This podcast with Mimi Joy explores consumer financial wellbeing in the US and initiatives to improve access to quality affordable financial services for low and moderate income Americans. Mimi shares her perspective as Head of Partnerships at the Financial Health Network, a leading authority in the space.

Topics discussed include:

• The current state of the financial health landscape
• Research on the effect of the pandemic on low and moderate income consumers and their financial wellbeing
• New approaches to serving the needs of vulnerable consumers
• Key financial health lessons for payments professionals

What is financial health?

As the economic recovery continues, financial health is attracting increased attention from stakeholders across the financial industry. The Financial Health Network, previously CFSI, works with stakeholders including banks, technology providers, and others to improve financial health by enhancing consumer resilience and increasing opportunity. The first component of this goal, resilience, refers to a household’s ability to withstand a financial shock. The second, opportunity, refers to a household’s ability to save for the future, for housing, education, or retirement.

The Financial Health Network measures the financial health of American families through periodic research including its ongoing Pulse Survey and the annual Finhealth Spend Report. Both track the financial lives of Americans, examining the effects of government stimulus, predatory lending, and new financial technology on how consumers, and especially vulnerable consumers, transact, save, and plan for the future. This research shows that low and moderate income households bear disproportionate costs for everyday financial services.

What are the levers of change?

It doesn’t have to be that way, and providers are realizing the opportunity to serve the broad swath of American consumers who lack access to quality affordable financial services and associated products. The changes don’t have to be monumental; banks eliminating overdraft fees or allowing grace periods before the imposition of an overdraft fee are good examples of seemingly mundane changes that can be hugely beneficial to consumers living paycheck-to-paycheck.

Outside of the traditional banking sector, fintechs are helping low and moderate income consumers make payments, borrow, and save through innovative new products.

What do payments professionals need to know?

As fintech players continue to expand their focus on historically underserved consumers and banks retool their offerings to better meet the needs of the segment, there’s plenty of opportunity for payments professionals to get involved in the changes going on in the industry.

Real time payments, for example, offer an opportunity to speed up access to cash for people who need their next paycheck as soon as possible. And advances in cross-border payments are making it easier for workers in the US to send money to family abroad. Providers can also use data to help consumers make informed decisions about spending and saving, and help people without a credit history borrow based on transaction patterns.

With all these developments, it’s an exciting time to be a payments professional thinking about financial health.

Transcript

Erin McCune:

Welcome. We appreciate you taking the time today to explore this important and timely topic. My name is Erin McCune. I’m a partner at Glenbrook. My colleague, Justin Pituch, and I are thrilled to speak with Mimi Joy. Mimi leads business development at the Financial Health Network, an organization whose former name, CFSI, may be more familiar to some of our listeners. She collaborates with a broad range of organizations within the financial services industry to engage them in the delivery of products, services, and experiences that will enable their impact on the financial health of consumers. She’s a long time veteran of the financial services industry and has extensive experience with fintechs. We’re delighted to speak with her today.

Erin McCune:

Before we jump in, I’ll provide a little background on how Glenbrook came to the topic of financial health here in the United States. This discussion is really just one element in Glenbrook’s ongoing exploration of solutions for traditionally underserved constituents. As our team reflected on inequality in the United States, we recognized, somewhat uncomfortably, that although we do a significant amount of work in the developing world to foster financial inclusion, Glenbrook has had very little focus on domestic solutions for unbanked or underserved consumers here in the United States. This discussion with Mimi today is part of our effort to remedy that. And our goal is to draw attention to this large segment and encourage creative solutions to longstanding challenges. With that, let’s dive in.

Mimi Joy:

Erin, thank you so much for the opportunity to talk to you about financial health today. I’m looking forward to our discussion.

Erin McCune:

We are too.

Justin Pituch:

Great. So with that, we can jump right in. So Mimi, can you tell us a little bit about your background and how you made your way into the world of financial health?

