2019 is set to be a banner year for holiday shopping: Some analysts are predicting the first-ever trillion-dollar holiday season in the U.S., and Deloitte estimates the average household will spend at least $1,496 on holiday gift giving – roughly 2% of average household income.

It comes as no surprise that 70% of American consumers encounter significant stress during the holidays, over a third of which is centered on financial anxiety. This statistic shouldn’t be surprising when we consider that 78% of Americans live paycheck to paycheck. Four in 10 adults would have difficulty covering a $400 emergency, and 12% of adults would be unable to pay the expense by any means.

Clearly, for many Americans, financial stress extends well beyond the holidays – and well beyond the individual.

Boston-based nonprofit and MassChallenge FinTech partner Commonwealth released their “Rise with the Raise” report this year, which showed that employees who are more financially secure have been shown to be less stressed and more productive, which also provides business value to employers.

According to another study by the Urban Institute, families with income disruptions are significantly more likely to be evicted, miss housing and utility payments, and receive public benefits – all of which are not only life-altering realities for these families, but also costly to governments.

Given financial health’s broad reach and implications, fintech innovation that addresses financial insecurity is a game changer for individuals, organizations, and beyond. How is fintech doing it? Here are a few key ways.

1 - Rethinking Target Audience

In fintech, there’s a race to reach new consumers, particularly in the millennial and mass affluent segments. However, the most promising fintech solutions in financial literacy include in the target audience people who are financially vulnerable. Two examples include:

Propel

A social enterprise that builds software products for low-income Americans, Brooklyn-based Propel uses a financial management app called Fresh EBT to help low-income Americans manage their SNAP benefits, save money, and earn income. The company raised a $12.8-million Series A round last December.

Flourish Savings

Based in Berkeley, California, Flourish was founded to help first generation financial citizens in the U.S. build short-term savings. The fintech uses a gamified savings app with prizes to help individuals develop better financial habits. The team has also partnered with Commonwealth to improve their technology and broaden both organizations’ impact.

2 - Collaborating Across Industries

Because financial health affects a range of stakeholders and outcomes, the solution must be multi-faceted, which necessitates collaboration.

Take BlackRock Emergency Savings Initiative, for one. It’s a $50-million commitment started in 2019 to help people living on low to moderate incomes gain access to and use proven savings strategies and tools to help them save.

Through the initiative, BlackRock has partnered with leaders in the space — such as Commonwealth, the Financial Health Network, and Common Cents Lab — to help design, test, and pilot savings solutions for partners, such as Uber, Acorns, Arizona State University, UPS, Mastercard, Etsy, and Brightside.

3 - Focusing on Specific, Research-Backed Interventions

Building small dollar savings is challenging. Often, practicing good financial habits requires delayed gratification and a future-focused mentality, and frequently savings come second to immediate or unexpected financial needs. But in addition to increasing access to financial tools, fintech is employing innovative strategies that can effectively address behavioral barriers. Examples include:

Prize-Linked Savings

This approach attempts to make saving more engaging by giving savers the chance to win monthly, quarterly, and annual prizes deposited into their accounts. In 2017, Commonwealth worked with MassChallenge FinTech partner Walmart to offer the first nationwide prize-linked savings program through a retailer in the U.S. The program incentivizes savings on their prepaid card program, which has resulted in over $2 billion saved to date.

Collective Finance

This approach creates a social contract as a group to drive savings or credit. The concept is not new, having a foothold in ROSCAs (rotating savings and credit associations), wherein individuals group to form alternative, informal financial institutions. Two examples of fintechs in this space are Boston-based ROSCA, which helps individuals improve their credit scores through creating or joining existing ROSCAs, and LeverEdge, a collective bargaining group for student loans.

Financial Health is a Win-Win

Fintech is already positively impacting the financial health of many, and it will continue to do so as more sectors and companies recognize the business case for improving financial health. These solutions can help businesses and governments reduce costs while drastically improving quality of life for consumers.

Talk about spreading holiday joy – and then some.

Luke Lennon is the Marketing and Community Manager at MassChallenge FinTech (MCFT). Commonwealth is an MCFT Gold Partner, helping MCFT double down on its efforts around financial literacy and inclusion.

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