DETROIT, November 11,105 (CDFI Connect) At the 2015 Wells Fargo NEXT Awards for Opportunity Finance celebration during Opportunity Finance Network’s Annual Conference in Detroit, Kimberley Ostrowski, Senior Program Director-Corporate Giving/Prudential Foundation of Prudential, a NEXT Awards partner, announced that the Awards will again focus on innovation in consumer financial services and products for 2016.

“A second year devoted to this topic will continue to build momentum and visibility for CDFIs in this space,” Ostrowski said before sharing another announcement with the event audience about the coming year for the NEXT Awards. “One of things that we heard from CDFIs is the critical need for grant support to help develop products, support savings strategies, and build new platforms – we are pleased that the NEXT Awards will have a higher percentage of unrestricted grant in 2016 to fund leading consumer finance strategies.”

To give context to the need nationwide for responsible financial products and services, and why CDFIs are best positioned to meet this need, we spoke with Jennifer Tescher, President & CEO of the Center for Financial Services Innovation (CFSI), the nation's authority on consumer financial health and a collaborator and advisor to the 2015 NEXT Awards.

What is the current state of consumer financial health in the U.S. and how do you measure it?

Nearly a decade post-recession, Americans are still walking a financial tightrope: they lack financial health. According to CFSI’s research, 57% of Americans are struggling with their financial health. That’s 138 million people, more than twice the number of people the FDIC labels as un- and underbanked.

The numbers are staggering:

  • 43 percent of Americans describe themselves as struggling to pay bills and credit payments
  • 30 percent of American households say they could only make ends meet for three months or less if they were to experience a sudden drop in income
  • 27 percent of Americans report having less than $1,000 saved for retirement

What does consumer health mean/look like? What does it mean when an individual/household is healthy financially?

Financial health is about how financial products and behaviors make life work: it’s our ability to spend, save, borrow and plan for life.             

Financial health is measured in three ways: day-to-day financial management, the ability to weather life’s inevitable ups and downs, and the capacity to seize opportunities that will lead to financial security and mobility over time.

Where are the opportunities for improving financial health in underbanked and unbanked communities—what does technology play? And what roles do or can CDFIs play?

Good products matter, but not if we can’t get them into the hands of the people who need them the most. That’s why both technology and CDFIs are critical. Technology is simultaneously reducing the cost to serve consumers and increasing the ability to reach them anytime, anywhere. CDFIs are important “technology extenders”—getting the word out about the best financial products and apps and helping clients increase their comfort and familiarity with digital finance.

More and more, policymakers nationwide are attempting to regulate against predatory lenders and/or lending practices. Is anyone succeeding? What role can regulation play in creating a responsible consumer financial services marketplace? 

Having the right amount and kind of regulation is critical to ensuring a basic floor that will keep consumers safe. On the consumer lending front in particular, regulators are in the midst of crafting the next generation of rules to try to rid the market of bad actors. The next six months should reveal more of the details.

Reigning in harmful products is important. Equally important is promoting innovation to ensure good products are created to take their place. All of the federal regulators have suggested they want to be supportive of innovation, though there is still a gap between intention and action. That’s what makes the consumer financial focus of the NEXT Awards so timely and necessary.

Tell us about CFSI and how you tackle these issues.

As the authority on consumer financial health, CFSI helps providers become more than distributors of financial products—we help them become champions of financial health. We lead the CFSI Financial Health Network, a diverse group of financial services innovators striving to design, build, and measure outcomes of high-quality products that make consumers’ lives work better.

We believe it is possible to build high-quality, profitable solutions that lead to improved consumer financial health outcomes. CFSI convenes leading industry minds from large institutions and fintech startups alike to generate and provoke new, big ideas. We help members understand the consumer pulse—especially the millions of Americans impacted by poor financial health—and design products uniquely tailored to benefit customers’ lives, with a focus on quality.

Why is CFSI involved with the NEXT Awards?

We were incredibly excited when OFN told us they were interested in using the NEXT Awards to promote innovation in consumer finance. For over a decade, CFSI has worked to seed and support innovation in a variety of ways—investing in early-stage companies, organizing challenges and competitions and nurturing an ecosystem of entrepreneurs who are poised to build businesses that solve the most pressing consumer problems. The NEXT Awards hold tremendous cache among the CDFI community and beyond and represent a powerful platform for bringing even more focus to consumer finance challenges. 

 

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