Mimi Joy:

Yes. I’ve spent my career in technology for financial services and before joining the Financial Health Network had really focused on digital banking services with a startup and then with a larger company. And what was so interesting about that evolution in digital banking, first it was online banking and then it was mobile banking, is that when we launched mobile banking, we realized we had greater insights into what consumers were doing, checking their balances and trying to understand their activity. And that really was my first introduction to financial health. I didn’t really understand what it was at the time, but I was very interested in understanding these consumers better and how to better serve them. And that really led me to what at the time was CFSI as Erin pointed out, which is now we have rebranded as of 2019 to the Financial Health Network and our mission to improve financial health for all consumers.

Justin Pituch:

Could you tell us a little bit more about the Financial Health Network and what you do and who you serve?

Mimi Joy:

Yes. So we are a national non-profit based here in the United States with the mission to improve financial health for all. We are a B2B organization. So we work with financial institutions, lenders, technology companies, large and small, as well as other nonprofits, all around the goal of building out strategies and delivering on financial health solutions. We are not an advocacy organization. We don’t provide financial literacy content. We really work with organizations to help them evaluate products and services, leverage our measurement methodology around financial health, build out their strategies. Beyond that, there are really what I call six pillars to our practice. We have a membership organization where organizations can join the Financial Health Network, we do research, we have an accelerator program called the Financial Solutions Lab, we have a measurement methodology around financial health that we’ve created, we offer consulting services as well as on events platform.

Erin McCune:

So Mimi, would it be correct to think of the Financial Health Network as a catalyst to drive attention to financial health?

Mimi Joy:

Certainly. We want to serve as the North Star when organizations are really looking for solutions either to initially get engaged in the concept of financial health or as they mature through that process, to really help them execute on initiatives to better serve their customers.

Erin McCune:

Great.

Justin Pituch:

So that leads us to our next question, which is how do you define financial health at the Financial Health Network?

Mimi Joy:

So we define financial health as when your financial systems help you build resilience and pursue opportunity.

Erin McCune:

How do you define resilience?

Mimi Joy:

Certainly. And so resilience is really about being able to sustain a financial shock and at the same time, be able to plan for the future. Income doesn’t tell the whole story of an individual or a household, nor does wealth, such as home equity. At a minimum, financial health should address families’ abilities to meet current obligations and needs, absorb and recover from financial shocks and secure their future and improve their financial situation over time.

Erin McCune:

And that improving over time is really key, sort of overcoming an obstacle, but then safeguard and plan and be prepared.

Mimi Joy:

That’s right.

Erin McCune:

Yeah. Thank you.

Justin Pituch:

We know that you do a lot of research that’s related to that. Can you describe some of the research that you conduct at the Financial Health Network and how you go about doing that?

Mimi Joy:

Certainly. I’m going to highlight two of our most recent types of research. Broadly, our research is supported by grants and private institutions and cover topics related to financial health, ranging from large to multi-year studies on the subject to shorter and more targeted analyses of segments and demographics. With much of our research, we partner with a vendor for qualitative or quantitative research and then test solutions with partners directly and also conduct our own research on strategy and as well as business cases for financial health. Two examples I’d like to highlight are the Financial Health Pulse Report, where we are measuring financial health across the United States. That’s actually being run by the USC Center for Economic Research to help us get a very broad demographic sampling of over 5,000 respondents to really get under the hood of what’s happening in their financial lives.

Mimi Joy:

And within that survey for respondents who want to opt in and share their transactional data with us, we believe that combination is very powerful to understanding what’s happening in the financial lives across the US. The other big piece of research, which we just released this year, and I should back up a minute. And Pulse is supported by Citi, that is our funder. The second report I’m going to talk about is the FinHealth Spend Report, and that’s sponsored by Prudential. And it is a look at the financial struggles of households and their everyday spending patterns in financial services. And it really highlights the burden on low and moderate income households, LMI households, and how they really spend a greater share of their income on interest and fees for financial services compared with other groups.

Erin McCune:

Just as an aside for our listeners, we’re going to include links to the latest publications and results from the ongoing studies that FHN has conducted, in the show notes for the podcast. So be sure to check those out.

Justin Pituch:

And just out of curiosity, Mimi, what are the metrics that you’re tracking across those two surveys to look at the financial situation of these households that you’re tracking?

