Expanding Market Reach and Impact with Small Business Financial Health
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Expanding Market Reach and Impact with Small Business Financial Health
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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
- 2. Confidential & Privileged DocumentConfidential & Privileged Document 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. 2 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
- 3. Over 140 Industry Leaders
- 5. Confidential & Privileged DocumentConfidential & Privileged Document Household and Small Business Finances are Intertwined 5 Small Business Household
- 6. Confidential & Privileged DocumentConfidential & Privileged Document What is Financial Health? Financial health comes about when your daily systems help you build resilience and pursue opportunities. 6 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?
- 7. Confidential & Privileged DocumentConfidential & Privileged Document Financial Health in America 7 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
- 8. Confidential & Privileged DocumentConfidential & Privileged Document Income Doesn’t Tell the Whole Story 8 Healthy Not Healthy Source: Understanding and Improving Consumer Financial Health in America, CFSI, 2015
- 9. Confidential & Privileged DocumentConfidential & Privileged Document Behaviors versus Demographics 9 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
- 10. Confidential & Privileged DocumentConfidential & Privileged Document Behaviors Matter 10 Healthy Plan Ahead Save Regularly Source: Understanding and Improving Consumer Financial Health in America, CFSI, 2015
- 11. Confidential & Privileged DocumentConfidential & Privileged Document CFSI’s U.S. Financial Health Measurement Framework 11 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
- 12. Confidential & Privileged DocumentConfidential & Privileged Document CFSI Financial Health Score™ 12 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
- 13. Confidential & Privileged DocumentConfidential & Privileged Document
- 14. Confidential & Privileged DocumentConfidential & Privileged Document 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
- 15. Confidential & Privileged DocumentConfidential & Privileged Document 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.
- 16. Confidential & Privileged DocumentConfidential & Privileged Document Location of Households
- 17. Confidential & Privileged DocumentConfidential & Privileged Document 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 18
- 19. Confidential & Privileged DocumentConfidential & Privileged Document Small Business Financial Health Elements 19 Source: A New Vision for Serving America’s Small Businesses
- 20. Confidential & Privileged DocumentConfidential & Privileged Document Small Business Owner FinHealth Needs 20 • Manage finances separately Build savings Build personal credit Plan for volatility
- 21. Confidential & Privileged DocumentConfidential & Privileged Document Supporting Entrepreneurship Starts with Personal FinHealth 21 Non-profits are leading the way Funders can set the standard and fund what works For-profits can reach millions
- 22. Confidential & Privileged DocumentConfidential & Privileged Document 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. 22
- 23. Confidential & Privileged DocumentConfidential & Privileged Document 2018 Small Business FinHealth Initiatives 23 Small Business Financial Health Measurement & Working Group Small Business Financial Health Study and Segmentation Small Business Owner Product Landscape Assessment
- 24. Thank You
Editor's Notes
- 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
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- 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.