Digital inclusion has an incredible impact on people’s ability to achieve financial stability. Globally, more than 1.7 billion people do not participate in the formal financial system, the majority of whom are women. But this issue is not reserved for developing countries. In the U.S., 25% of households are unbanked or underbanked, resulting in high barriers to economic mobility, business or education loans, and investment opportunities.
We know that digital inclusion impacts nearly every sector of life—from healthcare to education to workforce development. So far in this series, we’ve interviewed Dr. Amy Sheon, a leading researcher of the impact of digital inclusion on health outcomes, Clayton Banks, CEO of SiliconHarlem, a workforce development organization in New York City, and Steve Huter, Director of the Network Startup Resource Center (NSRC). With each interview, we dive into a new layer of digital inclusion, exploring the role connected technology plays in our daily lives and highlighting the danger when its opportunities are limited to the lucky few.
We interviewed Tim Lucas, the Director of Research at SaverLife, about his research into financial inclusion. Through his role at SaverLife, a nonprofit organization dedicated to improving financial stability for low-to-moderate-income Americans, Lucas uses data and stories to help drive systemic change and increase Americans’ financial security. He offers unique insight into the role digital inclusion plays in financial success.
How does digital inclusion impact financial management & stability?
Digital inclusion has a massive potential to drive financial stability. App stores are awash in personal financial management applications, with more and more solutions being created daily. From tools that help people track their personal spending or monitor public spending, to sites that provide individualized advice on increasingly granular personal finance questions, or apply for loans, people can access a broad range of financial services from anywhere in the country without having to leave their home.
But issues surrounding information asymmetry haven’t disappeared, they’ve simply shifted. We’ve gone from having a dearth of information to being overwhelmed by it, so the challenge has become people having to sift through too much information to find the right products or services, or simple advice, to meet their specific needs. And unfortunately, it is all too easy for people to find the wrong products and services, or bad advice, when looking for ways to improve their finances.
How does SaverLife employ technology to provide its services?
SaverLife has been helping Bay Area families build a habit of saving money for over twenty years, but with the growth of financial technology happening in our backyard, we realized there was an opportunity to address the problem at much greater scale. In the past five years, SaverLife’s member base has grown to over 500,000 people with just a couple dozen employees, a feat that wouldn’t have been possible without technology. At its core, the SaverLife platform leverages a live, read-only view into members’ savings accounts enabling monitoring of member saving activities. Technology makes it possible for someone with an account at virtually any bank or credit union in the country to link to SaverLife and take advantage of all the platform has to offer.
Having this live view of savings activity opens the door for SaverLife to leverage a variety of behavioral economics techniques, most notably prize-linked savings. We’re continuously running challenges where members are incentivized to save money by having an opportunity to win cash prizes. For example, we run a weekly challenge where anyone who is able to save $5 has a chance of winning $5. Or, we often run monthly challenges where someone who saves $100 has a chance of winning $100 or more.
Technology also makes it possible to provide an increasingly individualized experience and customized advice. For example, we’ve recently experimented with providing customized SMS messages when someone signs up for SaverLife. These messages provided personalized savings goals based on their savings balance, which proved an effective way to jumpstart someone’s savings versus a control group. We’ve also shown that messages tailored to someone’s dominant personality trait, based on responses to a short survey, caused someone to be more likely to save over a thirty day period.
Lastly, technology has enabled SaverLife to develop a broader sense of community where members can share their experiences with other members located all over the country. Our online member forums allow people to offer advice on what’s worked for them in situations that are shared by many within the SaverLife population versus advice found on the internet that often is too generalized to be relevant to SaverLife’s lower-income, predominantly female, and predominantly person-of-color audience.
Who do you serve? How does digital inclusion impact this community?
The SaverLife member community differs from the U.S. population in many ways. First and foremost, it is much lower-income than the U.S. population. 81% of the SaverLife population lives in households with under $50,000 in annual income, versus 37% of the overall U.S. population. It is 80% women (versus 51%), 59% people of color (versus 34%), and much more likely to have children (81% vs. 44%).
Every member of our community accesses SaverLife via technology, and nearly 100% have used a mobile phone to sign in at some point. 75% of SaverLife members are using other online apps to manage portions of their finances. In fact, nearly half our members use online-only banks or payment companies.
Nationally, populations that mirror SaverLife member demographics are likely to live far from their jobs, financial services, and healthcare. Mobile technology helps people manage these increasingly complex systems and access services remotely, where available.
