How a Cutting Edge Effort to Boost Family Financial Stability is Giving Out $3 Million

We've been keeping an eye on the Center for Financial Services Innovation, which is backing new ways to promote the financial health of Americansespecially the "underbanked and the underserved, traditionally an overlooked segment of the financial services market."

A key premise of CFSI's work is that companies can profitably serve the poor with low-cost financial service productsand help put the bottom-feeding predatory lending industry out of business. 

Financial inclusion is a super-hot funding area right now, even more so globally than in the United States, as we report often, and lots of funders working on economic security issues are interested in CFSI, as are financial institutions. We wrote back in March about JP Morgan Chase's collaboration with CFSI and its powerful new advisory council including Darren Walker, Ben Jealous, and other heavy hitters in the assets and financial inclusion arena. 

JPMorgan Chase is the founder partner with CFSI of the Financial Solutions Lab, a $30 million, five-year initiative "to identify, test, and expand the availability of promising innovations that help Americans increase savings, improve credit, and build assets."

Recently, we got a better taste of the ideas this effort is backing, when it selected the winners of a competition who'll share $3 million.  

With hundreds of applicants from across the country, this was a steep competition. These projects all aim to help families manage finances. The 8 to 10 final winners, chosen by an esteemed panel of judges, will be announced in June at the EMERGE Forum, one of the largest national conferences on consumer financial health.

As a therapist, I frequently hear about the financial woes of families; in going through this list, I tried to imagine what would be most useful to families I have met who were struggling with finances. Here are the ones that rose to the top of the list of finalists for me:

  • Ascend Consumer Finance: Ascend offers people with low credit scores the opportunity to demonstrate better borrowing skills, and by demonstrating these skills, provides them with the ability to lower their rates. The system basically incentivizes reducing consumer debt, increasing savings, and limiting credit card spending—helping clients develop the basic healthy habits of asset-building. Note from therapist: Anytime you can reward the right behaviors, you are creating a positive feedback loop for health, and that's a good thing.
  • Digit: Digit is a service that takes small amounts of money (between $5 and $50) from your checking account and stores it away for savings. How does it know how much to save for you? It relies on an algorithm that analyzes your income and spending and figures out the safe times to set aside money for you. The service is FDIC insured and comes with an overdraft protection guarantee. Note from therapist: I can see how this could really help people who lack the analytical skills to figure out when to stow away cash for a rainy day.
  • Propel: This company bills itself as "making the government more user-friendly" and provides assistance with the food stamp application process. Its first product is a mobile-friendly website that simplifies the application process, determining your eligibility and showing you how to shorten your phone interview by answering a few more questions upfront. Note from therapist: Government hassles for basic help with food money is not good for anyone. Great idea for streamlining and letting people spend their time more usefully!
  • SupportPay: The idea here is to help divorced parents move away from conflict about money and participate in a platform that helps them share information about child care expenses and exchange child support/alimony directly. Note from therapist: If this thing really works, holy smokes! There are so many couples who need help managing the financial transactions and conversations regarding child support, and if this platform can really reduce conflict about money, it will be providing a huge service. Also, having been through a divorce myself in my twenties, I can attest that even without kids, there is often conflict about money. I wonder if this platform could be extended to divorced or separating partners in general. Might save everyone time and legal fees, and help people get on with their lives.
  • Puddle: Puddle is a platform for reputation-based borrowing which requires no credit score or application and is based on a proven microcredit system called the Accumulated Savings and Credit Association Model. Users gain access to a shared pool of capital and have 3 or 6 months to pay back loans they get from the pool. Periodically, interest gained from loans made from the pool is divvied up and returned to the pool's participants. Note from therapist: We don't have good systems like this in the U.S., so it's helpful that Puddle is finding a way to introduce them. 

There are some big ideas here that could have major impacts on the household finances of American families. We will check back in after the EMERGE conference in June to find out which ideas made the final cut.