Why Financial Health and Inclusion Matters: Lowering the Price of Being Poor

“It is really expensive to be poor. The most vulnerable households are spending 16% of their income on financial services.” —Professor Emily Williams of Harvard Business School

This shocking statistic shared at the 2024 Money Experience Summit illustrates the inequitable nature of the financial system in the United States — those with the greatest need often receive the least support. 

Fintechs were initially founded to find gaps in the financial market and help serve people historically left out of the financial system. However, according to Jennifer Tescher, CEO and founder of the Financial Health Network, “fintech has lost its way.” The economics of a business-to-consumer (B2C) fintech solution are hard to make work at the scale needed to survive. And, business-to-business (B2B) fintechs have had a harder time creating solutions that improve the financial health of those living in these financial gaps.

Williams and Tescher were joined by Ashley Bell, CEO of Redemption Holding Company, and Nik Milanović, founder of This Week in Fintech to discuss the current state and future of financial health and inclusion in the United States, and how financial institutions can implement strategies for consumers from different backgrounds.

Here are some key takeaways from the conversation.

Boom and Bust: Trends in Supporting Black-Owned Fintechs

The dynamic of historically underserved populations has always been particularly prevalent in African American communities, but Ashley Bell explained a more recent aspect of this issue. 

He shared that in the midst of the most recent fintech boom, the nation was also living through a heightened time of civil unrest in the United States. According to Bell, this combination led to a rapid increase in funding for fintechs designed to support Black communities. However, most of these fintechs did not make it because they were based on solutions that did not solve the underlying financial struggles within the communities they were supposed to serve. 

It’s not that financial solutions for minority communities cannot make money, but that it is “really hard to be a new start up and build the economies of scale to do that,” said Tescher. Instead, fintechs should take a B2B approach that never loses sight of the end user. By benefiting from the economies of scale offered in a B2B business model, fintechs can empower financial institutions to deliver better B2C solutions in these underserved communities. 

Representation Matters

Keeping the consumer at the center is a great first step, but will not solve for the more systemic nature at the heart of this issue: representation.

Those from the community are always going to be the best qualified to understand the financial issues within that community, shares Bell. Putting people who can both speak to and for the people of minority communities in a position of authority creates the best outcomes for the business and the communities it serves. 

Bell explained that during the recent boom of fintechs made to serve African American communities, problems arose from poor representation. These fintech solutions were either made for problems perceived from the outside or were not marketed in a way that showcased why they are better than the solutions, or lack thereof, already in use. Having board members and executives that are a part of minority groups and communities can solve for both of these problems. 

We have a huge variety of people and communities in the U.S., but every one has a need to be financially healthy. By having people who understand the needs of an underserved community in positions to affect change, we are able to improve the financial health of those people and communities historically left out. 

Walk a Mile

Whether equitable representation is a goal or a reality for your business today, progress won’t happen without employing an empathetic mindset. As Tescher put it:

“When you walk in someone else's shoes and you really understand from their perspective, you start to see things differently.” 

Doing this right means looking at consumer financial data differently, looking beyond the averages. Data is often used to paint the world by averages, to take people and make them numbers on a graph. But Tescher says, “Averages skew what is happening to certain people.” 

She urged an empathic mindset and to ask yourself “What do I need to better understand about their (the consumers) lives so that I can … engage with them at the right time and intervene when I can make a difference in their ultimate financial outcome?”

Achieving financial health and inclusion for all Americans will be the greatest feat of the 21st century. But like any difficult journey, it will come one step at a time. By keeping consumers at the center of our efforts, finding ways to expand representation within our fields, and having an empathic mindset, we can start taking those steps today. 

To hear more from these industry leaders, check out the full session on Payments, Lending, Financial Health, and Inclusion here.