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Introducing Marketplace Relief: Products to Help Customers Mitigate Financial Insecurity

Megan Bolado | Assistant Director of Fintech Partnerships | The Financial Clinic

 

Last week, we announced the launch of an inclusive product Marketplace on Change Machine — a diversification of our online platform that enables practitioners to expand their financial coaching work to include the recommendation of safe, effective, affordable products and services for low-income customers.

Marketplace products are evaluated and maintained according to our Seal of Inclusivity, which vets and prioritizes products that build financial security for low-income consumers. The Seal of Inclusivity relies on customer feedback to determine which products are included in the Marketplace over time, and only positive user experience maintains the viability of a given product. In this way, the Seal of Inclusivity is actionable for our customers — a living, breathing process of validation and accountability.

In response to the sudden and widespread financial insecurity triggered by COVID-19, the Clinic launched Marketplace Relief: an initial suite of products and services selected to address the specific sources of financial insecurity facing millions of Americans today. This week, we’re excited to introduce you to the products and services that comprise Marketplace Relief.

  • SaverLife is a product that connects customers with an easy way to save, with potential to win cash prizes. We selected SaverLife because we know the importance of savings and liquidity for our customers, particularly in the face of income volatility.
  • FAIR is a safe, affordable, and inclusive branchless bank. We selected FAIR because access to trustworthy mobile banking gives financial control to our customers who may need quick access to financial resources, including IRS Economic Impact Payments, Unemployment Insurance and more.
  • FitFin is a simple and free budgeting tool that helps customers understand how and where they are spending their money and identifies potential saving opportunities. We selected FitFin because an individuals’ understanding of their spending habits is essential to their financial health, and identifying opportunities to save can be crucial to keeping money in their pockets.
  • UBDI supports customers in using their anonymized and aggregated data as an asset, giving them the opportunity to earn small amounts of money as they use the application. We selected UBDI because it gives its users an opportunity to gain additional revenue without special skills during this economic crisis that has forced many to work remotely, and when any source of income and work can be inconsistent.
  • The Capital Good Fund offers a Crisis Relief Loan intended to help those financially impacted by COVID-19. We selected the Capital Good Fund because the Crisis Relief Loan (eligibility varies by state) helps those struggling to pay for basic needs as a result of the steep economic fallout caused by COVID-19.
  • Propel’s FreshEBT provides a fast and safe way for customers already receiving SNAP or EBT benefits to track and use these benefits. We selected FreshEBT because, particularly in this moment of economic uncertainty, it’s important for low-income customers to be able to track their basic necessities.

Low-income consumer participation in the digital economy is essential to creating a more equitable financial landscape, especially in times of economic downturn. Further, the right fintech products benefit customers in more ways than one, including the ability to manage one’s finances from anywhere and at any time, a greater sense of control over one’s financial life, increased affordability of products and services compared to traditional products, and higher probability of finding a product that meets one’s unique needs.

Better access points to promising fintech products and services for low-income consumers means that the households most heavily impacted by the economic ravages of COVID-19 are better positioned to mitigate financial insecurity in the months and years ahead. Marketplace Relief the Clinic’s first step toward disrupting traditional fintech service delivery and driving participation among low-income customers by leveraging one of our greatest assets — our community of practice on Change Machine.

We’re proud to partner with this initial suite of products, and look forward to learning more about their impact on the financial security of our customers. If you represent a fintech company and would like to discuss your product, please send a note to partnerships@thefinancialclinic.org

Announcing Change Machine’s Marketplace: Driving Low-Income Consumer Participation in the Digital Economy

Mae Watson Grote | Founder and CEO | The Financial Clinic

 

COVID-19 has impacted every aspect of our living and working lives, erasing industries, skyrocketing unemployment, and deepening the economic divide. This drastic and instantaneous shift has also created a digital “new normal” that is being formed and reformed every day by the remaining businesses and their remote workforces.

To address the shifting ground beneath our feet, the Clinic has launched the Marketplace — an expansion of our online platform, Change Machine, which empowers nonprofit practitioners to confidently recommend and connect their customers with trustworthy fintech products and services. The first suite of offerings, titled Marketplace Relief, is intended to mitigate financial insecurity amidst the unfolding economic recession.

All featured products have been rigorously vetted and awarded the Seal of Inclusivity — our set of criteria that determines which products do and don’t appear in the Marketplace. Developed with low-income customers and nonprofit leaders at the helm, the Seal of Inclusivity guarantees that products included on the platform are safe, affordable, and effective for low-income consumers.

