Lives Interrupted: Bridging Financial Transitions

Consumers’ financial lives are changing, but the financial services system has not yet evolved to meet those changes. Now, more than ever before, the need for financial security and mobility is driving demand for financial services—and thus also driving consumer engagement with credit unions in an increasingly crowded financial services marketplace.

The impacts of the COVID-19 pandemic and recession have raised the stakes by accelerating the insecurity and inequality facing many people well before the virus was on anyone’s radar. Today, these challenges remain: 

• Millions of people—especially women—have left the workforce to care for children or parents. 
• Millions of people working in the service sector—especially people of color—are feeling the long-lasting impacts of job and income loss. 
• Hundreds of thousands are navigating the death of a loved one. 

The long-term well-being of these households and communities hangs in the balance, even and especially as we see signs of an economic and social recovery.

As a result, credit unions are re-aligning their organizations and creating unique value propositions focused on supporting members through life transitions, planned and unplanned. As CUNA Chief Economist and Deputy Chief Advocacy Officer Mike Schenk recently wrote, “financial well-being is table stakes.” But how can credit unions meet members’ financial needs in their time of need?

What was the event about?

During Lives Interrupted: Bridging Financial Transitions, researchers and credit union professionals explored how consumers’ well-being is being reshaped by broad shifts in the economy and society. Attendees then learned how credit unions can operationalize a focus on financial well-being and reap the benefits of supporting members through these changes.

Discussion focused on three critical life transitions around work, health, and justice.

• What are the challenges faced by newly precarious on-demand workers, and how do these challenges foreshadow the future of work for all of us?
• How do healthcare needs shape financial decision-making, and how can credit unions help members gain more control over their financial, physical, and mental well-being?
• How can credit unions become more inclusive organizations by confronting the financial burdens created through involvement with the criminal justice system?

Why dive deep in these three areas?

First, in the 21^st century, work itself is changing, becoming more flexible and more precarious. As Dr. Mary Gray, MacArthur Fellow and Senior Principal Researcher at Microsoft Research, shared with attendees, on-demand task labor is the future of work across industries—extending well beyond the figure of the rideshare driver to include all manner of other workers: data cleaners and labelers, transcribers and translators, user testing, content creation and design, at-home health aides, and much, much more. These workers suffer from the dismantling of secure work and the devaluing of task-based services. In serving these workers as members—but also in working with them—credit unions have the opportunity to support workers’ search for financial stability in the face of a lacking social safety net, with products and services that focus on identity, payments, income smoothing and saving, and partnerships to facilitate networking, information-sharing, and community building.

Second, many people, with and without adequate health insurance, struggle to prioritize decisions about their healthcare needs. Dr. Mina Addo of the University of Pennsylvania reported on new research forthcoming from Filene about how even many middle-class people with health insurance struggle to pay for their healthcare needs. These challenges are widely shared: average out-of-pocket health care costs nearly doubled between 2004 and 2018, from $2,600 to $5,000, even as 60% of Americans have had at least one chronic condition (and 42% have had multiple chronic conditions). Non-primary care is especially challenging, and uncertainty and lack of transparency in healthcare costs mean that people often manage the financial burdens of health by skipping or delaying care for things like dental work, mental healthcare, or chronic conditions. Attendees learned how credit unions can start with their own employees in beginning to address these issues, and that simplicity wins in service delivery design for those facing healthcare challenges.

Third, for a growing number of people, brushes with the justice system can lead to profound financial consequences. Anne Stuhldreher, Director of the Financial Justice Project for the City and County of San Francisco, described a first-in-the-nation effort embedded in government to assess and reform fines, fees, and financial penalties that have a disproportionate adverse impact on people of modest means and communities of color. The population of justice-involved individuals is not small: 1 in 3 adult Americans has a criminal record—more than have a college degree—and 11 million have had their drivers’ licenses suspended for unpaid fines and fees. The financial consequences can be dire: For example, 40% of people who lose their license lose their job.

Credit unions are already positioning themselves to support vulnerable populations like justice-involved individuals and their families—with potentially outsized spillover effects. Understanding how to meet members’ needs as they face these complex challenges will allow credit unions to elevate their member service and experience across many more traditional lifecycle and lifestyle transitions: the first car, college, marriage, buying a house, retirement, and the end of life. Focusing on serving credit unions’ most vulnerable members ensures that credit unions will be able to serve all their members better.

What are the credit union implications?

• Revisit your value proposition. What would your products and services, and market positioning look like if your credit union focused on supporting member well-being, managing moments of financial transition, and reducing financial precarity? Use this approach to differentiate your brand and drive member engagement.
• Listen and learn to better align with member needs. Pay closer attention to members’ experiences and moments of financial transition. What assumptions do you and your staff need to strike down? What do the research and data reveal is taking place in members’ financial lives? What types of products and services could better address needs and reduce financial precarity?
• Consider moments of transition. Explore how your credit union can better address members’ financial needs for “lumps” and “flows” to support, for example, an unexpected and large medical bill, or income volatility.
• Set well-being benchmarks, measure for them, and iterate. Setting the right KPIs and measuring member well-being, especially from a holistic lens, takes dedicated time and focus. This will help you understand what levers your credit union should pull, what adjustments to make over time, and grow impact.
• Simplify the member experience. There is a large fraction of unbanked and underbanked consumers who stand to benefit from the credit union difference. How can you make your offerings and member service transparent and simple to understand? How can you build trust in members who do not have faith in financial services providers?
• Build and deepen community partnerships. Factors affecting financial precarity draw from a number of big, sticky problems that cannot be solved by any single organization alone. Identify community organizations that align with your mission to improve member and community well-being and work together to improve conditions.
• Tell your story. If you center your value proposition on member well-being and reducing financial precarity for members, don’t forget to share the news!

Filene thanks TruStage for their support for this event.

Filene is deeply appreciative for support for the Center for Consumer Financial Lives in Transition from CUNA Mutual Group, PSCU, BCU, and DCU.