The Triple Threat | Article on Global Resession | Harsh Kumar
Expanding Market Reach and Impact with Small Business Financial Health
1. EXPANDING MARKET REACH AND
IMPACT WITH SMALL BUSINESS
FINANCIAL HEALTH
Darren Easton,
Center for Financial Services Innovation
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About CFSI
The Center for Financial Services Innovation is an authority on consumer financial
health, leading a network of financial services innovators committed to building better
consumer products and practices.
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Inform
We provide deep consumer
insights and industry research.
Innovate
We seed and test promising new ideas.
Advise
We offer consulting services to both for-
profit and nonprofit providers.
Connect
We foster dialogue and collaboration through CFSI
events and networking opportunities.
CFSI
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Household and Small Business Finances are Intertwined
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Small
Business
Household
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What is Financial Health?
Financial health comes about when your daily systems help you
build resilience and pursue opportunities.
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Day-to-Day Resilience Opportunity
Are you prepared for the
unexpected?
Are you able to pursue your
financial aspirations?
Do your financial products
support resilience and
opportunity?
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Financial Health in America
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Source: Understanding and Improving Consumer Financial Health in America, CFSI, 2015
Thriving
12%
HEALTHY COPING VULNERABLE
Focused
15%
Stable
16%
Striving
16%
Tenuous
12%
Unengaged
16%
At Risk
12%
57% Struggling Financially
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Income Doesn’t Tell the Whole Story
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Healthy Not Healthy
Source: Understanding and Improving
Consumer Financial Health in America,
CFSI, 2015
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Behaviors versus Demographics
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Households that plan ahead to
make sure they have the money to
pay for large irregular expenses
10x more likely to be Healthy
than those who cannot or do not
Individuals & couples with a planned
savings habit
4xmore likely to be Healthy than
those who do not
Households in income quartile 4
($100k+/yr)
1.4x more likely than income quartile
1 (< $30k) & 1.2x more likely than
income quartile 2 ($30-60k) to be
Healthy
Individuals with a college degree or
higher
1.3x more likely to be Healthy than
those who do not
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Behaviors Matter
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Healthy
Plan Ahead
Save Regularly
Source: Understanding and Improving
Consumer Financial Health in America,
CFSI, 2015
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CFSI’s U.S. Financial Health Measurement Framework
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SPEND
1. Spend less than income
2. Pay bills on time and in full
SAVE
3. Have sufficient liquid savings
4. Have sufficient long-term savings or assets
BORROW
5. Have a sustainable debt load
6. Have a prime credit score
PLAN
7. Have appropriate insurance
8. Plan ahead for expenses
SPEND
SAVE
BORROW
PLAN
Eight Ways to Measure Financial Health
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CFSI Financial Health Score™
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Spend
Save
Borrow
Plan
Fin Health Score
XXX
XX
XX
XX
XX
Snapshot of financial health
One CFSI Financial Health Score™
and four sub-scores.
Simple, straightforward, and
easy-to-use
Simple – just eight multiple choice
questions
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U.S. Financial Diaries Principal Investigators
• Jonathan Morduch, Professor of Public Policy and
Economics, New York University
• Rachel Schneider, formerly of Center for Financial
Services Innovation
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U.S. Financial Diaries
300,000
cash flows collected during the year. About 100 spending categories,
38 income types, 69 financial instruments.
460,000
answers to survey questions on health, financial literacy, time preference,
organization, tax refunds, financial instruments, aspirations, income patterns.
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Garza Family
• Young couple in their 20’s
with a daughter
• Multiple sources of income
and experience significant
fluctuation in their incomes
from month to month
• Wide variety of financial
services usage
Source: J. Morduch and R. Schneider, “The USFD Methodology: The financial lives of
low- and moderate-income Americans,” US Financial Diaries Issue Brief, December 3,
2014
18. Source: A New Vision for Serving America’s Small Businesses
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Small Business Financial Health Elements
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Source: A New Vision for Serving America’s Small Businesses
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Small Business Owner FinHealth Needs
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•
Manage
finances
separately
Build
savings
Build
personal
credit
Plan for
volatility
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Supporting Entrepreneurship Starts with Personal FinHealth
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Non-profits
are leading
the way
Funders can
set the
standard and
fund what
works
For-profits
can reach
millions
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Research: Small Business Financial Health Study
A national survey to determine The State of Small Business Financial Health.
