The concept of using technology to help the underserved to improve or manage their financial positions is not new. There are panels on the subject at nearly every fintech event, numerous reports have been produced, and many people who are genuinely passionate about it. However, companies in this space, and there are a lot of them, remain largely under the radar.
These companies are needed now more than ever as cost of living crises bite across the world and services which have historically been provided by charities are cut due to budget constraints. But, serious questions remain as to how private companies can scale to support as many people as possible while becoming successful businesses.
One of the biggest hurdles businesses aiming to serve the underserved face is raising awareness of their products and services among their target audiences.
Many potential customers can’t be accessed by the cheapest and most widespread channels, namely digital options like social media. That’s because people who are struggling financially are often from minority communities, and/or suffer from mental or physical health conditions. In turn, that means their use of digital products and services is limited by language barriers, offerings that don’t take into account accessibility for people with disabilities, or simply lack of resources. Those in the last category may just not have access to the internet – I wrote about the number of people who are still unconnected last year.
So, companies have to look at other ways of communicating their offerings, many of which are analogue, such as print media, branches or just having boots on the ground to speak to passersby.
One example of this is savings club Bloom Money, which collaborated with food banks to run workshops on financial literacy in lower income communities — specifically aimed at those who are trying to manage complicated benefits systems, did outreach with specific religious communities, and ran digital inclusion workshops.
Another is OneBanx, which offers an app allowing people to view all their accounts in one place, pay bills, and manage deposits and withdrawals without having to visit a branch of their bank. It operates kiosks out of local grocery shops, which both raises awareness of its services among communities, and enables it to offer hands on support to those not digitally native, as well as providing cash deposits and withdrawals.
However, these methods, while effective, are resource intensive — particularly in terms of the time commitment required by founders and early employees, and therefore not necessarily an option for all.
Another option for fintechs wanting to serve those in need, is to partner with large organisations that have reach and resources. Such organisations can include charities and local or national authorities, many of which already understand the value of such partnerships — Bloom Money works with Community Centres and local councils, for instance.
Key partners can also be large corporations, in particular banks, and while these organisations have historically struggled to work with fintechs, attitudes should be changing given there is high demand from customers for more support — 73% of European consumers feel like their banks should be doing more to support them, according to research from CRIF. Specifically, they want more tailored products and services, proactive engagement from lenders when it comes to lowering bills, and advice and support on how to contribute to savings.
At the time of writing, none of the major UK banks seem to be meeting this demand — 35% of consumers would turn to family before their bank, according to CRIF. That’s likely because measures to help customers largely focus on providing helplines, online portals and budgeting tools, according to Which?. These methods all require the customers to be proactive in searching for help, which, as covered above, is unlikely in many cases.
Instead, banks should be providing offerings that are fit for purpose, i.e. customer-centric, fully functional and reliable, and quickly. In order to do that, they should be actively looking for partners whose services they can roll out, rather than trying to develop their own versions in-house. By working together, fintech businesses can reach a wider audience helping them scale, while banks can offer proactive support to customers, rather than relying on their customers coming to them.
Partnerships can also help fintechs overcome another major hurdle: Business sustainability. Due to their target audiences they can’t charge high fees if they charge any at all, but on the other hand, they are businesses and not charities — leaving them with a very fine line to walk.
Not only can working with a larger organisation that already has a significant customer base reduce marketing spend, there is also the potential for the fintech to act as a service provider to the bank. This is the model Kalgera, which identifies vulnerable customers from their online behaviour, now uses, having initially been a consumer facing app.
Another option is that used by IE Hub, which offers income and expenditure management to customers struggling with debt for free, and makes money by charging the companies owed. It works with a range of companies, from digital-only bank Atom, to larger, more traditional utility providers. That ensures its services get into the hands of a wide range of people who might need them, while helping organisations better manage their collections without causing unnecessary stress to customers.
The most difficult time is yet to come
The fintechs mentioned here offer examples to other companies wanting to help people manage and improve their financial situations of how to overcome major hurdles.
However, there is still more to be done, especially in terms of bank partnerships with fintechs. Banks need to be more willing to work to share customers with other companies in order to better serve people over what is going to be a difficult period for many. That will be key to helping more people, greater customer satisfaction with banks, as well as the long-term success of fintechs in this space.
Fintechs also need to be willing to think outside the box when it comes to both business models and how to reach the people they want to help. While macroeconomic conditions continue to be damaging to many consumers’ lives, both customer numbers and revenue will be more important than ever. Sometimes digital isn’t the answer, sometimes it’s simply getting out there.