The Power of Us: Smart Solutions and Effective Partnerships for Financial Wellbeing

By Diana Iovescu Tatucu and Timothy Dinneen

Smart solutions led by social innovators and supported by an ecosystem of partners are taking flight in communities across America. It is only through these collaborative partnerships that we can solve the world’s most intractable problems, problems otherwise too unwieldly for one sector to tackle alone. Social entrepreneurs and companies like BNY Mellon have a vital role to play.

A recent study conducted by the Brookings Institution indicates that an annual household income of $59,000 places an American family of four in the global middle class. By this standard, about 70 percent of the U.S. population falls into this category. Yet, many families are far from worry-free. According to a survey led by the Consumer Protection Financial Bureau, 64 percent of Americans feel some kind of distress or insecurity related to their financial future. Across the country, the financial wellbeing of a socioeconomic strata once defined by stability and success is deteriorating. What is more, many of the same pressures shrinking the American middle class are further stifling the ability of the working poor to achieve economic mobility.

Social innovators are reframing these problems and tackling them in different ways. They are at the forefront of new and promising solutions, contributing to a complex ecosystem of individuals, communities, and institutions working to move us toward economic parity.

BNY Mellon has partnered with Ashoka, a leader in social innovation, to launch Unlocking ₵hange: Innovations for Financial Wellbeing, Resilience, and Freedom, a challenge to identify and support solutions for achieving financial wellbeing.  

In conversation with Charlie Goodwin, managing director, head of public finance, BNY Mellon Capital Markets, LLC, and Reem Rahman, director of knowledge and learning, Ashoka, we see on display the insights and perspectives of each sector, and highlights from innovators in the field.

 

Diana Tatucu: How do you define financial wellbeing?

Charlie Goodwin: What comes to mind is a person’s ability to survive beyond a paycheck-to-paycheck subsistence and absorb some sort of unanticipated financial shock, whether it be a car repair, medical bills, or the loss of a job. These events have the potential to undermine the financial security of a family.

Reem Rahman: I agree. In framing the challenge we were very purposeful in using “financial wellbeing” as opposed to simply “financial security” or “financial literacy.” Financial wellbeing is a more holistic measure of someone’s financial health, ensuring he or she is not just surviving, but also thriving as a whole person. This considers a balance of factors including debt, savings, assets, and financial behavior and judgement.

 

DT: What strategies or approaches are needed to increase financial wellbeing across the US?

RR: We have seen a wide variety of solutions submitted to the challenge, innovations that range in focus from entrepreneurship, to personal credit, lending, home ownership, etc. Yet there are common themes among them. Some of these solutions like Fig Loans and Mission Asset Fund’s Lending Circles, are delivered to individuals as part of comprehensive financial counseling they are receiving from community-based organizations.

What gives some of these innovations real systems-changing potential is their ability to create benefit for multiple stakeholders in the same community. For example, University of Evansville’s ACE³ program (Access to Capital and Expertise for Emerging Entrepreneurs) provides loans and support to entrepreneurs from underprivileged backgrounds while providing business students with practical real-world experience. Opportunity Fund helps underserved businesses access funds to achieve the next stage of their development when traditional loans are not accessible. This empowers small business owners to scale.

CG: One of the most important strategies we can employ is teaching financial literacy, and this is true across all ages and socioeconomic levels. Anyone can run into periods of overspending that can put them at some sort of financial risk. Only a very small percentage of folks can really afford a high level of conspicuous consumption. This is in part a generational issue and one that is changing rapidly.

We need to make saving appealing to people again. And saving can start on a small scale. Think of the amount of money that can be saved on coffee spread over two years. Consistent little financial changes, over time with the magic of compounding, becomes real money.

Similarly, there are many educated people who don’t fully understand how financial markets work and yet their personal financial position may be balanced on these markets’ performance.

 

DT: How have the innovators in the Unlocking Change challenge make use of technology in their solutions?