A national survey will allow us to:
• Measure the financial health of small businesses and owners across the U.S.
• Analyze the links between the owners’ financial health and the firm.
• Identify differences in financial health by demographic variables.
• Develop segmentation of small business financial health into tiers and
associated challenges and demographics.
• Benchmark future small business financial health assessments.
We seek a consortium of philanthropic partners to sponsor our small business
research.
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2018 Small Business FinHealth Initiatives
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Small Business Financial Health Measurement & Working Group
Small Business Financial Health Study and Segmentation
Small Business Owner Product Landscape Assessment
CFSI, the Center for Financial Services Innovation, is a national nonprofit headquartered in Chicago, with offices in NYC, D.C., and San Francisco.
We started in 2004 to shine a spotlight on the tens of millions of Americans falling through the cracks of the traditional banking system; the un- and underbanked.
We have since evolved and our mission is to improve the financial health of Americans, especially the underserved.
We lead a network of financial services innovators who are committed to building a robust marketplace with higher quality products and services. CFSI does this by innovating, informing, and advising our large network of companies and partners.
We work with a variety of companies who are all advancing financial health - from the largest retail banks in the US to innovative nonprofits to small fintech startups.
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Darren
8
10
Darren – shift to Theresa
As a Network member, Regions’ results helps CFSI refine our measurements
Theresa
CFSI has a tested tool that is FREE to use!
Regions already has full access to this, and has used it with Now Banking and Regions at Work
Companies can use the score to assess individuals’ or groups of customers’ financial health. Data should be collected on the individual level, but results can be aggregated to provide an overall snapshot of the financial health of a customer base, workforce, or group of individuals. Companies can share the results of this analysis with their customers or employees, or they can draw upon the results solely for diagnostic purposes.
So let’s begin.
The U.S. Financial Diaries (USFD) is a research study that aims to better understand the financial lives of low and moderate income households in the United States
It is a joint initiative of NYU’s Financial Access Initiative and the Center for Financial Services Innovation.
(When appropriate – e.g. BFA is in the room or when being ask about them or who helped create the project - add that Bankable Frontier Associates was instrumental in the creation of the project as well.)
The project was started in 2010. Leadership support for the project is provided by the Ford Foundation and the Citi Foundation, with additional support and guidance from the Omidyar Network.
This study is unique because it combines high-frequency economic and financial data with in-person interviews that were conducted every 2-4 weeks over the course of a year.
It provides us with a view into things that are usually hard to capture in large, national studies such as the strategies that people use to manage their money on a daily basis.
This study is rooted in the diaries methodology that was pioneered internationally before it was brought to the United States.
Field researchers were sent to interview 235 households in four sites across the country. These four sites were:
California (urban)
Eastern Mississippi (rural)
Ohio and Kentucky (small town and rural)
New York City (Urban)
Options for how to describe research sites as:
California, Northern California, San Jose, San Jose and environs, San Jose and surrounding areas
Eastern Mississippi
Ohio, Kentucky, Ohio/Kentucky, Cincinnati, Cincinnati and environs, Cincinnati and surrounding areas
New York City, Brooklyn, Queens, Brooklyn and Queens
Demo’s: Ricardo and Daniela Garza are a Latino/Hispanic couple in their mid-20’s who live in northern California with their 3-year-old daughter.
Working Group: Focus of 2018 is working group members who are piloting small business financial health measurement using a survey derived from our 9 elements of small business financial health.
Study: In fundraising stage.
Product Landscape Assessment: Funded by JPMC, released this summer.