Three Ways Financial Institutions Can Support Consumer Financial Health Journeys Through Fintech Partnerships


By Elizabeth McCluskey, Director of the Discovery Fund at CMFG Ventures

In recent years, financial health has become a trending topic in the financial services industry. Although some progress has been made, much work remains to be done as millions of Americans remain financially unhealthy. Current market conditions, such as a potential recession, will continue to exacerbate existing financial problems, especially among low-income people and younger generations. Therefore, these consumers will seek more affordable and accessible financial services to help them improve their financial health.

Offering relevant products and services to improve consumers’ financial health and help them remain resilient will be essential for financial institutions to maintain trust with consumers. Banks and credit unions are well positioned to help their customers and members through this time of uncertainty, but they cannot do it alone. By partnering with fintechs, these institutions can quickly deliver proven tools to help Americans achieve financial stability.

Simplify lending and borrowing

With inflation at an all-time high, consumers are struggling to make ends meet and pay their bills on time. According to the Census Bureau’s latest finance survey, Household Pulse, an additional 19.1 million people depend on loans from family and friends. This presents a major opportunity for financial institutions to help, especially low-income people, who are historically denied and become prime targets for payday lenders and predatory services.

Companies like Zirtue offer alternative payment options, giving consumers access to cash and short-term capital. Zirtue formalizes loans between friends and family loans, which are among the largest lenders in the world. The Federal Reserve Bank reports that $200 billion is borrowed from friends and family each year to pay bills, and 82% of Americans are willing to help a family member financially. By offering this service, banks and credit unions can provide consumers with greater accessibility to loans and funds, as well as expand access to credit, creating a more financially inclusive experience.

Automation of the home buying process

Another area where fintechs can help financial institutions provide financial support to consumers is in the mortgage sector. Housing shortages, layoffs and home ownership gaps have made buying a home difficult. Consumers looking to become first-time home buyers, especially minorities and millennials, will face additional constraints in today’s housing market as housing remains expensive. Among these consumers, black Americans are denied home loans at higher rates than any other race or ethnicity.

Fintechs like Home Lending Pal are solving this problem by removing bias from the home loan process and providing affordable mortgage options. The company is also educating consumers who are currently less likely to get loan approval on how to improve their current situation. This education goes beyond getting a loan – the company uncovers the hidden costs of homeownership to help consumers budget and plan for unexpected expenses. Leveraging these solutions narrows the homeownership gap and makes home lending fairer, so more consumers can invest in real estate and start building wealth.

Pay off the debt

One of the main areas where consumers need financial advice is paying bills. Today, approximately 50% of American adults struggle to pay their bills on time, resulting in late fees and damage to their credit. Bill payments can add up quickly and become a huge stressor for many consumers. So much so that most people learn they’ve paid $577 more in bills every year, factoring in fees, penalties, and the effects of damaged credit.

Companies like Cushion work to alleviate that stress, helping consumers get their bank and credit card fees reimbursed, as well as pay their bills on time. Having a few extra dollars in their pockets can go a long way, especially when budgets can be tight. Automating bill payments can also save consumers money on late fees and overdrafts, avoiding a negative impact on their credit. Through strategic partnerships with fintechs, financial institutions can protect consumers’ money, allowing them to save more and ultimately become debt free.

Now is the time for banks and credit unions to invest in the fintech relationships that will enable them to improve the financial lives of their consumers and members. Financial institutions can partner with fintechs to help consumers meet today’s challenges and plan for a better financial future by simplifying the lending process, automating home buying and providing tools to repay their debt.

About the Author:

Elizabeth McCluskey is the Director of the CMFG Ventures Discovery Fund, which invests in early-stage fintech led by underrepresented founders building solutions for financial inclusion. CMFG Ventures is the venture capital arm of CUNA Mutual Group.


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