By Alejandra Ruales, Senior Manager, Financial Health Network
Amid the economic devastation of COVID-19, understanding the financial health of households has never been more important. In this time of uncertainty, financial health measurement can provide real-time information on how the virus is affecting customers, employees, and small businesses, as well as information on where organizations should focus their relief efforts. As organizations develop creative solutions to respond to and support the current needs of consumers, financial health data can be a valuable source of information to evaluate the impact of these solutions and steer organizations toward greater impact both now and for the future.
Using Transactional Data to Understand Differences in Financial Health Data
To measure the financial health of customers during this time, organizations can leverage their own existing data and evaluate the rate of change in these metrics over time. Credit card usage, changes in liquid balances, and cash flow can indicate the extent to which COVID-19 has affected the financial health of customers. These insights may help financial institutions determine potential changes in fee structure, loan forbearance, and additional solutions to support customers.
Companies may look at changes in transactional metrics, such as inflows and outflows in accounts, to understand liquidity challenges from customers. For example, some banks and fintechs are observing increased manual deposit transfers in savings accounts and reduced spending to adjust for declining regular flows of income. Based on preliminary data analysis, these companies hypothesize that the boost in savings deposits is due to the stimulus payments and anticipate that liquid balances will continue to decline, particularly for their more vulnerable customers. Another provider identified a growing trend toward paycheck advances since the start of the pandemic. After the first stay-at-home orders, about 20% of users were seeking advances to pay for essential goods. That number has shifted more recently to 40%.
Leveraging Administrative Data to Assess Demand for Services
Nonprofit organizations are also seeing a sharp increase in demand for financial coaching services, forbearance and other resources to adjust payment obligations, options for low-cost credit, and even help to find food pantries and other basic necessities. Non-profit financial resource providers have seen a steep surge in partnership requests and clients seeking for financial assistance/coaching resources.
Fielding Surveys to Better Understand Customer Sentiment
Organizations can also opt to use survey data to get a deeper understanding of how COVID-19 is affecting the financial health of their customers. For example, the Financial Health Network used the 2020 U.S. Financial Health Pulse survey to gain insight at the national level into how the pandemic is affecting people’s levels of financial stress, the economic impact on households, and any fees or challenges related to stimulus disbursements.
In addition to COVID-19-specific questions, including segmentation questions as part of a survey questionnaire can uncover early data on the disproportionate impact of the virus based on race, gender, and income, and provide immediate and targeted support or relief. Actively measuring financial health data provides companies with valuable insight into how the crisis is affecting their own customers, helping them identify, design, and promote solutions that address specific customer needs.
As local economies reopen and the country settles into the new normal, companies that understand their customers’ financial health will be more strongly positioned to design long-term solutions to help their customers weather the crisis today and improve financial resilience in the years to come.
2020 Financial Health Leaders
Financial health measurement is a key element in advancing strategies and innovation to promote financial health. The Financial Health Network annually recognizes our Members that have taken concrete steps to measure the financial health of their customers, employees, and/or clients as Financial Health Leaders. These Members share the aggregate results of their evidence-based measurement to gain insights and exchange best practices with the entire membership network. This year, the Financial Health Network recognizes 37 Leaders (see complete list of names below). These Leaders are actively assessing the financial health of their customers, employees, and/or clients, which is critical to develop strategies and design solutions that promote financial health — especially now. In our Financial Health Leaders Working Group earlier this month, these Leaders shared the work they are doing and what they have learned from measuring financial health during a pandemic.
Current 2020 Financial Health Leaders
Alkami · Balance · BCU · Boeing Employees Credit Union (BECU) · Coast Capital Savings Federal Credit Union · Commonwealth Bank of Australia · Consumer Action · Credit Karma · Elevate Credit · ESL Federal Credit Union · Even · Finfit · Finicity · GreenPath · LendStreet · Machias Savings Bank · Meridian Credit Union · Money Management International · MX · National Credit Union Foundation · Neighborhood Trust Financial Partners · OppLoans · Opportunity Fund · PayPal · Regions Bank · Salary Finance · SaverLife · Servus Credit Union · Simple · SpringFour · Stash · Sunrise Banks · TD Bank · VALID Systems · Virginia Credit Union (VACU) · Washington State Employees Credit Union · Wright-Patt Credit Union
Thank you to MetLife Foundation, a founding sponsor of our financial health work.