FinLab Consumer Impact Report

Maria Lajewski and Sarah Parker

As highlighted in UNC’s recent evaluation of the Financial Solutions Lab, one of the key differentiators of the Lab from other accelerators, incubators and investment activities is our commitment to improving consumer financial health. Success for us goes beyond helping an organization raise its next round of capital. What matters most is being able to demonstrate success from the consumer’s perspective. Therefore, each organization in the Lab makes a commitment to track key indicators that measure the extent to which their innovations are improving the financial health of their customers. While measuring financial health can be challenging and takes time and rigorous data tracking to prove, we believe each of the winners of the Lab’s 2015 class is on the right path and we are excited to share their progress to-date.

Measuring Financial Health

After conducting a groundbreaking study to explore the state of financial health in America, CFSI developed a set of eight indicators to help providers take action and to measure the financial health of their customers. We know that it can be challenging to identify the right metrics and that collecting the necessary data can be complicated and cumbersome. CFSI is currently testing the financial health indicators with seven diverse financial services providers through our Financial Health Beta Project.

Early stage startups face the additional challenge of rapid product iteration, which can make any measurement process difficult to implement. From the start, we knew the Lab’s impact measurement approach would need to be thoughtful, balancing the need for experimentation and flexibility against the demand to measure performance. Therefore, leveraging CFSI’s Financial Health framework and set of indicators, we worked with each Lab company to identify a shortlist of impact metrics that align with their business. At the same time, we set the expectation that the metrics would likely evolve as products inevitably morph and adapt (as many already have).

It is important to note that not all consumer impact metrics demonstrate an improvement in financial health. For example, tracking a consumer’s satisfaction with your product or the amount of time a consumer saves as a result of your service is different than tracking financial health outcomes, such as increased savings, reduced debt or a higher credit score. While both kinds of measurement can reveal important consumer insights and are worthwhile to track, being able to prove your financial health impact is what we believe will ultimately determine the success of your business.

While each of the 2015 Lab winners is demonstrating positive consumer impact, it will take more rigorous data tracking to prove their impact on the financial health of their customers. Below, we are excited to share the progress each Lab winner has been making towards that goal.

9 Companies, 9 Impact Stories

Digit helps consumers automate savings by predicting their cash flow and identifying savings opportunities. In the past 18 months, Digit has saved its users over $250 million. On average, Digit users earn less than $40,000 per year and save 3.4% of their net income in their Digit account. While it is difficult to assess if Digit users have sufficient liquid savings to cover their expenses in the case of an emergency or job loss, the use of automatic transfers to put money away is a positive savings behavior and is on the right path towards building a sufficient savings reserve to cope with an unexpected expense.

LendStreet provides debt consolidation services to help people get out of debt and rebuild their credit. Since its launch, LendStreet has settled over $4.5 million in debt for its customers. The average LendStreet borrower has settled an average of $35,000 of debt. LendStreet is working to gather enough data to assess its impact on its customers’ debt-to-income ratio and credit score. LendStreet is also a participant in CFSI’s Financial Health Beta Project.

SupportPay believes that technology can and should be used to make family life easier. Through an automated child support payment platform, SupportPay is helping parents amicably settle and exchange child support/alimony directly with each other. Today, more than 40,000 people – whether separated, divorced or grandparent custodians – are using the SupportPay platform and as a result are 90% more likely to exchange child support. SupportPay is working to collect the necessary data to understand how much increased income this has meant for their customers on the receiving end of the exchange.

Puddle is a platform for reputation-based borrowing, currently available to anyone in the U.S. with a debit card. Members can borrow up to 5x the amount they contribute and interest rates are set by the members themselves. During the Lab, Puddle surveyed a segment of their highest performing borrowers – repeat borrowers who had made successful repayments on Puddle for 4+ months in a row (you cannot re-borrow if you are late on any payments). Of this customer segment, 69% self-reported their credit score as “below 630” or “do not know” and 50% reported having little to no savings. Consumers with sub-630 credit scores often face major obstacles in obtaining credit through standard sources such as credit cards. Through Puddle, borrowers with sub-630 credit scores are likely paying much less for access to credit. And once Puddle starts reporting to the bureaus, Puddle members will also have the opportunity to establish or repair their credit history.