Products and services from traditional financial institutions have high premiums (i.e. time and opportunity costs, fees, price of products), while fintech companies often save by avoiding brick and mortar/walk-in services. The latter offer products and services at more competitive rates, and produce those products at a much higher clip. As a result, the market is flooded with fintech products that promise a range of financial support services, but with no clear or systematic method to evaluate products for safety, affordability, and effectiveness among low-income consumers.

The Seal of Inclusivity meets this demand for low-income individuals and the practitioners who serve them, and democratizes fintech in a way that drives a more equitable digital economy. Its design is intentionally utilitarian, offering practical support to practitioners in their everyday work. Not only does it procure products that are safe and user-friendly and underwrite those products on behalf of the practitioners who recommend them, it also puts customers in the driver’s seat. Central to our Seal of Inclusivity is our belief that customers are their own best experts; it is their experiences and collective feedback — combined with changes to their financial security — that ultimately determine which products remain in the Marketplace over time.

The COVID-19 crisis, like other moments of economic vulnerability, attracts predatory actors performing in bad faith. As such, a critical element of the Seal of Inclusivity is the safety and transparency of fintech products. Companies whose products are featured in the Marketplace must be clear and upfront about their services — what is offered, how it’s offered, and how consumers can choose to access the product now and in the future. During the product recommendation process, our customers will be made aware of how the associated fintech company might collect, use, and store their information, as well as how their data is being protected from data breaches or faulty technology.

The ability to manage one’s finances from anywhere, and at any time, lends efficiency and a greater sense of control over one’s financial life. However, many products require special skills or subject matter expertise to be viable, and are therefore inaccessible to segments of consumers. The Seal of Inclusivity means that Marketplace products are designed for ease of use and understanding. Their systems and softwares are recognizable and/or intuitive, and make everyday financial activities quick and efficient. Products in the Marketplace are chosen to meet the distinctive needs of low-income, majority Black and Brown consumers and to remove barriers to participation.

The principles outlined above that form the foundation for the Seal of Inclusivity are intended to be iterative and flexible. As we learn more about what’s important to our customers, practitioners, and fintech companies, we will continue to hone and adjust the process by which products are tested and evaluated. Unlike criteria that have come before us, our Seal of Inclusivity is designed to be actionable for low-income customers — a living, breathing process of validation and accountability.

In this emerging post-COVID economic reality, the digital divide is hardened and deepened; low-income people face additional barriers to participation in the digital economy, and a lack of access to products and services leaves financially insolvent people more vulnerable to predatory actors. Despite the systemic barriers, we know that harnessing the voices of our customers is the only way to forge lasting change. The Marketplace will amplify those voices and up the ante for fintech companies that claim to serve and meet the needs of low-income consumers. Our customers will be the judge of that.

If you represent a fintech company and would like to discuss your product, please send a note to partnerships@thefinancialclinic.org.

For Low-Income Households Facing a Liquidity Crisis, $2 Trillion Won’t Cut It

Mae Watson Grote | Founder and Chief Executive Officer | The Financial Clinic

 

(And Other Things I Told the New York Fed at Last Month’s Community Advisory Group Meeting)

The week before last, I told the Federal Reserve Bank of New York that, much like Jerome Powell and the Federal Reserve have done with our financial systems:  Low-income American families need someone who’s got their back.

My point was that the same urgent policies enacted to stem the economic fallout from the COVID-19 pandemic — emergency measures meant to ensure businesses and markets that the American government has their backs — are just as necessary for the vast majority of American households that, even in a strong economy, live precariously, paycheck to paycheck.

As part of the Community Advisory Group, I and other nonprofit and community leaders advise the New York Fed on issues faced by communities across the second district (and so of course, the views expressed in this article are my own, and don’t reflect that of the New York Fed). It’s no surprise that our most recent discussion was devoted to the ongoing COVID-19 pandemic that continues to escalate across the United States and especially here in New York. The economic toll faced by low-income Americans will be — and has already been — unprecedented.

More than 22 million Americans are now out of work with unemployment filings at record highs. An economist with the St. Louis Fed has projected a potential 47 million could go unemployed this year. If the Fed can resort to unlimited bond-buying programs and trillion dollar market injections, why can’t we go to parallel lengths for low-income families?

Here at The Financial Clinic, the biggest lesson of the pandemic’s ongoing economic crisis is that margins have cliffs. If even in a tight labor market millions of Americans were financially insecure — especially disproportionately vulnerable groups like Black and Brown women — imagine how they fare now.

