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In Search of Fintech for Debt Management and Repayment JUNE 2020 low In Search of FinTech For Debt Management and Repayment QUALITATIVE USER TEST RESEARCH FINDINGS IN THE ADDRESSING DEBT IN BLACK COMMUNITIES PROJECT IN SEARCH OF FINTECH FOR DEBT MANAGEMENT AND REPAYMENT In Search of FinTech For Debt Management and Repayment Authors Spectra Myers, Ivan Avila and Cat Goughnour Acknowledgments We wish to thank the team who made this report possible. Our partners at the Bedford Stuyvesant Restoration Corporation, Bon Secours Community Works and the Urban League of Broward County invited clients to participate in the interviews, and staff often shared their reflections to inform this report. Applied Research interns Brian Williams, Jordan Beeker and Ethan Steakly supported background research, documentation and analysis. Our colleagues at Prosperity Now -- Pamela Chan, Hiba Haroon, Kasey Wiedrich and Lillian Singh -- provided helpful feedback and guidance. Santiago Sueiro and Melissa Grober-Morrow shared fintech tool recommendations. Joshua Sledge from the Financial Health Network, Chip Baker from FT Advisors, Audrey Perrott from Consumer Action and Ayanna Fortson from the National Urban League shared their insights and experiences with fintech. Lillian Singh, Kasey Wiedrich and Guillermo Cantor reviewed the paper and provided helpful feedback. Myrto Karaflos, Lauren Treadwell and James Durrah edited the paper and Sandiel Grant designed the layout and graphics. This report was made possible with the generous support of MetLife Foundation. About Prosperity Now Prosperity Now (formerly CFED) believes that everyone deserves a chance to prosper. Since 1979, we have helped make it possible for millions of people, especially people of color and those of limited incomes, to achieve financial security, stability and, ultimately, prosperity. We offer a unique combination of scalable practical solutions, in-depth research and proven policy solutions, all aimed at building wealth for those who need it most. About MetLife Foundation At MetLife Foundation, we believe financial health belongs to everyone. We bring together bold solutions, deep financial expertise and meaningful grants to build financial health for people and communities that are underserved and aspire for more. We partner with organizations around the world to create financial health solutions and build stronger communities, engaging MetLife employee volunteers to help drive impact. MetLife Foundation was created in 1976 to continue MetLife’s long tradition of corporate contributions and community involvement. Since its founding through the end of 2019, MetLife Foundation provided more than $860 million in grants and $85 million in program-related investments to make a positive impact in the communities where MetLife operates. To date, our financial health work has reached 9.9 million low-income individuals in 42 countries. To learn more about MetLife Foundation, visit www.metlife.org. 2 IN SEARCH OF FINTECH FOR DEBT MANAGEMENT AND REPAYMENT Table of Contents Executive Summary .......................................................................................................................................................... 4 Introduction ......................................................................................................................................................................... 6 Why Focus on Black/African American Communities? ...................................................................................... 7 Why Consider FinTech for Debt Management? ................................................................................................... 8 How Did FinTech Options Stack Up Against the Criteria? ................................................................................ 9 About the User Test and Feedback Interviews ................................................................................................... 11 Summary Characteristics of the Testers .............................................................................................................. 12 Summary Findings .......................................................................................................................................................... 14 Detailed Findings on the Tools’ Utility for Debt and Past-Due Bills .................................................................. 16 Albert .............................................................................................................................................................................. 16 Pefin .............................................................................................................................................................................. 20 Insights for Financial Coaching and Counseling Organizations ...................................................................... 27 Insights for FinTech Developers ................................................................................................................................ 28 FinTech Providers' Responses .............................................................................................................................. 29 Conclusion ....................................................................................................................................................................... 30 3 IN SEARCH OF FINTECH FOR DEBT MANAGEMENT AND REPAYMENT Executive Summary What is FinTech? Financial technology is the use of the internet and mobile applications (apps) to create financial services tools. Consumer Action citation: https://www.consumer- action.org/english/articles/improving-your-financial-health-with-fintech. Debt and past-due bills negatively impact the financial lives of many low- and moderate-income Black/African American1 community members. These community members have not been afforded the full opportunity to earn fair wages, build assets like emergency savings and wealth, or be fully shielded by consumer protection, all parts of a financial continuum that protects against costly debt. Prosperity Now’s previous research revealed that community members felt a financial app could be beneficial in helping them optimize repayment, saving both money and the hassle of tracking debts and other obligations. 2 Ideally, clients and community members would leverage fintech to get insights and manage their finances quickly and conveniently alongside and following meetings with financial coaches in service of their own financial goals. Prosperity Now developed criteria to search for potential apps based on the same research to center the expectations of the target audience. We then searched for options using the criteria to assess potential apps. While we found no existing tool that perfectly met the criteria, we found two with several of the features that community members wanted: Albert App and Pefin. Prosperity Now collaborated with three local nonprofits—Bedford Stuyvesant Restoration Corporation (Brooklyn, NY), Bon Secours Community Works (Baltimore, MD) and the Urban League of Broward County (Broward, FL)—to test the utility of two financial technology (FinTech) tools to help address debt and past-due bills for Black/African American community members. They were also interested in the potential of these tools to complement their coaching services. We tested these tools with partner clients through qualitative user tests.3 During these tests, we facilitated the app account creation process and captured reactions as clients (“testers”) navigated the tool. Then, we followed up with interested clients after two weeks to learn more about their experience with the tools. 1 Today, some people view “Black” and “African American” interchangeably, but many have strong opinions that “African American” is too restrictive for the current U.S. population. The term “African American” emphasizes origins in the African continent and history on the American continent. The term “Black” is used more broadly to include the collective experiences of the U.S. population. Approximately 10 percent of the 46.8 million Black people in the US are foreign born. See https://www.urban.org/urban-wire/say-african-american-or-black-first- acknowledge-persistence-structural-racism for additional perspective. As this project includes partner sites with significant Afro-Caribbean- descendent clients, we combine these terms to be inclusive of all, and we endeavor to be specific with sharing disaggregated data. 2 Myers & Chan (2018) Overdue: Addressing Debt in Black Communities. Prosperity Now. https://prosperitynow.org/sites/default/files/resources/Addressing_Debt_in_Black_Communities_1.pdf 3 User tests allow us to evaluate a product or service by testing it with potential users through observation while a participant completes a task or set of tasks and then debriefing their experience. See Prosperity Now’s Human Insights Toolkit for more information on user testing: https://prosperitynow.org/human-insights-tools-test. 4 IN SEARCH OF FINTECH FOR DEBT MANAGEMENT AND REPAYMENT Unfortunately, neither tool fully met the criteria and, therefore, Prosperity Now is unable to recommend a fintech tool as a complement to financial coaching for debt and past-due bill management. But testing offered deeper insight into what is available and working and what still needs refinement or innovation. Specifically, for these two tools, we identified the following high-level pros and cons. Albert Pefin Pros • Testers found Albert easy to use • Pefin gives
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