In order to move people up the economic ladder, income is one thing, but wealth is a big part of that picture.
Few could have predicted that Leigh Phillips, a British national who graduated in literature, would end up working in the FinTech sector in the United States. She tells us: “My brother had moved to San Francisco and I came to visit him and I thought, ‘this is such a cool place, I want to move here too,’ though I didn't really know what I was going to do with myself.” After finishing her degree, the young Brit first worked for a while as a dog-sitter and at a toy company before deciding: “I should probably think about doing something more serious.” She was particularly interested in working in the public sector or a non-profit organisation and one day, she recalls: “A smart friend of mine said, well, if you want to work in a non-profit you should learn how to raise money. And you should try to do it somewhere with a good name.” So Leigh Phillips first took a job at the University of California in San Francisco (UCSF). One of her colleagues there informed her that his husband, José Cisneros, who had just become the Treasurer of the City and County of San Francisco, was looking to hire people. She tells us: “At the time I wanted to be a writer, that was my other goal in life, and I thought maybe I can go and work for the Treasury and have a job at City Hall, and write on the side – it could be fun.”
However, fate decided otherwise as Leigh Phillips found herself working on a job that really excited her. She explains: ”The Mayor at that time, Gavin Newsom, asked the Treasury to set up a tax credit programme for low-income families, and I took on that project.” The project really took off, “becoming a programme to bank the unbanked, and our office then became one of the first financial empowerment offices, dedicated to helping low-income people achieve more financial security and stability.”
Over an 11-year period, Leigh Phillips worked through the Bank On programme to help several thousand people obtain their very first bank account. She underlines: “It went national, with over 100 banks on programmes across the country. We also launched the first children’s savings programme. In San Francisco today, every child in public school gets a college savings account in their name and their family have the opportunity to save and match funds.”
Then, after running the Financial Empowerment Office of the city and county of San Francisco and serving on the board of a Fintech startup called Level Money, in September 2015 she was appointed CEO of EARN, a partner organisation whose mission is precisely to encourage people to save and invest.
- 1 min
CAN’T COVER A $400 EMERGENCY EXPENSE
EARN was set up in 2001. Leigh points out that “around 40% of the people of this country don't have $400 in savings to cover an emergency. Basically, that means that almost half of us couldn't cover an emergency of 400 dollars or less without going into debt.” She underlines: “That means that you can't, anytime anything happens that is unexpected, if you get a flat tire or you missed some days at work because you were sick or your kid was sick, a medical emergency, whatever the case may be, you're going to end up in debt or whipping out all the little savings that you have.” This precarious picture illustrates the need to educate, encourage and help less-well-off people to put some money aside for a rainy day. This approach is especially vital in a country where the Welfare State is practically non-existent. Explains Leigh Phillips: “The idea is that in order to move people up the economic ladder, income is one thing, but wealth is a big part of that picture. So the opportunities to invest in yourself either through home ownership, small business entrepreneurship, education for yourself, your child, these are the things that help people to move up the economic ladder, experience that kind of mobility.”
Back in the days when EARN was first set up, “the Federal government had launched a programme that matched savings for low-income people, as long as the money was invested in housing, business, or going back to school.” Leigh explains: “EARN was an Individual Development Account, so if a family saved a dollar, the Federal government would contribute a dollar and philanthropist would also contribute a dollar. And you could do these matches until people were able to make a down-payment on a house, start a business etc.”
The Federal government programme lasted until two years ago. Meanwhile EARN had given a leg-up to many people from disadvantaged sections of the population by trying to find the right balance between motivating people and providing them with financial assistance in their bid to achieve a more comfortable existence
So for close to 13 years, EARN had been working to meet its original goal, assisting some 6,000 people, “which was great but not even scratching the surface of what we needed to do,” stresses Leigh Phillips. So EARN’s founder, Ben Mangan, started to think about how technology could play a role in scaling these types of savings programmes and then brought Leigh on board in 2015 to carry through the necessary changes. She tells us: “The main goal was to use financial technology in a way that could help support people who were often excluded from mainstream financial products and services, and to do that deliberately and exclusively.”
Nowadays EARN’s SaverLife programme enables participants who manage to save at least $20 per month over a period of six months to obtain an extra $10 a month as an incentive to continue saving. Leigh reveals: “When we launched that product we had a lot of people who were signing up but were not saving and then we learned from them that they didn't think they could afford $20 a month right away. So SaverLife has now become an online community where you can sign up even if you're not able to or not ready to save yet. There are resources, videos and a financial coaching series that everyone gets, you get a weekly email with coaching tips. We work with a really terrific financial coach who provides that content for us.”
- 1 min
We’ve learned through the years that lower-income people can save money when given the right incentives and the right support.
In order to make use of this service, “you need an email address, an Internet connection. Most of our folks – about 99% – use the programme via smartphone or tablet. And you need a bank account with online banking. We use data aggregation technology that allows us to connect to thousands of different banks.”
EARN endeavours to break down all barriers and simplify the process in order to reach as many low-income people as possible. Leigh acknowledges that “there's obviously the role of the individual and how they manage their resources,” arguing however: “But the system in which we operate is not well-designed for the success of lower-income people. Bank accounts often come with high fees and most of the folks that we've worked with have a lot of volatility in their incomes – they’re not consistently paid the same amount of money every week. If your pay check is always changing, that makes it very difficult to pay the bills on time, to save and to plan ahead.” The non-profit is now striving to make further headway with the help of the FinTech tool. EARN is hoping to influence the system by highlighting success stories and factual data illustrating “what we’ve learned through the years: that lower-income people can save money when given the right incentives and the right support. People do save $550 dollars in six months,” points out the CEO.