RR: Technology was a part of the majority of the submissions in the challenge and it is indispensable in taking a solution to scale. We saw submissions that used gamification to deliver financial education to youth and business tools to low-income microentrepreneurs, like ENVision Mobile. Others used technology to make their solutions more accessible and efficient through user-friendly portals or mobile apps for loan applications and even bankruptcy filing.

 

 

DT: How do you take financial wellbeing from the individual level, to the community level, and beyond?

RR: As I mentioned, I think technology is part of it, helping us scale-up to more people and communities. But not at the expense of the personal factor; people are not simply consumers. Services must be designed with an understanding of the fact that we are serving people with families and unique circumstances.

CG: Thanks to technology, I think we are seeing a trend toward small-scale finance, which can be affordable and cost effective. You can create an atmosphere with a communal experience that benefits both the borrower and the lender. There is also a movement toward the democratization of access to financial products. We're all in this together, trying to improve financial wellbeing for our neighbors in concrete ways.

 

DT: Speaking of the “we”, what is the role of each sector (e.g. public, private, non-profit) in creating financial wellbeing?

CG: There is a significant demand from our investor base on the private side to invest for the long term instead of thinking about how much they will make in the next quarter, next year, or even 10 years.

The world of financial services is changing and will continue to evolve very rapidly. Many of us realize that if we want to have sustainable financial institutions we have to adapt. And what we're going to be doing in 2020 is going to look a lot different.

RR: In our online challenges, we have consistently seen powerful solutions submitted by non-profits, but also from for-profit, or hybrid organizations. We have also seen an increase in private-public partnerships – where companies partner with community organizations to co-create a solution with greater impact and scale than they could have by each tackling the issue alone. And we are finding that the partnerships are most successful when they are flexible, long-term, and iterative, learning from lessons along the way.

 

DT: How will this partnership between BNY Mellon and Ashoka and the Unlocking ₵hange Challenge contribute to advancing the field of financial wellbeing?

RR: We look forward to seeing the impact of the challenge play out over time and the power of this collaborative community to strengthen the work of its members. Take the work of our 10 finalists: the Pioneers of Financial Wellbeing, they are already having a tremendous impact on their communities. Hot Bread Kitchen is providing culinary training that offers economic security to low-income women; ROC USA is making resident ownership of mobile home communities viable and successful; and the Prison Entrepreneurship Program is pairing business executives and inmates through a passion for entrepreneurship.

The challenge highlighted the importance of community-mediated solutions, and the incomparable power of local, on-the-ground expertise to solve problems. Tuba City Project is a great example; though it’s not the first small business incubator, it’s among the first tailored to the needs of rural Native Americans and based on a reservation. 

CG: There are a couple of immediate benefits we have already seen. For one, the learning experience for BNY Mellon employees. Becoming more familiar with Ashoka and their theory of change, and also serving as a reviewer, was very educational for me personally. There were a number of really, really great ideas and presentations that prompt you to start thinking critically about society’s needs and creative solutions to meet them, what’s replicable, and where a small amount of cash can make a big difference and drive significant positive change. It was an enjoyable and rewarding experience to apply my background to some of these submissions and provide feedback and recommendations I hope were beneficial.

 

We look forward to continuing our support of the challenge finalists, with whom BNY Mellon is extremely proud to partner, so that they can further scale their impact in financial wellbeing.

On October 3rd, 2018, Ashoka and BNY Mellon will be announcing the winners of the Unlocking ₵hange Challenge at a public event in New York City. Social entrepreneurs and industry leaders will meet to further advance the conversation and collaboration to achieve financial wellbeing.

 

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This interview is part of a series for the Unlocking ₵hange Challenge, a partnership between Ashoka and BNY Mellon to identify innovative solutions for financial wellbeing in the United States.  

Diana Iovescu Tatucu is a writer and founder of mozaique.co, a social business providing access to markets and financial predictability for artisans and handworkers in remote communities around the world.

Timothy Dinneen is Vice President, Global Philanthropy at BNY Mellon.