Imagine two people meeting for the first time. Both are looking for a relationship and hoping to meet “the one.” The conversation starts slow; neither seems to be the other’s usual type. But they stumble upon a common interest or two and even though they aren’t a lot alike, they’re intrigued by the things that make them different. The first meeting ends and they part ways…but they felt a connection and are eager to meet again to see where things go.
No, this isn’t the voiceover to a Match.com commercial. It’s what can happen when FinTech startups and nonprofit organizations meet to explore partnerships.
We see tremendous potential in these types of partnerships given the relative strengths of the two types of organizations. Many nonprofits work directly with the financially underserved, building trusted relationships and becoming partners in addressing their clients’ financial challenges. At the same time, FinTech providers are leveraging mobile and online technology to create new products and tools to help users more easily manage their financial lives. Put them together and you have a powerful combination: innovative technology tools complemented by ongoing relationships with trusted community partners — all with the goal of building financial health.
But the mere potential for a great relationship isn’t enough to guarantee a match made in heaven. For many nonprofits, a partnership with a FinTech provider would be a first and it may take many conversations before a committment. For FinTech providers, particularly start-ups, speed and customer acquisition are top priorities, and they may perceive nonprofits as being slow to adopt new things.
Squaring these two cultures was at the heart of a conversation held during CFED’s Assets Learning Conference (ALC) in September. CFSI, CFED and JPMorgan Chase & Co. collaborated on a session titled “A FinTech and a Nonprofit Walk Into a Bar” exploring nonprofit-FinTech partnerships. The session was well-attended and a general theme emerged from the conversation: Many nonprofits were interested in exploring how FinTech offerings might help their clients succeed, but are unsure how to assess a potential partnership.
A cautious approach is the right one to take, particularly for nonprofits that are just dipping their toe into the FinTech waters. In recent years, we’ve seen a wave of FinTech startups emerging with solutions ranging from basic spending trackers to digital currency platforms and robo-advisors. And it’s not just for-profit start-ups roaming the FinTech frontier. Enterprising nonprofit organizations like Commonwealth, EARN, and Neighborhood Trust are leveraging their insights and experience to build tech-driven tools and platforms to advance financial health. This year alone, CFSI received over 350 applications from FinTech providers to its Financial Solutions Lab, a five-year initiative with JPMorgan Chase to identify, test and bring to scale financial innovations that substantially improve the lives of hard-working Americans. These applicants range considerably in their focus, approach and maturity. To learn more about the wide range of FinTech innovation just represented by the FinLab applicant pool, one needs to look no further than the 2016 FinLab Snapshot.
With so many options to choose from, where do nonprofits start to assess viable partners? During the ALC session, attendees heard from Catalyst Miami, a leading nonprofit working with FinTech solutions, about their experiences. This generated discussion on four key questions nonprofits should ask themselves:
- Do I build, buy or partner? You see your clients facing a key financial challenge and want to find a new solution to solve it. Is this a specific challenge which an existing product doesn’t solve? Build it. Does a vendor offer a plug-and-play solution that can be incorporated into existing programming? Buy it. Is there a provider offering a customer-facing product or service that would meet your clients’ needs? Partner to bring the solution to your clients.
- How do I vet potential partners? You probably wouldn’t marry someone you just met (unless things got out of hand in Las Vegas). You’d want to get to know them first. The same goes for FinTech partnerships. How do you know that the product being offered is a good fit for your clients? How do you know you can trust the company to do right by them? How does it make money and how will that affect business decisions over time? For early-stage providers, how do you know they’ll even be around in a year’s time? What happens if they sell to a larger company?
- How does a FinTech offering fit into my program? A good FinTech partnership will complement the services a nonprofit provides, not replace them. This requires careful thinking about how a FinTech offering will fit into existing operations and the client experience. When will the offering be introduced to clients? How will enrollment work? What kind of training is required to get frontline staff bought in and comfortable discussing the product with clients?
- How do I measure impact? The goal of a FinTech partnership is to increase the impact a nonprofit can have on its clients’ financial health and well-being. How does a nonprofit assess whether this goal is met? How do you measure a FinTech offering’s impact on engagement and client outcomes?
To see more fruitful partnerships emerge, we see a need to help nonprofits ask these tough questions and make sense of the answers. Greater visibility into emerging FinTech solutions and a decision guide might help organizations identify tools and products that would be a good fit for their clients. An assessment guide for vetting providers and a platform for nonprofits to share their experiences with different providers would inform nonprofits during the “getting to know you” phase of partnership exploration. Finally, an overview of best practices for integrating FinTech offerings into existing programs and a common set of impact metrics could help nonprofits implement a partnership and gauge if it’s working.
We see great potential in matchmaking between the FinTech and nonprofit communities. While we can’t guarantee that every partnership will convert on the potential we see, we are certain of one thing: Fintech providers and nonprofits should go on more first dates.