After that, a virtuous circle is set in motion. “They are then more likely to budget, to save consistently, to live within their means.” The use of digital technology has certainly helped to boost EARN’s overall impact, and more and more people are seeing their lives improve.
have benefited from the SaverLife programme
Leigh points out: “Since we launched SaverLife we’ve gone from helping 6,000 people in 15 years to over 100,000 people in just two years.” In fact, 60% of the users who connect up their bank account save around $550 dollars within six months. As regards the average background of the programme beneficiaries, “it's national, we have savers in all 50 states and 84% of our savers are women. Last time I checked, average income was about $25,000 dollars a year, so we are definitely hitting our target demographics,” claims Leigh Phillips.
In order to help those most in need of the service, EARN enters into partnerships and targets its audience carefully. For instance: “Last summer we launched a SaverLife campaign, with the city of San Francisco. The goal was to get a thousand people in SF to sign up and start saving so we partnered with City Hall. And we're launching SaverLife Nevada, so the whole state of Nevada is gonna be doing a SaverLife campaign,” she reveals. In fact, the SF-based non-profit works hand-in-hand with a variety of partners. ”We partner with over a hundred different non-profit organisations across the country to help get the word out. We also partner with other FinTechs, and that has helped us. We have partnerships with LendUp and Propel for instance, and we're promoting our products to their clients,” explains Leigh Phillips.
EARN also cooperates closely with employers. She reveals: "We’re now taking on a new project, getting companies to offer SaverLife to their employees. We have a target and a budget for that number of people. Sometimes we already have funding and are just looking for partners, but it depends – sometimes we ask the employers to match their employees’ small amount of savings.”
Companies have a lot to gain from this approach. She explains: “Right now, a lot of employers have been coming to us. They've heard about SaverLife and they know that employees who are more financially stable and secure are better employees – they miss fewer days of work, they’re more focused on the job. So, there are a lot of employers who really want to help their employees with their financial health."
One example is the Levi Strauss company, which has agreed to match 1-1 the sums saved by employees who have signed on to the SaverLife programme, up to a maximum of $40 per month per employee.
EARN has thus switched from being a traditional charity organisation to a not-for-profit FinTech firm. “We're no startup, we've been doing it for a long time now, and we're a non-profit, and that's where our strengths come from. We've learned a lot over the last 17 years and now how we're doing it has changed but the reason we're doing it remains the same,” stresses Leigh Phillips. The company is having the same kind of impact as a FinTech firm but minus the pressure to make money from the service and they have an intimate knowledge of their beneficiaries. Meanwhile, the main thing they have learned over the years, says the EARN CEO, is that “being able to save money and invest in yourself really transformed people, not only because of the money but also how they felt about themselves and how positive they felt about their future, that they felt in control of their future, so we'd see really great results coming from this relatively simple act of saving money.” To underline her point, she cites figures published by the Urban Institute think tank showing that “people with $250 to 750 in savings are significantly less likely to be evicted, to fall behind on mortgage payment and utility payment. It's four times less likely.” In the absence of a safety net, a vicious downward spiral can be triggered by a sudden need for what might seem a rather insignificant amount of money. For instance, “if you think about getting a speeding ticket or your car getting towed away, and you can't get to work or can't pay the fine, you lose your driver’s license and your job.” In order to avoid this kind of vicious circle, EARN wants people to go the opposite route – surfing a positive wave of change and hope. “We know most of our clients may be struggling financially, but they feel inspired and positive about making changes,” insists Leigh Phillips, explaining: “We try to build on the incredible power of resilience that people have, to make it work. Most of the time they’re saving for their children, so their kids can have a better life.”
The goal: saving money
Going forward, EARN’s goal is “to reach at least 250,000 people by 2019. We're just getting started, and we're on track to figure out the best way to reach people,” claims Leigh Phillips, revealing:” We've been doing a lot of experimentation with different savings incentives, such as: is a small regular match the best incentive or is it better to have prizes?” She goes on: “We want to build a community, so as to have more engagement with our clients. And we do a lot of research, we have a research series called Big Data on Small Savings.”
Meanwhile, on the basis that there is strength in numbers, EARN has also banded together with other non-profit organisations in the FinTech sector to form a group called Non-Profit Leaders in Financial Technology, which is part of the Aspen Institute network. Leigh tells us: “I worry when people start talking about this big technological revolution and, you know, how FinTech is disrupting banking and all that kind of stuff, but now is a great moment to really focus on that change and think about what kind of economy do you want to have, how do we want to build that more inclusive economy… and if we don't have the voices of under-represented people at the table, it's just not going to happen.”
And what plans does she have on the personal front? She confides: “Just returning to work and now having a daughter, I’m definitely thinking about women and leadership goals, trying to set a good example here for my team and for my family. I'm thinking about who will be supporting me and my family, a lot of the time it's other women who are providing childcare, helping with domestic work, helping us get groceries delivered when we’re too busy, and I find myself thinking a lot about how we can lift up the women who make it possible for women like me to be successful.”
That’s quite a programme... and it seems to be working!