During the past decade, the stock market has rallied ever higher, breaking records and fattening the investment accounts of many Americans. But eye-popping annual returns don’t necessarily translate to financial stability. Indeed, more than half of all Americans are teetering on the financial brink: 56% report not having enough savings to cover an unplanned expense of $1,000. Indeed, two-thirds of the country is not financially healthy—struggling with saving, spending, borrowing, or planning—according to the nonprofit Financial Health Network.
Financial health and inclusion were the focus of a recent panel discussion hosted by Fast Company and H&R Block, whose new mobile banking product Spruce aims to address these issues. The conversation focused on the intersection of fintech and financial health and discussed the systemic inequities that have created barriers to inclusion for individuals in the financial services industry. “There are too many parts of the system that are just broken for too many people,” Jeff Jones, president and CEO of H&R Block, said during the panel.
Here are some key takeaways from panelists and other experts about how to address these increasingly important topics.
1. Digital trends offer opportunity.
The pandemic accelerated consumers’ shift to doing more online—including managing their financial lives through mobile banking, remote deposits, and digital payments. This transition has forced companies, from traditional banks to upstart fintechs, to think carefully about how to reach more customers and make their experiences easy, intuitive, and consumer-friendly.
But companies also need to look beyond ease of use. “A big focus for us is that when companies are trying to solve consumer problems, that they’re understanding it in the context of the consumer’s broader financial health,” said panelist Jennifer Tescher, president and CEO of the Financial Health Network. “They need to think about what kind of positive outcome they can help the customer achieve as opposed to just making it a pretty or fun or simple experience.”
H&R Block is aiming to do just that with Spruce, which ties a debit card to a robust digital app to help users track spending, set savings goals, and track their progress toward these goals. In an interview with Les Whiting, H&R Block’s chief financial services officer, he notes that a key difference between Spruce and a traditional bank’s offerings is the lack of fees, including no monthly fees and no fees for minimum balances and most ATM withdrawals. “I believe that every consumer has the right to an easy-to-use and free set of financial tools that helps them be good with their money,” Whiting says. “Sadly, that’s not the case for far too many Americans.”
2. Inclusion matters… and so does trust.
The percentage of unbanked Black and Hispanic households in the U.S. is more than double the U.S. average, at 13.8% and 12.2%, respectively. “A huge reason for that is access,” said panelist Lynnette Khalfani-Cox, a personal finance expert and author known as The Money Coach. “In many African-American and communities of color, we often don’t see institutions that support, are listening to, or are tending to their customers.”
Khalfani-Cox noted that fintech innovations such as Spruce that put the consumer first and knock down obstacles to access can help reduce the percentage of unbanked households—particularly among historically marginalized communities. But to do so, fintechs and traditional financial institutions must focus on building trust with consumers. Companies can build that trust in several ways, including by being good stewards of consumers’ personal data and by offering a more personalized approach to banking and investing.
H&R Block’s Jeff Jones shared that his company has developed a heritage of trust from helping millions of people with their most personal financial details every year at tax time. Now, H&R Block is leveraging what it’s learned from those relationships to introduce Spruce, with modern features designed around customer needs and built on the latest technology.
3. Good financial health requires more than access to financial services.
Helping individuals improve their financial health will require companies to radically reconsider how they treat customers and employers. For instance, it’s not enough to simply give an individual access to a checking or savings account. Instead, companies need to consider issues such as fees and hidden expenses that can hurt consumers’ financial health. “When you’re thinking about this broader idea of financial health, so many things affect your ability to spend, save, borrow, and plan in ways that enable you to build resilience and thrive,” Tescher said.
H&R Block’s Jones acknowledged that the business models of many companies in the financial services industry aren’t necessarily aligned with improving consumers’ financial health. For instance, charging a $35 overdraft fee for overspending by 20 cents on a cup of coffee can serve as yet another impediment to financial stability. “The question becomes, how do you actually help your customer have better outcomes?” he asks.
That question was at the center when Jones, Whiting, and H&R Block developed Spruce. By removing traditional expenses such as overdraft fees and minimum balance fees, users need to clear fewer hurdles on the path toward financial health. “Having been a banker—in fact, I often refer to myself as a reformed banker—I’m proud to bring these things to the market,” Whiting says. “It’s the way financial products should operate. And that’s just how we do it.”