Business and financial concept
The Financial Health Network recently published its annual report US Financial Health Pulse Trends Report 2023, the most comprehensive view of the current financial health of all Americans, and the results are alarming. The number of financially vulnerable people in the United States is increasing dramatically, especially among people of color. There is a critical lack of emergency cash for most Americans: about 50% spend more than they earn each year, and few have the recommended $2,000 in emergency savings that ensures financial security.
The report is a rallying cry for investors like us ResilienceVC who are focused on contributing to the financial stability of all Americans through technology and startup-led innovation. We believe startups are the entities best positioned to significantly build the resilience of LMI Americans while building large, sustainable, world-changing businesses. As Jennifer Tescher, founder and CEO of the Financial Health Network, shared: “There is an opportunity for innovative products and services that help build financial resilience – especially in the face of our latest findings on the decline in financial health of people. people across America, especially among Americans. historically marginalized groups.
A key element of financial resilience is finding ways to generate additional liquidity, exogenous to existing income sources, that can help build short-term savings and help Americans build a savings reserve. ’emergency. ResilienceVC and investors like us are actively seeking the next generation of fintech startups that are attempting to exploit latency in regulations, tax code, partnerships and technology to generate “found money”: new revenue streams and reduction of expenses which can contribute to the reduction of finances. vulnerability.
Found Money startups often seek information asymmetry in tax and regulatory systems, where LMI and financially vulnerable Americans do not take advantage of tax benefits and programs that are more readily available or more obvious to income populations higher. Beginning innovators like LeaveGetSet help Americans get tax credits (like the child tax), even if they don’t file their taxes otherwise, while Benny helps fund employee stock purchase plans. Alice (a ResilienceVC portfolio company) helps generate an extra week of annual income for service workers by helping them take advantage of commuter tax benefits.
Some late-stage startups, like Propel, are pioneers in Found Money by reducing the expenses of low-income consumers. As Propel’s Jeff explains: “We build tools that help low-income families save money on everyday expenses, from utility assistance programs to broadband subsidies like the affordable connectivity. Millions of families use the Providers app every month to find and sign up for these services, helping them keep money in their pockets.
There are still other ways to generate found money for IMT populations and help them build cash reserves. Some of these companies, like Dolr for student debt, Donors for caregivers, Acre for mortgages and Long live for rent payment, are looking at how to generate cash back (and startup-friendly incentives) through positive consumer behavior. Others, like Sunny Day Fund And Canaryare pushing employers to increase their emergency savings reserves through Secure Act-enabled matching programs or new grant programs.
These companies and many others like them are working toward a key end goal: figuring out how to put more money in consumers’ pockets for the tough days we know are coming. Building these businesses isn’t easy, but the startups that win will identify real, sustainable win-wins between stakeholders – like employers, landlords and consumers – and develop unique technology to seamlessly connect them. These companies will drive the resilience of their customers, as well as the scale and positive unit economics that investors seek. Fintech investors here in the United States would do well to find these innovators and support them.