The Road Ahead: Strategies for Tackling America’s Financial Health and Poverty
This is part 3 in a 3-part series on financial health, and how local governments and financial organizations must work together for broader impact. Part 1 lays out the current roles government and finance play in tackling financial stress and poverty. Part 2 details the operational and cultural challenges they face in working more closely together. Part 3 discusses strategies to improve.
By Paul Hoffman, Senior Engagement Manager
I can nerd out with the best of them about government technology. When a Deputy Mayor from Florida attending a technology conference recently asked me what CityBase does, I was ready to get into the nuances of PCI compliance and UX design. I talked to her about payments, digitizing government services, access, and how this would benefit her constituents. After my short overview, I asked her what was top of mind for her and her community. “Same as everyone else,” she started, “housing, education, helping people in our community get on their feet.”
This two-minute interaction captures the enormous responsibility of our city governments and illustrates the opportunities for fintechs to work with them on financial stress in their communities. As I’ve said in my previous posts, city governments and fintechs can make a bigger difference when it comes to financial stress and poverty when they overcome their significant operational differences and work collectively.
David Brooks, the New York Times columnist, recently called a similar collective approach “A Really Good Thing Happening in America.” As Brooks explains, the StriveTogether method (also known as collective impact) has improved education outcomes in communities across the country with impressive results. Just like financial stress, education is a vexing social challenge teaming with public, private, and nonprofit actors. It is increasingly data rich, and is has spawned its own EdTech industry. Fintech and those interested in financial stress should take note.
Collective impact is local and systems based. It starts in cities. It takes a longitudinal view, considers the whole person, and builds new civic architecture. Finance and fintechs are familiar with systems, we have the data to drive collective impact, and we need to be part of this new civic architecture. The collective impact model outlines the way to do it:
Determine a common agenda
With any set of stakeholders and organizations, agreeing on a common agenda is difficult, but a consensus is forming on financial health that cities, fintechs, and nonprofits can rally around. It is built on improving an individual’s financial system, their ability to withstand financial shocks, and their capacity to cover normal expenses month-to-month. It’s been outlined in work from the Center for Financial Services Innovation, white papers, and startup pitch decks. It includes services from the public sector when necessary, but relies on private sector innovation to bring financial services to segments that wouldn’t otherwise have access.
Find common progress measures
StriveTogether’s work is an excellent model for creating a common set of performance indicators. From “cradle to career,” StriveTogether measures educational success across a broad set of longitudinal outcomes. Like education, financial health is difficult to measure in aggregate, but easier to understand when we work with individuals over time. StriveTogether tracks outcomes from cradle to career. It is easy to imagine the value of measuring financial health from a moment of financial stress to a sustainable level of financially health. Fintechs and governments are uniquely positioned to consider these concepts over time because the nature of their data is longitudinal. We track balances for customers, and governments track benefit payments for recipients. The data infrastructure is there to do this measurement well, but we need to connect the dots.
Pursue mutually reinforcing activities
Organizations that participate in collective impact bring different assets and expertise to the work. The real change comes from coordinating unique strengths. On the journey from financial stress to health, different organizations bring different services to bear. In extreme cases of financial stress, city governments provide welfare, food stamps, and public assistance housing. Nonprofit service providers provide coaching, saving tools, and potentially debt consolidation. As a person’s financial health improves, they might be eligible for fintech products, or change their participation in city services. The most financially healthy individuals would have a strong saving and spending system. They are eligible for a range of financial services, and they no longer rely on social safety net programs. Every organization along this life cycle gets customers and participates in social impact. Most importantly, the financially stressed get help moving from program to program and achieving stability. We all win.
Create a backbone organization
Backbone organizations convene, focus effort, and manage collaboration. These organizations are typically nonprofits or philanthropic funders. This isn’t a role innovative startup or fintech companies typically embrace. We are interested in the problems we can solve, the impact we can make quickly, and disrupting the status quo. Our products should continue to do those things, but we should realize the span of our impact relative to the enormous problems we want to solve. We should be conveners and support conveners. In financial health, collective impact can’t happen without technology.
Fintechs are rapidly changing an outdated financial system that wasn’t built for the financially stressed. Governments are implementing a social safety net that wasn’t built for a technological world. One way or another, we are building new financial and civic architecture. It would be much better for those who need it most if we worked together.