The deep asset poverty experienced by low-income Americans, coupled with an eviscerated social safety net, means we’re now confronting a future in which many Americans simply won’t recover. This is especially concerning for Black and Latino households, who are less likely to have saved for an emergency and who have a liquid asset poverty rate twice that of white households. These people — like so many of those we serve at the Clinic — have fallen over a cliff and are now in free fall.

Even recent catastrophes offer little guidance. During Hurricane Sandy — which hit poor households especially hard — there was an initial storm. However, once passed, we could begin to assess the destruction and human loss. Or with the Great Recession, as the labor market tightened, we could appreciate how deliberate policy decisions left communities of color out of a full economic recovery. In our current crisis, that assessment has yet to take place, and this free fall makes it hard to grapple with the long-term impact.

Meanwhile, the Clinic is directly responding to our customers who are now in dire financial straits. We’re launching free virtual, financial coaching and expanding Change Machine to further address the needs of those hit hardest by this catastrophe. What is already clear from this work is that families are scrambling. With household budgets in total shock, how will families make rent in the coming months?

The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act — which includes direct payments to American workers — is the largest in U.S. history, but it doesn’t go far enough. Low-and-middle-income households are facing a liquidity crisis. Countless are confronting a sudden loss of income while their essential expenses have stayed the same.

Across the last twenty years and over two recessions, rising rents continue to outpace incomes. What we’re now witnessing is the bottom fall out for already-cash-strapped workers. That means cash inflows — like the CARE Act’s $1,200 payments to low-income Americans — are essential, but even most people who live in the Fed’s second district have rent payments higher than $1,200. (In New York, for example, the median rent for a one-bedroom apartment is $2,850.)

The reality is that individuals on fixed or limited incomes lack the resources to take the necessary precautions required by this pandemic. Often they don’t have the ability to buy in bulk. Many live in food desserts — which studies show are disproportionately concentrated among poor, Black neighborhoods — and aren’t able to drive to multiple stores, only to be turned away because the shelves have been cleaned out. 

 So what else can be done to mitigate the pandemic’s economic impact on the most vulnerable among us?

In the weeks to come, the emphasis shouldn’t be on stimulus, but rather putting a total moratorium on all debt and essential payments and penalties: everything from student loans, mortgages and rents, and credit card debt to evictions and utility disconnections. Our focus must be on safety nets and social insurance.  Just as importantly, any cash payments must not count towards actual income that might otherwise disqualify them from essential benefits like SNAP or SSI.

While the future of this crisis remains unclear, we already know what so many low-income Americans need. They need, in other words, what our financial systems have already been assured: a strong safety net and a guarantee that we have their back.

A New Day: Financial Security and the Role of Nonprofits

Haidee Cabusora | Chief Program Officer | The Financial Clinic

 

Today’s talk of fiscal packages comes as critical relief to millions of Americans. The proposed support is intended to help the first circle of victims; those who are affected directly by COVID-19 will receive $100 million in the form unpaid leave, unemployment insurance, and free testing. It pierces through a fog of terrifying health statistics, words repeated over and over again (unprecedented, flatten, video conference), and eerie silence. 

From a government that often seems in political paralysis, decisive action to meet the rising acceptance of a deep economic crisis is relief in its own right.

And the good news doesn’t end there; stimulus packages are being actively debated and negotiated as relief widens to individual checks, sector bailouts, and small business support. These instruments are equally welcome and a sign of a government that sees the need and is willing to meet it.

We may applaud the motivation and the potential $2 trillion on the table, and we may still pause to consider what this means for working poor Americans. For decades, we have seen the slow shift of financial insecurity from governments and employers to low- to moderate-income Americans. Pensions and profit-sharing plans have disappeared. Wages stagnate. Public benefits are not indexed to keep up with inflation.

As long as we separate the deserving poor from the undeserving poor, our national policies will accept poverty as inevitable.

And while crises reveal that margins have cliffs (and that marginalized Americans will eventually fall off the edge), it shouldn’t take a pandemic to remind us that widespread unemployment, loss of income, lack of savings, no health insurance, unpaid sick leave, and insufficient childcare are essential components of financial insecurity. Further, according to a 2018 PolicyLink study, almost half of all people of color are “financially insecure,” living with incomes below 200% of the federal poverty level, with 53% of Latinxs, 51% of Blacks, and 53% of Native Americans considered financially insecure.1 Single mothers are more likely to be “financially insecure” at 71%2, and more specifically women of color who are disproportionately working low wage jobs.3

These factors existed before COVID-19 and, despite current attention to addressing them, will persist long after the pandemic unless we deliberately make different policy choices.

