Fintech Apps Offer First Aid For Hardest-Hit Consumers

On March 18, a couple days after New York City public schools closed due to the coronavirus, Jasmine Freeman Jones resigned from her crossing-guard job to take care of her five children. Her rent on her Brooklyn apartment was overdue, and she had little food to feed her family. She also began worrying about her kids’ education. Although the City promised to send iPads to help them complete the online learning assignments their teachers have given out, the devices still haven’t materialized. 

A week ago, Freeman Jones logged into her Fresh EBT app, which allows food stamp recipients to check their balances without having to call an 800-number. A notification said she would be receiving $1,014 in financial aid from GiveDirectly, a 10-year-old, 250-person New York nonprofit. GiveDirectly is donating $1,000 (plus a few bucks for ATM and withdrawal fees) to extremely poor Americans, and it’s trying to raise $10 million so it can help over 9,000 families. 

When Freeman Jones first saw the notification, she doubted it was true. But then she received a debit card and activated it, buying $300 worth of food, an iPad her children could share for school assignments and cleaning supplies. She’s still concerned about how she’ll feed her family in the coming weeks, but for now, the $1,000 check is “like a weight off my shoulders,” she says.

Fintech plays a critical, behind-the-scenes role in this story. To identify qualified recipients quickly, GiveDirectly partnered with Brooklyn fintech startup Propel, whose Fresh EBT app has more than two million low-income users. With GiveDirectly’s guidance, Propel is homing in on the poorest zip codes that have been hardest-hit with coronavirus cases—including New York, the San Francisco Bay Area, Seattle and New Orleans—to decide who should get paid. 

Fintechs have long touted their ability to make financial services faster, cheaper and more accessible, and Propel is just one of many that are making good on those promises during this economic crisis.

Even is an Oakland, California, startup whose app helps people budget and access earned wages early so they don’t have to wait two weeks for each check. Even works with employers like Walmart WMT and restaurant chain Noodles and Company, which offer the app as a subscription service to employees. Employers usually pay part of the subscription cost, and employees pay the rest. For example, Walmart’s workers normally pay $4 a month for Even, although the retailer recently waived that fee due to the coronavirus and is now covering the full cost. More than 500,000 Walmart employees log into Even each month.

In this new economic environment, Even CEO Jon Schlossberg has redirected his engineers to focus on faster access to earned wages. Previously, users could only take out money once per paycheck. Even created that rule to force its users to plan ahead, instead of relying on frequent earned-wage withdrawals. But in this crisis, millions living paycheck-to-paycheck have lost their jobs, so they need money immediately. Even now lets users take out money every day if they’d like to and if the employer permits it. The once-per-paycheck limit might come back when the crisis ends, Schlossberg says. Even doesn’t charge an extra fee for earned-wage withdrawals. 

For the small set of industries that are seeing strong business demand and a thinly stretched workforce during the COVID-19 outbreak, like grocery stores, hospitals and lab-testing companies, Schlossberg has been contacting them and offering Even’s service for free, with no obligation to renew once the crisis ends. 

Digit, a San Francisco company founded in 2012, helps people save money by automatically moving cash from their bank account into a separate account. It analyzes their income and expenses to determine how much a user can safely siphon off. Linnea Nelson, a 42-year-old cybersecurity consultant living in Chicago, started using the app in 2015. Back then, she hadn’t been managing her finances well and had no savings. But as her income grew and she kept the app turned on, she accumulated $60,000 in her Digit account. 

When Nelson’s sister, who has four kids and lives in Tucson, Arizona, saw her childcare expenses spike due to schools being closed, Nelson started giving her $1,500 a month to cover the costs. She’s also sending bulk orders of food from Sam’s Club and Amazon AMZN to three of her elderly relatives.

SaverLife, formerly known as Earn, is a San Francisco nonprofit with 250,000 members that offers incentives to hit savings goals and is free to join. One current online contest: If you save $100 by April 30, you could win another $100. Nicole Sifford, who works in customer service at United Health Care in Atlanta, used SaverLife to help sock away $1,700 over the past year. A few weeks ago, after her husband lost his warehouse job due to a shelter-at-home order and her children’s schools were closed, her household income shrank and expenses rose. Since then she has used her $1,700 in savings to help feed her family. Now she’s down to about $1,000. “I’m happy I had those couple extra dollars put aside for a rainy day, because the rain does come,” she says. 

Last week, SaverLife also announced a partnership with Wells Fargo WFC and financial coaching service Neighborhood Trust to provide $1 million in financial aid. They’re giving out $500 checks and providing financial coaching to 1,000 small businesses affected by the coronavirus. 

San Francisco digital bank Chime is offering $1,200 in paycheck advances to 1,000 of its users while they wait for their $1,200 government stimulus checks. Atlanta-based online lender Kabbage started a program that lets consumers buy gift certificates from restaurants, trying to give them much-needed cash. They’ve facilitated nearly $50,000 in gift card purchases so far. Square SQ launched a similar program, and it has encouraged the government to use its Cash App to distribute stimulus checks more quickly. And saving app Acorns is putting out personal finance advice, including a daily newsletter and a stimulus check calculator, to help people navigate the economic downturn.

Source: Forbes – Money