Ascend Consumer Finance offers personal loans to consumers with subprime credit scores. Ascend provides customers with two loan types: the Ascend Personal Loan, which has fixed interest rates and payments, and the RateReward Loan, which gives borrowers the chance to qualify for lower finance charges by using a new risk evaluation method called adaptive risk pricing. At interest rates ranging from 27% to 36% and loan terms of 36 months, both loans offered by Ascend provide competitive rates to borrowers with tarnished credit. However, those who opt into the RateReward Loan can reduce their interest costs up to 50% by making financially responsible decisions each month, such as paying debt accounts on-time, increasing savings balances and/or reducing their overall debt. As of Q3 2016, 57% of RateReward borrowers are earning a discount on their interest expense in any given month and, on average, are saving $300 off their interest expense over the life of the loan. RateReward earners have also significantly lowered Ascend’s financial exposure by demonstrating an impressive 84% reduction in delinquency.

Even helps consumers stabilize volatile income by guaranteeing a consistent amount of pay each pay period. During Q3 2016, Even users’ positive and negative swings in income averaged $175 in upswings and $125 in downswings. Regardless of how more or less volatile a user’s income becomes overtime, Even will guarantee their average take home pay each pay period. In the second version of Even (which launched this quarter), the team will be able to measure the extent to which income smoothing has helped consumers pay their bills on time and set money aside for savings.

Prism is making bill pay easier by bringing all of a consumer’s bills together in an easy-to-use app. With all of your bills in one place, Prism enables consumers to make bill payments directly via ACH or with a credit/debit/prepaid card (65% of Prism users report having a bank account). To date, Prism has facilitated the bill payment of more than $50 million. Prism is working to collect the data necessary to measure what % of bills paid through Prism are on-time vs. late and how that ratio changes over time.

Propel helps food stamp recipients more easily enroll and track the usage of their benefits. Its first product, easyfoodstamps.com, is a mobile-friendly site that streamlines the process of applying for food stamps. Propel has since launched the Fresh EBT app that allows users to more quickly and easily check their food stamp benefit balances. Previously, beneficiaries would need to call a number to check their balances, taking about 2 minutes – and now they can check their balances in about 5 seconds on the app, saving both time and as one user stated “embarrassing moments at the cash register.” Propel is currently working with CommonCents Lab to see if design changes in the app can help improve the way low-income Americans apply for SNAP (one-third of eligible households don’t apply) and potentially manage their spending.

Neighborhood Trust recently announced a partnership with FlexWage Solutions to develop WageGoal, a mobile product that will give employees access to their earnings ahead of payday. Workers today frequently experience short-term cash shortages, resulting in expensive payday loans, overdraft fees, or even loan requests to their employer. While WageGoal is currently in design and testing, the team is committed to measuring how on-demand access to wages can help employees avoid high-cost alternatives in an emergency.

Conclusion

In early 2015, the Financial Solutions Lab put out a call for innovators working to help the more than 100 million Americans who have difficulty managing their household cash flow. Looking back, we could not have imagined the extraordinary impact the 2015 Lab winners would demonstrate in such a short period of time. These entrepreneurs have dedicated their time, talents and energy to create new products and services that are helping households across America better manage the spikes and dips in their incomes and expenses.

While the 2015 Lab winners are already showing positive signs of impact, we know that their impact on financial health is not easy to measure and will take more rigorous data tracking to prove. Despite the challenges, we remain fully committed to helping each Lab member continue to refine and strengthen their measurement approach so that they can ultimately demonstrate their impact on consumer financial health. The Lab winners are showing strong impact, and we only expect it to grow. In addition, we have applied our learnings and CFSI’s growing research to further strengthen our measurement process with the Lab’s 2016 class. We hope by sharing the Lab’s impact journey, that other providers are inspired to follow suit because despite how challenging it may be at first, what’s measured is what matters.

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