Our responsibility is to look up from the now that dominates and to consider the connections between past, present, and future financial insecurity. For decades, social service organizations and the communities they serve have tackled survival on a month-to-month basis. That experience is our strength today. We are trained and are ready to help. As the health crisis recedes, these same social service organizations will apply their skills to become the first responders to evictions, overrun benefits enrollment centers, and workforce development programs.

But a larger responsibility looms; as we look down the road, big battles will open up in the years to come.  Staying vigilant — not allowing the same placid acceptance that this is a reality of the modern American economy or, worse, subtly blaming the victims  — is crucial. Someone must pay for stimulus packages and the need for more support. When that happens, will nonprofits and those they serve be prepared to make the case through data, stories, and a unified voice? As we have recently learned, it’s never too early to start.

 

 

(1) PolicyLink (2018), 100 Million and Counting: A Portrait of Economic Insecurity.

(2) Ibid. 

(3) Institute for Women’s Policy Research and OXFAM

Margins Have Cliffs: Who will weather COVID-19?

Mae Watson Grote | Founder and CEO | The Financial Clinic

 

Our economy demands that working poor people assume the risks of capitalism, living day-to-day at the margins. COVID-19 will demonstrate that margins have cliffs; deep asset poverty and an eviscerated safety net means we’re facing a future in which many Americans simply will not recover.

Here’s how the Clinic is responding to our customers who are in a financial free fall:

  • Next week, we will launch a series of free virtual offerings for customers and nonprofits, including financial coaching referrals to our programs, community trainings on COVID-19 resources, and access to Change Machine where more than 4,000 practitioners get answers to their questions, exchange resources, and deepen their connections with colleagues.

  • The Clinic is rapidly evolving Change Machine to help nonprofit partners on the front lines expand their reach with virtual coaching services, respond to heightened financial insecurity caused by COVID-19, and drive advocacy and resource-generation grounded in the stories and experiences of their customers.

  • We will equip the field to bridge the digital divide exacerbated by COVID-19. While fintech companies exclude low-to moderate-income consumers, and predatory actors target those same consumers in the face of emergent federal and state relief, the Clinic will be launching an inclusive product Marketplace that empowers practitioners to recommend promising products for their customers.

As we dig deeper with our customers and nonprofit partners on the front lines, we thank you for your engagement and support. Together, we’ll work to emerge from this crisis closer to our vision of a country where ALL are financially secure.

In the wake of the Great Recession, natural disasters, and a government shutdown, the Change Machine community put $42 million back into the pockets of working poor Americans.

Is Uber Offering It’s Drivers Payday Loans?

Mae Watson Grote | Founder and Chief Executive Officer | The Financial Clinic

Employers intending to thrive on the very financial insecurity they create reflects a deeply broken labor market.

In the late aughts, one of the last customers I coached was a man named Jay. Jay’s prison term had ended the year before we met, he was single, didn’t have debt, and held a job delivering paychecks. I was helping him establish a new financial identity, from securing a relationship with a bank to establishing credit history, and identifying a financial goal. Among all my customers, Jay was one of  the more financially secure because, in most months, he could make ends meet.

But building on that foundation and achieving financial mobility was going to be even harder for Jay. Delivering paychecks was a steady gig — he would joke about the holes he’d wear out in his monthly MetroCard from running all over the city — but it was still a gig. He wasn’t an employee and didn’t have benefits. At the end of the day, he was still one paycheck away from abject poverty.

If there were a standard, 40-hour-a-week job with benefits available to Jay, he wouldn’t have thought twice. But he’s a formerly incarcerated Black man from East New York. William Julius Wilson’s field-defining work on race and poverty helps us understand why generations of African American men like Jay have worked at the periphery of the labor market.

Since the advent of the modern labor market, African Americans and women are disproportionately represented in the gig economy.1 Sometimes people take on extra, albeit temporary work because they want to afford a better vacation. Or maybe they need the flexible hours to help care for their families because affordable child care is scarce, or a medical expense needs to be paid. More often than not though, gig work is a manifestation of their marginalization. Sometimes people take on extra, albeit temporary work because they want to afford a better vacation. Or maybe they need the flexible hours to help care for their families because affordable child care is scarce, or a medical expense needs to be paid. More often than not though, gig work is a manifestation of their marginalization.2

There’s no doubt that the margins can be an engine for growth. Tech platforms, for example, have enabled labor markets to be more efficient. “At nearly $1 trillion (approaching 5 percent of U.S. GDP), freelance income contributes more to the economy than industries such as construction and transportation and is on par with the information sector,” according to Upwork and Freelancers Union.