Mimi Joy:

So for the Financial Health Pulse Survey, we have, through years of research, distilled in a measurement methodology that we use as part of that survey. And it’s a composite score of eight indicators across the categories of spend, save, borrow, and plan. And we score the results on a zero to 100 basis. And through that scoring process, sort the respondents into financially coping, financially healthy or financially vulnerable. And then based on those results, we can address the different populations. So we do this large aggregate analysis, and then we also have the ability, with Pulse, to dive down into specific groups, such as divided by gender, income levels, geographic areas, and other components. With the FinHealth Spend Report, we’re really taking a look at spending patterns, especially the low and moderate incomes are bearing under in financial services. And they really comprise about 84% of the spending of everyday financial services. And this falls, especially onto Black and Latinx households, among the low to moderate income spenders.

Justin Pituch:

Thanks Mimi. So let’s get into talking about the current state of the financial health landscape. And as Glenbrook has become more interested in this topic, we’ve been tracking news that’s out there in the industry, and we’ve noticed that financial health has been generating a lot of attention recently, from everyone from politicians to big corporations, to technology companies. And we’re wondering what changed to foster this conversation now?

Mimi Joy:

Well, it’s been an interesting evolution. I can say that our CEO, Jennifer Tescher, and the team have been laying the groundwork around the concept for financial health for the past 15 years. So we’ve been out talking about it. When I joined the organization in 2016, oftentimes when I would engage with organizations on financial health, I’d get this blank stare like, “Yes, is that my financial literacy program or is it what I’m doing with CRA?” And it’s really not quite either of those. We’ve leapfrogged with the stresses that people have encountered with the pandemic and resulting economic crisis from having to explain what financial health is to the conversation now of what do we do about it, which is really, for us, a great place to be because we’ve got lots of thought leadership, as well as research and ideas about what can be done to improve financial health across the US.

Erin McCune:

Maybe what are the most important levers in terms of what can be done?

Mimi Joy:

Well, it’s a big bag of tricks. Certainly, and I know you’ve done your work, you published earlier this year about financial inclusion in the US, certainly getting onboarded into the banking ecosystem, into products that really can serve a low and moderate income household, right? There’s a lot of information out there around fees and why people do or don’t have checking accounts. So there’s a component of just having access to high quality services. And of course, beyond that, access to good medical care at a good price, ability to get an education without going into excessive debt, the ability to make a living wage or beyond that, right? There are many components to financial health. And I wouldn’t say there’s one silver bullet for any of them, but all of those categories are really important. And our work is now increasingly taking us beyond just the arena of financial services into workplace financial health and the dynamics there, as well as the intersection of financial health and physical health.

Erin McCune:

I was just going to probe along those lines. It’s great that more constituents are joining your network.

Mimi Joy:

It’s terrific. And our network is very diverse and we really believe that diversity of participation among organizations is critical to solving the challenges the consumers are facing. The burden is not just on the banks and credit unions or just on the employers. It crosses multiple areas.

Justin Pituch:

So as you’re going out and having these conversations with folks out in the industry, do you think that the conversation today that we’re having around financial health is moving in the right direction, or is there something blindingly obvious to you at the Financial Health Network that people out in the financial services industry just aren’t getting?

Mimi Joy:

I think there are many that do get it. And there are a lot of great innovators out there that have come out with solutions in the fintech arena. You see a lot of the banks starting to shift in terms of how they better serve their consumers. For example, Huntington Bank, years ago, implemented 24 hour grace to allow people time with when they overdraft to pay it back without paying the overdraft fee. PNC has now entered into that arena to help protect consumers against overdraft fees. So you see efforts in multiple areas.

Mimi Joy:

So I would like to think that we are moving in the right direction. Messaging from the top is so important. Inside the White House, economists have zeroed in on labor force participation rate among Black women as a key measure of economic health. Chairman Powell at the Fed mentions, in every public appearance, about race and inequality. We are now seeing leadership in organizations such as PayPal, the banks, and across the board, really talking about financial health and what it either means for their employees and or their customers. So I think there’s a lot of opportunity out there and we’re excited to be in the mix.

Justin Pituch:

I want to spend a little bit of time talking about the material changes for low and moderate income consumers that have come out of the pandemic. We know that this is really important to the financial lives of so many Americans today. And one thing that we were wondering about, given your tenure in the financial health space, is how this crisis compares to 2008. Do lower income Americans today have better options for navigating difficult financial circumstances than they did at that point in time?