In your role as Director of Research, what have you studied over the past year?
One of our primary research goals is to reflect our members’ experiences and mirror their priorities. This means that as COVID-19 has dominated the lives of SaverLife members, it has also been our research focus. Since last March, we’ve been studying everything imaginable related to COVID’s financial impact on SaverLife members. This includes how spending changed when families went into lockdown, how people saved and spent stimulus payments, and monitoring unemployment and underemployment, which has been rampant within our population. We also did a second round of research to understand the Racial Wealth Gap in the wake of George Floyd’s murder and subsequent national protests.
Some of our notable findings from the past year include the discovery that a large number of Americans incorrectly believed that they were ineligible for stimulus payments and that unless they took action on the IRS website they would receive nothing. We also studied the effects of one-time $500 cash grants that we were able to distribute to over 5,000 families, noting increased spending on groceries, utility payments, increases in saving, and larger debt repayment when compared to families who weren’t selected to receive the cash grants. We learned that families receiving SNAP benefits were paying 20–30% more for groceries on average versus 2019, making the case that the benefit needed to be adjusted for the new reality that families with children were having to take on much more of the responsibility for feeding families. We also looked at the impact of being a parent and schooling on financial health, discovering the vast disparities in incomes and expenses for parents of kids who were going to school virtually versus going to school in person. With each of these studies, we’re trying to ensure policy is informed by the data and voices of the communities policies attempt to serve.
How has your research changed your understanding of people’s relationship to finances?
Transactional data is wonderful for gathering concrete findings on changes in spending, saving, and debt. You can use transactional data to answer questions such as “how will grocery spending change after the receipt of a stimulus payment?” with relative ease. What gets lost in this analysis is the impact on peoples’ emotional well-being. We’ve learned from our members that the ability to pay for basic necessities like food and healthcare is a source of near-constant anxiety for many, and having a sense of optimism or confidence in reaching longer-term goals is out of reach for far too many members.
That said, we’ve learned that even small advances in saving may dramatically alter someone’s relationship with their money. One of our major findings from 2020 is that there’s a strong correlation between an increased likelihood of someone stating that they are financially satisfied and relatively small amounts of savings. Someone with as little as $100 in savings is 29% more likely to indicate that they’re financially satisfied versus someone with less than $100 in savings. $100 may not sound like much, but those families know that $100 means having an added layer of protection to keep the lights on and keep food on the table.
What would you want policymakers to understand about the challenges your clients face?
There are two things I want policymakers to understand about the challenges SaverLife members face. The first is simply about having a seat at the table. People want to weigh in on policies intended to help them, which means not only helping prioritize what gets tackled first, but that within the design of policies, low-income families should have an opportunity to shape the implementations of policies, as often very well-intentioned ideas may place undue strain on families, or may wind up being counterproductive.
Second, that the patchwork of supports for low-income families, from tax credits, to housing, to food, to unemployment insurance, and between federal and state agencies, is wildly complex, and a massive time burden for families to provide documentation at the point of initial applications and subsequent check-ins. As well-intentioned as many of these supports are, accessing government support is almost a full-time job on its own, and is restricting peoples’ ability to improve their own situations. More thought should be given to how to provide support in a way that minimizes the burden on families’ time.
What has the greatest impact on the community SaverLife serves?
When we’ve polled our members on this in the past, we’ve learned that having a more consistent work schedule is the top thing our members think could help them achieve financial stability. Their financial transactions support this – we see incomes fluctuating wildly, and frequently, which supports the need to have short-term savings buffers.
Members also cite childcare expenses, lowering the cost of secondary education, and raising the minimum wage as some of their top priorities. So it’s our goal to better quantify the degree to which these issues affect our members, and gain a nuanced understanding of how those issues can be best addressed to serve our members.
What are you excited about in the future of connected technology & financial management?
I’m incredibly excited about the capacity for technology to provide increasingly individualized guidance based on personal financial situations, goals, personalities, and needs. We’ve come a long way from cookie-cutter financial services that predominantly served the needs of fewer, wealthier individuals, but there is still a long way to go before financial services can meet everyone’s needs.
Connected technology, such as data aggregation, has a major role to play. In order to develop specialized financial services for more granular segments of Americans, the ability to aggregate data and share across platforms, in a secure way that is transparent to all from a data privacy perspective, means that more and more companies with just a few employees can test financial products tailored to increasingly granular segments of the consumer market. This type of segmentation will hopefully make it easier for the underserved to access the right financial services at the right time.