Scores of people have joined Jay’s ranks since I coached him a decade ago. Whether by choice or default, tech-enabled platforms have allowed millions of job-seekers to secure income as gig workers. But these platforms largely exploded in popularity only after the Great Recession, during a period of economic recovery. What happens to gig workers during the next recession or economic downturn?

Between dwindling retirement contributions and rising healthcare costs, workers are shouldering a greater share of the risk and taking on an increasing amount of financial insecurity in the workplace, as Jacob Hacker argues in The Great Risk Shift. As this trend of risk displacement reshapes how workers are paid and compensated, low and middle-income people’s financial insecurity will only be exacerbated.

To wit: Uber Money.

Last November, I was in Las Vegas when Uber announced its push toward financial services at Money20/20. Like a 1980s Milli Vanilli concert, the announcement featured dry-ice vapor and a laser light show.

The smoke and mirrors didn’t end there: “Drivers often start the day in the negative,” said Peter Hazlehurst, Uber’s Head of Payments, “because they have to buy gas. So Uber’s new card will front them $100.”

Wait, what?! That sounds like a payday loan. Smoke and mirrors is one thing for a corporate kick-off event, but no amount of spin should obscure worker exploitation.

Hazlehurst described a small, short-term loan probably unsecured and possibly linked to the driver’s next paycheck. But what distinguishes payday loans from small-dollar loans offered by your local credit union or non-profit lender, and even many credit cards, is their predatory nature and wealth-stripping effect.

The specific terms of Uber’s microloans are not yet available, so an ominous question looms:  Is Uber planning to offer payday loans to its own workforce? The company already has a track record of misleading drivers about the true financial benefits and costs of ridesharing. 

Drivers don’t start the day with a deficit because they need to fill the tank at the top of the day. They start the day with a deficit because they don’t have the proceeds from the previous day to pay for that gas.

Employers intending to thrive on the very financial insecurity they create reflects a deeply broken labor market.  And given rideshare companies’ innovation is the very technology that manages complex systems of data, no entity could appreciate the financial insecurity caused by income that doesn’t cover expenses than the platform itself.  There’s really no better illustration of how design reflects the intent and purpose of the designer.

Uber drivers start the day with a deficit because financial insecurity is the norm for a marginalized workforce. Legally, rideshare drivers are considered independent contractors, but nonprofits we’ve partnered with in the Change Machine community contend that they rarely think of themselves or fully operate as small business owners and operators. Not only are Uber drivers unable to to set their own prices and are closely supervised by the app’s algorithms, but in our experience, drivers readily buy-into Uber’s “earn anytime, anywhere” pitch, as if one is an entrepreneur just by picking up rides in between educational classes, or using the downtime between rides to work on their screenplay.  But below, in 7.5 point font, there’s the rub:  “The opportunity is for an independent contractor” which effectively means that drivers are assuming the risk, but hardly the profit.

From too-low estimates on the accelerated depreciation of the car to unanticipated costs like a license to access the airport, rideshare drivers often spend significantly more than they anticipate. Even when expenses are carefully tracked, real-life expenditures often exceed income — leaving drivers struggling to just break even.

As a result, they’re “lost to rideshare,” said a financial coach working with a workforce development nonprofit in Columbus, Ohio. Coping with all these unanticipated consequences puts the job search or going back to school even farther out, becoming another barrier disguised by the promise of mobility and entrepreneurship.

Uber’s genius is in building a software app to utilize fallow assets, but the company doesn’t help drivers make that mental or operational shift as independent contractors who maximize those assets. Of Uber’s 11 Resources for Drivers (“Get all the information you need to start driving and delivering with Uber”) only one addresses the financial implications. And even then, “Your tax questions, answered,” makes no reference to quarterly income and employment tax payments, how to record expenses like parking, tolls, and gas, let alone advise drivers about the Volunteer Income Tax Assistance, the IRS’s free tax preparation program.  

A decade ago, at least Jay could afford a monthly MetroCard upfront, and nor did his employer introduce by-design, wealth-stripping financial products.  But his financial insecurity, alongside that of most gig workers, is not a foundation for a thriving labor market nor a healthy economy.

 

 

(1) “People of color … are more likely to be in non-traditional arrangements that are lower paid and offer less flexibility to workers.” Gig Economy Data Hub, “Who Participates In the Gig Economy” (Washington, D.C.:  Aspen Institute’s Future of Work Initiative and Cornell University’s ILR School, 2020), bit.ly/2T4wJXn

(2) “More than half of contingent workers (55 percent) would have preferred a permanent job.” U.S. Bureau of Labor Statistics, “Contingent and Alternative Employment Arrangements – May 2017” (Washington, DC: U.S. Department of Labor, 2018), bit.ly/3byrUfo