Mimi Joy:

There are certainly more options for lower income Americans than there were in 2008. The rise of fintech has resulted in just a proliferation of offerings. One example of that might be the online installment lending has grown dramatically over the past several years. But that all being said, our data indicates that the vast majority of Americans are still not really financially healthy. And we believe, as I’ve mentioned before, that banks and fintechs can only address so much of this equation. There are multiple components to this. Beyond that, with our Pulse research and just the amount of money that the US has pumped into the economy, the financial health in 2020, actually among our Pulse respondents improved. And it really demonstrated that the stimulus money was helping as people were trying to navigate this pandemic. But these consumers continue to pay a higher percentage of fees for financial services. Overall, spending has dropped, but it’s bound as the economy opens to creep back up. And so we will have to see what comes next.

Justin Pituch:

And so as Americans are spending throughout this crisis, we’re seeing generally that there’s been a shift from credit products to debit products and have some idea that that’s coming from the increase in government aid and stimulus payments. Is that something that we’re also seeing with low and moderate income consumers, and is that affecting the overall characteristics of financial health for those consumers?

Mimi Joy:

So from our research, when we looked at the sample of people who had active credit cards accounts in 2020, we saw there was a statistically significant decrease in the average number of weekly purchases, and that people were using their cards less frequency. However, we also saw the same thing in checking account spend as well. And the overall hypothesis is just that there was just overall reduced spending. So I think while consumers certainly like to probably tidy up their debt they might be carrying on credit cards, really I think what’s going to have an influence on that are the opportunities for them if they’ve been unemployed, or if they’re going to get more employment in 2021 and their ability to manage through all of that.

Erin McCune:

So Mimi, are you saying that either the stimulus and relief payments helped consumers that were at risk?

Mimi Joy:

Yes.

Erin McCune:

But in addition, while they weren’t out and about as much, because lots of things had shut down, places where we would be spending money, all of us, we didn’t have as many opportunities. So the spending went down. That means that as we reemerge from the pandemic and reopen, then perhaps all we’ve done is delayed the consequence. And now there’s going to be some reckoning. Am I misinterpreting the situation?

Mimi Joy:

Right. Well, I think, especially among people who were laid off, like any other down cycle, their credit card debt increased, which is consistent with what’s happened in prior years. But overall, I think as we come out of this, we’ll have to see what the spending patterns are in terms of what people are doing with their money. They certainly were able to pay down credit card debt with the stimulus money. We saw balances rise in savings accounts last year, which were all really good things. But it remains to be seen what happens as we come into 2021 and what those spending patterns really are. People have deferred medical care and a lot of other things. So it would not be surprising, especially if they are employed, that we would see spending increase across the board.

Erin McCune:

Thank you.

Justin Pituch:

As we get back to spending more as a country, we’re thinking a lot about alternative credit products and in particular buy now pay later products that folks might be using as an alternative to credit cards. And trying to think through what the implications of those products might be for financial health, are those products where consumers don’t really understand the full range of risks that they’re taking on, and is that something that we’re beginning to see impact the financial health of consumers in the same way that credit cards have?

Mimi Joy:

Well, I think one of the benefits of the buy now pay later offerings are that consumers can parse out their purchases in the four installments, they understand what the cost is upfront, right? And that’s probably better than if you’re carrying a balance on your card, because if you’re rolling balances over and paying interest on that, then you don’t really know what kind of interest and fees you’re actually paying for the product. A lot of what I hear, when I talk to organizations in the buy now pay later space, is about driving market share for the merchants, customer acquisition, and then driving larger baskets at checkout. And on average, I’ve read that the consumers that use buy now pay later spend about 20% more than they would without the product. So in some scenarios where if you’re trying to buy school supplies or medication or groceries, that could be really helpful that you can get it all in one go. But on the other hand, are consumers being encouraged to spend more than they really need to?

