a bill payment and presentation app to help millennials manage their personal finances and pay their bills from their smartphones.

Propel – Propel both simplifies and personalizes the food stamp application process in an attempt to capture the 15 million Americans qualifying for but not using the system.

Puddle – The reputation-based borrowing platform is available all US debit card holders. Users contribute to and access to a shared pool of capital while in the process building a reputation with others they trust. It is based on an offline model that has found success across the world.

SupportPay – SupportPay is an automated child support payment platform enabling parents to share child expenses and directly exchange child support and alimony.

Ms. Gordon said the first challenge facing many of the Americans targeted by these initiatives is cash flow management. A growing percentage have unstable incomes due to commission-based work, a series of part-time jobs or seasonal employment, so solutions which help lower interest-based debt or level incomes will help.

Mobile solutions are another focus area, Ms. Gordon added.

Many financially underserved consumers use mobile devices to conduct financial transactions,” Ms. Gordon explained. “There is exciting potential for delivering high quality services.”

While apps are a crowded field, Ms. Gordon said any solution must have a mobile aspect.

“It’s how you connect with customers. It provides a vehicle for timely and ongoing engagement.”

Ms. Gordon said in the near future she expects some solutions for improving America’s financial health to come from other countries.

“Many companies are linked with multinational firms, so they are plugged in to dialogue internationally on the underbanked and their financial health.”

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