By Elizabeth McCluskey, Director of Discovery Fund at CMFG Ventures

Over the past several years, financial health has become a trending topic within the financial services industry. While some progress has been made, there’s still a significant amount of work to be done as millions of Americans remain financially unhealthy. Current market conditions, such as a potential recession, will continue to exacerbate existing financial issues, especially among lower-income individuals and younger generations. As a result, these consumers will be looking for more affordable and accessible financial services to help them improve their financial health.

Offering relevant products and services to improve consumers’ financial health and help them remain resilient will be critical for financial institutions to maintain trust with consumers. Banks and credit unions are well-positioned to help their customers and members navigate this time of uncertainty, but they can’t do it alone. By partnering with fintechs, these institutions can quickly offer proven tools to enable Americans to reach financial stability.

Simplify lending and borrowing

With inflation at an all-time high, consumers are struggling to make ends meet and pay their bills on time. According to the Census Bureau’s latest Household Pulse survey of finances, 19.1 million more people are relying on loans from family and friends. This presents a major opportunity for financial institutions to help, especially low-income individuals, who are historically denied and become prime targets for payday lenders and predatory services.

Companies such as Zirtue offer alternative payment options, enabling consumers to receive access to liquidity and short-term capital. Zirtue formalizes loans between friends and family loans, who are among the largest lenders in the world. The Federal Reserve Bank reports that $200 billion is borrowed annually between friends and family to pay bills, and 82% of Americans are willing to help a family member financially. By offering this service, banks and credit unions can provide consumers with more accessibility to loans and funds, as well as expand credit access, creating a more financially inclusive experience.

Automating the home buying process

Another area where fintechs can help financial institutions provide financial support to consumers is in the mortgage industry. Housing shortages, layoffs, and homeownership gaps have made buying a home challenging. Consumers looking to become first-time homebuyers, especially minorities and Millennials, will face additional constraints in today’s housing market, as housing remains expensive. Of these consumers, Black Americans are denied at greater rates for home loans than any other race or ethnicity.

Fintechs like Home Lending Pal are solving this issue by removing biases from the home lending process and offering affordable mortgage options. The company is also educating consumers who are currently less likely to get approved for a loan on how to improve their current situation. This education extends beyond receiving a loan – the company uncovers hidden homeownership costs to help consumers budget and plan for unexpected costs. Leveraging these solutions reduces homeownership gaps and makes home lending more equitable, so more consumers can invest in real estate and start building wealth.

Paying off debt

One of the biggest areas consumers need financial guidance in is paying off bills. Today, about 50% of American adults struggle to pay their bills on time, which results in late fees and damages to their credit. Bill payments have the potential to stack up quickly, becoming a huge source of stress for many consumers. So much so, that most people learn they’ve paid $577 more on bills each year, factoring in fees, penalties and the effects of damaged credit.

Companies like Cushion are working on alleviating this stress, helping consumers get bank and credit card fees refunded as well as pay bills on time. Having a few extra dollars in their pockets can go a long way, especially when budgets might be tight. Automating bill payments can also enable consumers to save money on late fees and overdrafts, avoiding negative impact on their credit. Through strategic partnerships with fintechs, financial institutions can protect consumers’ money, allowing them to save more and ultimately become debt-free.

Now is the time for banks and credit unions to invest in the fintech relationships that will enable them to improve the financial lives of their consumers and members. Financial institutions can partner with fintechs to help consumers rise above the challenges of today and plan for a brighter financial future by simplifying the lending process, automating home buying, and offering tools to pay off their debt.

About Author:

Elizabeth McCluskey is the Director of the CMFG Ventures Discovery Fund, which invests in early stage fintechs led by underrepresented founders who are building solutions for financial inclusion. CMFG Ventures is the venture capital arm of CUNA Mutual Group.