Mimi Joy:

And I think when you’re working in an app, if you’re doing this virtually, you’re checking out on your app, I do think sometimes there’s a challenge to explain to consumers what they’re signing up for and everything they’re getting within the app. I’m sure there are folks trying to solve for that challenge, but I think there’s an opportunity for transparency that consumers really understand what they get. And oftentimes, these products can be really helpful for consumers that don’t have a credit history. So they might not qualify for a credit card, or they might qualify for a really high interest type of credit product, which doesn’t benefit them. So no, I think there are definitely pros and cons there.

Justin Pituch:

And can you talk a little bit about how the credit reporting works with those products? Is it universally BNPL providers report to the credit agencies, or is there some variation there?

Mimi Joy:

I think it really depends on who’s providing the service. I think for the shorter payment cycles, some of those do not report to the bureaus. But for the larger installment plans, if you’re buying a Peloton bicycle or a television, those actually get reported to the bureaus.

Justin Pituch:

Got it. Thank you.

Mimi Joy:

But you raise a good point because if a consumer is using this because they don’t have access to credit, wouldn’t it be great if we could help them establish credit in the process and also explain that to them as they use these services.

Justin Pituch:

Right. So BNPL is sort of the fintech side of the alternative credit coin. We’re also thinking about the traditional types of services that are available to low and moderate income consumers, like payday loans. And we know that payday lending has been a big business during the pandemic, even in spite of the government stimulus programs. And we’re curious as to why those sorts of businesses are still so pervasive and whether or not BNPL or other new credit services could erode their presence in the market.

Mimi Joy:

I certainly think there’s an opportunity to erode the payday loan ecosystem. They had a banner year last year in terms of the loans that they made. Actually, before the pandemic, we had this really cool field trip that we would do for organizations called a FinX, where we would take groups of people out into a city and take them to a payday lender and a check casher and a pawn shop and give them checks that they needed to cash, buy a prepaid card, try and load the prepaid card and then try and spend with the prepaid card.

Mimi Joy:

And I think the learnings from this is just how time intensive it is, especially if you’re on foot and just how difficult it is to actually do these things when you’re maybe in between jobs. You’ve got a few hours off, you might have your kids with you, you’re trying to do, I’m going to call it your banking but I’m using air quotes here, you’re handling your financial services in the process. But I think the payday loans persist because they’re right there in the neighborhood, people are familiar with them and it’s really part of the neighborhood and they’re very convenient.

Erin McCune:

Yeah. That time stress element is really an important factor.

Mimi Joy:

Right.

Erin McCune:

That I think folks that aren’t in this category of consumer don’t think about, don’t realize. And I really applied your efforts to take people on excursions and give them a very visceral understanding of what that entails.

Mimi Joy:

Yeah. And actually, we’re in the process of turning this into a virtual event.

Erin McCune:

Oh, wow.

Mimi Joy:

Right. But it’s very powerful. And then people come back and debrief about what their experience was trying to use all these and it’s hard work.

Erin McCune:

Yeah. We did a webinar and Justin has published a really nice piece where he looks at the financial experience of different personas and makes these contrasts. It’s obviously not as impactful as taking people on an excursion, but we tried to make some similar points ourselves.

Mimi Joy:

Right. And I think the other thing is a lot of times these folks have a point in time need. They need their cash now, they have a cash flow issue now. They need to pay their phone bill or pay for childcare. And if they have a check that gets deposited and there’s a hold on it or there’s just a lot of things to consider out in the backend architecture of how this works in these various ways that people might deposit this money and then make payments with it.

Justin Pituch:

I think that the point that you made about trust in these services is really important. You go into a check cashing shop or a payday lender and you see rates posted on a board in clear English, and you can understand that, and that stands in contrast to going to a bank and not really understanding what you’re signing up for necessarily or encountering products that might be confusing if you don’t have a certain level of financial literacy.

Mimi Joy:

Right. And also, you can’t underestimate the power of community. They’ve been present in the community, they’re a known quantity. And while we all agree, the fees are excessive, for the people that use them, they feel like they really know this entity.

Justin Pituch:

Thinking about what’s going on in the financial health space today, the new solutions that are being proposed, the intractable issues that seem to remain, what are the next generation solutions that get you really excited? What do you want to see more of out in the FinHealth health space?

