Self Financial is an innovative fintech company focused on helping people build credit while saving money. The company believes access to credit and the opportunity to build good credit at a relatively low cost are critical for increasing economic inclusion and financial resilience. In 2020, Self partnered with BlackRock’s Emergency Savings Initiative to move its customers further along the path toward financial resilience. Working with the initiative, Self is testing new methods to improve savings with its customers.
Credit and savings have been very different products traditionally, but Self links the two. What is the problem you’re solving by doing that?
Building good credit history and building savings are similar in that they depend on a commitment to making repeated actions over time. And while both savings and credit are options for consumers to use when making purchases large or small, the ramifications of lack of access to either option become acute in an emergency. Many people who have bad credit also have very little savings. They may not have or be able to get a credit card to help cover those temporary expenses, and their savings may not be enough. That puts them in a fragile position where they need to turn to more expensive or even predatory options, risking an even worse financial situation.
Self’s Credit Builder Account enables consumers to tackle both credit and savings at once, working toward greater financial resilience. Many of our customers have goals in mind when they work with our products. They want to be able to access a credit card, or to improve their credit to help both with a down payment on a car as well as access to better financing on their car loan, for example. Some customers just want better credit so they have more options, while others use the savings as a rainy day fund.
What trends or issues stand out to you when you look at customer behavior around credit and savings?
The biggest issue is when people run into unexpected hardships – job loss, for example, or a medical issue before they have much chance to make progress on their credit and savings.
Conversely, it seems that people who have a clear goal or who have otherwise found the motivation to make a change in their lives find a way to keep making progress month after month. For instance, we see consumers making clear commitments to our product at a higher rate in January, February and March, which coincides with establishing New Year’s goals as well as obtaining tax refunds. Our customers already are committed to the long haul of financial health, and with income volatility throughout the year, a little extra disposable income and motivation helps them make the right commitment to save and build credit.
What role do you see savings playing in building their financial health?
Savings give people options for managing unexpected expenses or achieving longer-term goals. Having savings lets people choose when to use credit and avoid expensive or even predatory short-term loans. Knowing that they have options can also provide mental and emotional benefits, like reduced anxiety and increased confidence.
Who are you serving and what kind of success have you seen? What are the greatest obstacles to success?
We’re serving people who have had a lot of negative experiences with the financial system. Our customers tend to be living paycheck to paycheck on low to moderate incomes, have credit scores below 600, and do not have much savings, if any. They also represent historically underserved communities in the U.S., as 50% of our customers are Black or Latinx. Many of our customers have long-term goals, the most common being the purchase of their first home.
While a big obstacle is that many customers don’t have wiggle room in their financial lives, there are also softer issues such as the lack of financial literacy, distrust of financial institutions, and a sense of hopelessness about their financial situations.
We’ve seen the greatest success with customers who see our products through to the end. Many of them see a positive impact on their credit history, but we also get a lot of feedback about their feelings of pride and accomplishment when they see results. While our customers do the work themselves, we also often hear that our nudges and content help, too. Our products enable access and affordability, allowing our customers to take control of their financial lives.
If you would like to learn more about creating a savings intervention in your organization, please contact the ESI team to discuss how you can work with BlackRock’s Emergency Savings Initiative.
BlackRock’s Emergency Savings Initiative
BlackRock announced a $50 million commitment to help millions of people living on low to moderate incomes gain access to and increase usage of proven savings strategies and tools, ultimately helping them establish an important safety net. The size and scale of the savings problem requires the knowledge and expertise of established industry experts that are recognized leaders in savings research and interventions on an individual and corporate level. Led by its Social Impact team, BlackRock is partnering with innovative industry experts Common Cents Lab, Commonwealth, and the Financial Health Network to give the initiative a comprehensive and multilayered approach to address the savings crisis. UPS, Uber, Mastercard, Etsy, Brightside, Arizona State University, and Acorns have joined BlackRock’s Emergency Savings Initiative to help their employees, customers, gig workers, and college students take the essential first step toward long-term financial well-being.