Early Learnings from the Financial Capability Innovation Fund. Sarah Gordon September 20, 2012 CFED Assets Learning Conference

Transcription

1 Center Center for for Financial Financial Services Services Innovation Innovation Early Learnings from the Financial Capability Innovation Fund Sarah Gordon September 20, 2012 CFED Assets Learning Conference

2 Agenda Agenda 1. The Shift from Financial Education to Financial Capability & the Financial Capability Innovation Fund Sarah Gordon, CFSI 2. Grantee Presentations Innovation Descriptions, Status Updates, & Early Learnings Borrow Less Tomorrow Scott Karol, Clarifi Cestas Populares Tara Robinson, Mission Asset Fund 3. Q&A

3 About CFSI The Center for Financial Services Innovation works to transform the U.S. financial services marketplace to help underserved consumers achieve financial prosperity Inform: Making the Case for the Underbanked CFSI leads the industry with actionable market & consumer research, new ideas and thought leadership Advise: Providing Ideas, Dialogue and Guidance CFSI brings likeminded companies together to facilitate an exchange of ideas and to foster partnerships Invest: Seeding Innovative Solutions CFSI promotes double bottom line innovation through grants and investments Advocate: Informing and influencing Federal Policy CFSI generates new ideas and provides underbanked expertise to shape and inform policies affecting financial products and services for underbanked consumers

4 The Problem The current financial profile of American consumers suggests the need for more and better resources aimed at improving financial capability How Do We Rate? 49% have difficulty covering monthly expenses 56% do not use a budget to guide spending 33% have no non-retirement savings 66% did not comparison shop when obtaining a credit card (51% for auto loans) 44% gave themselves a grade of C,D, or F on their financial knowledge Sources: FINRA 2010 Financial Capability Study, NFCC 2011 Consumer Financial Literacy Survey

5 Financial Capability What is financial capability? A set of consumer behaviors that lead to tangible improvements in consumer s financial health 1) Being able to cover monthly expenses with income 2) Tracking spending 3) Planning ahead and saving for the future 4) Effective selection & use of financial products 5) Exercising financial knowledge Financial Literacy: What you know::financial Capability: What you do

6 Elements of Effectiveness CFSI found that effective financial capability programs & tools incorporated one or more of the following four elements, enabling them to have a greater impact on consumers financial behavior. Relevant Focusing subject matter to address participants specific concerns and financial situations helped to capture attention and drive motivation for change Actionable Pairing resources with opportunities to demonstrate financial capability was instrumental in helping consumers establish positive habits and behavior Timely Timing the delivery of information to coincide with decision points helped consumers better understand the consequences of their behavior Ongoing Programs that develop long-term relationships are able to provide ongoing support as consumers go through the process of behavior change

7 Building Financial Capability KEY STRATEGY: ACCESS + GUIDANCE Linking access to financial products with guidance on how to use them Product Design Structured in ways that promote user success (e.g., defaults, automation) Link Tool and Service Design Designed to help consumers make choices, improve behavior, use products efficiently

8 Investing in Financial Capability Purpose: To provide financial and technical assistance to innovative nonprofit-led projects designed to promote the financial capability of underbanked consumers Lead Sponsor: Financial support: $1.5 million to 5 projects Strategic advice and technical assistance Visibility and connections Peer learning opportunities Robust evaluations Broad dissemination of learnings Also including:

9 Priorities CFSI prioritized projects that: Coupled financial products/services with new/improved educational tools and resources Leveraged technology to improve the customer experience and/or improve efficiency Applied behavioral economics concepts such as automation, defaults, social commitments, etc.

10 FCIF Grantees Mission Asset Fund Formalizing peer lending/saving circles to help immigrants build and manage credit Evaluating: scalability of peer lending circles and applicability to various communities; the effectiveness of product+ education link relative to product or education alone Clarifi Using social commitments and text alerts to help consumers reduce debt Evaluating: effectiveness of social commitments, text alerts

11 FCIF Grantees Co-opportunity, Inc. Leveraging online platform to enhance the scale of its volunteer budget coaching program Evaluating: ability of online platform to achieve the same or better results than in-person coaching (efficiency) Filene Research Institute - Rewarding auto loan borrowers for timely payments by lowering the APR on their loans Evaluating: impact of targeted incentives on repayment behavior PiggyMojo (with MAGIC Card) - Using text messages to help couples save by acting on impulse savings moments in everyday life Evaluating: impact of real-time action and commitment mechanisms on savings

12 Early Learnings Technology matters Embrace it. Invest in it. Both front end to enhance the consumer experience & back end to improve provider s efficiency & to support replication and scale Relationships matter too. What is the right balance of tech vs. touch? Partnerships are hard, but essential. Not all nonprofits are well-suited for financial services work. Financial institutions partners are stressed. Emotional connections to the work are key.

13 FCIF II Now Accepting Proposals Purpose: To continue to support innovative non-profit led projects employing new strategies to promote the financial capability of underbanked consumers Fund Size $2,500,000 Number of Awards Average Size of Awards Grant Term RFP Closes 7-10 awards to nonprofit organizations $250,000 $350,000 per award Varies by project; avg. ~2 years November 2, 2012, 11:59PM EDT To download the RFP, visit : cfsinnovation.com/content/financialcapability-innovation-fund-ii

14 Funder Recognition The Financial Capability Innovation Fund II is supported by a collaborative of funders led by: Also including:

15 Q&A???

16 For More Information For more information on CFSI and to sign up for our e- newsletter to receive updates about the Financial Capability Innovation Fund, please visit: Additional Resources Financial Capability Innovation Fund Mid-Term Report, From Financial Education to Financial Capability: Opportunities for Innovation, Making the Shift to Financial Capability,

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