Mimi Joy:

Well beyond just what gets me excited, I’d like to talk about what I think is so interesting and I’m excited about it. But for example, fintechs that work with government entities to better distribute payments and benefits. One of the companies in our financial solutions lab, Propel, has an app called Fresh EBT. And they help people manage their SNAP benefits while helping them build a stronger social safety net and improve their financial health. And people that use the app can check balances, they can save money with coupons and they also have a job finding resource. They’ve partnered last year with GiveDirectly to provide emergency cash grants to their customers. And it’s really a phenomenal service.

Mimi Joy:

Another example is Edquity, which is a company we work with, that works with universities. A lot of times universities have a fair amount of government money to distribute for emergency relief to students, but they don’t really have the infrastructure to do it, and Edquity is there to help them with that. I don’t think government’s going to solve this anytime soon and the innovators that are helping to solve it are really fascinating.

Mimi Joy:

Beyond that, within the banking ecosystem, we’re seeing all these specialty banks pop up. Greenwood is focused on Black and brown owned consumers, and it’s providing banking services specifically for those groups. Greenlight is a debit card for kids to help kids learn early about managing their finances. Aspiration Financial, they’ve got a green take on the shift in terms of the services they offer, really focusing on ESG and consumer action with socially conscious and sustainable cash management services. And Daylight, which is the first mobile banking solution designed specifically for the LGBT+ community. These are all really interesting, these very specialty banks, to meet the needs of consumers in these target groups that really have needs that go beyond, that are just unique to their group.

Erin McCune:

Mimi, we’ll put links to all of those solutions that you mentioned in the show notes, so people can learn more. Really appreciate you.

Mimi Joy:

Okay. Thank you. That’s terrific.

Justin Pituch:

Yeah. And that makes a lot of sense in terms of the lack of trust that a lot of these communities have with the traditional banking sector. But I’m wondering if you’re seeing that these solutions resonate with consumers or if consumers are more likely to continue using whatever solutions they’re currently using?

Mimi Joy:

Well, I think for consumers that are banked and we’ve seen this with a lot of the neobanks, they’ll often open an account with a neobank, but it’s a secondary account, and because the neobank’s doing something interesting that they want to get access to. So I think it’s early days, but certainly just from the level of interest, for example, in Greenwood and Daylight, Aspiration, just people interested in what they’re doing and the number of first time sign-ups really demonstrates that they’ve tapped into a need in society to help these specialty groups.

Justin Pituch:

Awesome. Thank you.

Mimi Joy:

You’re welcome.

Justin Pituch:

Wrapping up here, we are wondering what payments professionals should walk away from this conversation thinking about or learning about financial inclusion here in the US and financial health more generally.

Mimi Joy:

Well specific to payments, certainly the ability to have access to high payment solutions, whether it’s for remittances, cross-border payments or the ability to receive payments or make payments. Especially as we get closer to real time, I really think that’s going to make a difference in a lot of these consumers’ lives that they get paid instantly. And you see that a little bit with Uber and Lyft who often will allow the drivers can drive and they get paid immediately, they can cash out immediately. But seeing that move into a larger ecosystem where people can get paid in real time and just paying attention to solutions that enable that.

Erin McCune:

That’s great.

Justin Pituch:

Great, thank you.

Erin McCune:

Mimi, it has been such a pleasure to speak with you today and to learn more about what Financial Health Network is doing. We’ve been big fans for a long time, and we’re thrilled to have you share perspectives. And we’d love to have you come back.

Mimi Joy:

Thank you. I would love that.

Erin McCune:

We look forward to further conversations.

Mimi Joy:

Thank you so much for the opportunity to talk about our work. There’s just so much going on. So thank you so much.

Erin McCune:

And thank you for the good work you’re doing. This is incredibly important, particularly at this time. And it’s really encouraging to hear that you are working with a wider range of participants in our industry and more broadly, and that there’s a lot of attention on this space. We’re thrilled.

Mimi Joy:

It’s about time. It’s wonderful.

Erin McCune:

Keep going, keep going. Great to talk to you.

Mimi Joy:

Thank you, Erin, and thank you, Justin.

Justin Pituch:

Thank you Mimi.