The concept of using technology to help disadvantaged people improve or manage their finances is not new. There are seminars on this topic at almost every fintech event, many reports have been produced, and many people are really excited about it. However, companies in this field, and there are plenty of them, remain largely under the radar.
These companies are needed now more than ever as cost-of-living crises are being reversed around the world and services that have historically been provided by charities are cut short due to budget constraints. But, there are still serious questions about how private companies can expand to support as many people as possible while becoming successful businesses.
One of the biggest hurdles for companies aiming to serve the underserved face is to raise awareness of their products and services among their target audiences.
Not many potential customers can be reached by the cheapest and most pervasive channels, which are digital options such as social media. That’s because people who struggle financially are often from minority communities and/or suffer from mental or physical health conditions. In turn, this means that their use of digital products and services is restricted by language barriers, offerings that do not take into account accessibility for people with disabilities, or simply lack of resources. People in the latter category may not have access to the Internet – I wrote about how many people are still offline in the last year.
Therefore, companies have to consider other ways to communicate their offerings, many of which are analog, such as print media, branches or just having shoes on the floor to talk to passersby.
One example is the Plum Money Thrift Club, which has partnered with food banks to run workshops on financial literacy in low-income communities—particularly targeting those trying to manage complex benefit systems, have networked with certain faith communities, and run digital inclusion workshops a job.
Another is OneBanx, which offers an app that allows people to view all their accounts in one place, pay bills, and manage deposits and withdrawals without having to visit their bank branch. It operates kiosks of local grocery stores, which serve to raise awareness of its services among communities, enabling it to offer practical support to those who are not digital natives, as well as providing deposit and cash withdrawals.
However, these methods, while effective, are resource intensive—particularly in terms of the time commitment required by founders and first employees, and thus are not necessarily an option for everyone.
Another option for financial companies wanting to serve those in need is to partner with large organizations that have access and resources. These organizations can include charities and local or national authorities, many of which already understand the value of such partnerships – Bloom Money works with community centers and local councils, for example.
Key partners can also be large companies, particularly banks, and while these organizations have historically struggled to work with fintech companies, attitudes must change as there is high demand from customers for more support - 73% of European consumers feel their banks should be so. He did more to support them, according to research from CRIF. Specifically, they want more tailored products and services, proactive involvement from lenders when it comes to reducing bills, and advice and support on how to contribute to savings.
At the time of writing, none of the major British banks seem to meet this demand - 35% of consumers will turn to their families before their bank, according to CRIF. This is likely due to the measures taken to help customers focus more on providing helplines, online portals and budgeting tools, according to Which?. These methods all require clients to be proactive in seeking help, which, as noted above, is unlikely in many cases.
Instead, banks must offer offerings that are fit for purpose, i.e. customer centric, fully functional, reliable, and fast. In order to do this, they should actively look for partners who can roll out their services, rather than trying to develop their own versions within the company. By working together, fintech companies can reach a wider audience to help them expand, while banks can provide proactive customer support, rather than relying on their customers coming to them.
Partnerships can also help fintech companies overcome another major hurdle: business sustainability. Given their target audiences, they can't charge high fees if they charge any at all, but on the other hand, they're companies, not charities - which leaves them with a very good queue to walk in.
Not only is working with a larger organization that already has a large customer base to reduce marketing spend, there is also the potential for fintech to act as a service provider for the bank. This is the Kalgera model, which identifies vulnerable customers from their online behavior, which it is now using, having initially been a consumer-facing application.
Another option is the one used by the IE Hub, which offers free income and expense management to debt-ridden customers, and makes money by charging companies owed fees. It works with a range of companies, from the digital-only Atom Bank, to larger, more traditional service providers. This ensures that its services reach the hands of a wide range of people who may need them, while helping organizations better manage their collections without causing undue stress to customers.
The hardest time is yet to come
The fintechs mentioned here provide examples of other companies that want to help people manage and improve their finances on how to overcome major obstacles.
However, there is still a lot to be done, particularly in terms of banking partnerships with fintech companies. Banks need to be more willing to work on customer engagement with other businesses in order to better serve individuals during a difficult period for many. This will be key to helping more people, increasing customer satisfaction with banks, as well as the long-term success of fintech companies in this area.
Fintech companies also need to be willing to think outside the box when it comes to both business models and how to reach the people they want to help. As macroeconomic conditions continue to harm the lives of many consumers, both customer numbers and revenue will be more important than ever. Sometimes digital isn't the answer, sometimes it's just showing up.