In Collaboration with Commonwealth
Cross-sector collaboration and innovation are critical to addressing the widespread, pervasive challenge of financial insecurity. Over the last year, Commonwealth has been proud to partner with MassChallenge FinTech (MCFT), a Boston-based program that facilitates outcomes-driven partnerships between startups and enterprises to advance innovation in financial services. Commonwealth's work with MassChallenge FinTech has been made possible with support from BlackRock's Emergency Savings Initiative. As a social impact partner, Commonwealth lends expertise and insights to MCFT entrepreneurs and corporations that want to help their customers and workers build savings and be financially secure. While we look ahead to 2021, together we’ve reflected on the key takeaways from last year’s program and why 2021 is shaping up to be the year that fintech makes financial security a top priority.
Key Takeaways from MCFT20
1. Social Impact and Business Value Are Interconnected.
MassChallenge FinTech utilizes a “reverse pitch” model, where each year MCFT works with their corporate partners across banking, asset management, insurance, and other sectors to outline each partner’s focus areas, or “challenges,” for startup collaboration. For the 2020 program, multiple corporate partners, such as AARP and MassMutual, issued challenges focused on helping customers build savings or improve their overall financial wellness. These objectives were not just seen as CSR or social impact goals, but were business imperatives that aimed to reach and serve a broader array of consumers.
Since the pandemic began mid-program, COVID-19 has underscored to MCFT and Commonwealth the ways in which other aspects of life, including physical health, intersect with financial security. A Commonwealth survey conducted during the COVID-19 pandemic found that 42% of people who have been saving for emergencies have withdrawn from those funds over the past seven months. Making sure that Americans have the financial cushion necessary to make healthy work, childcare, and education decisions is key to overall well-being. As we have seen in 2020, Americans are looking for financial services organizations, government, and employers to help address their pressing financial needs, and all companies should make this an essential part of their business.
2. The Financial Services Industry Can Pivot Quickly to Address Pressing Needs.
Recognizing the important role innovation plays in times of crisis, in March MassChallenge FinTech continued its 2020 program virtually. As the pandemic’s related economic challenges became apparent, startups and MCFT corporate partners moved quickly to serve their customers in new ways. For instance, startups in the MCFT20 cohort offered free solutions to small businesses and customers, as well as adapted their technology to support lending and payment deposits related to the CARES Act. The financial services industry handled this unprecedented event with speed and responsiveness—which prompted MCFT and Commonwealth to ask: how might fintech apply this kind of agility to address other pressing challenges, such as the savings crisis and the racial wealth gap?
3. Partnerships Are Key to Innovation.
At Commonwealth, we focus on building partnerships and collaborating effectively in order to pilot new ideas and drive innovations to scale. Commonwealth partners with fintechs to better understand financially vulnerable people and design financial products that fit their needs. This same emphasis on partnerships and bringing fintechs and corporate partners together is what inspired us to join MassChallenge Fintech.
Using MassChallenge FinTech’s reverse pitch model, each startup in the cohort works directly with one or more financial services partners throughout the 6-month program (and in most cases, beyond). From long sales cycles, to buy vs. build debates, to security and compliance hurdles, MCFT recognizes the challenges inherent in corporate-startup collaboration but believes in its potential for impact. In light of the pandemic, 65% of the MCFT20 cohort launched or will launch a pilot/proof-of-concept by the end of 2020. To date, the program has facilitated well over 100 startup-partner engagements in its 2 year history.
In our first year with MCFT, Commonwealth engaged 10 MassChallenge finalists to explore how to reach underserved consumers and increase financial security for all. MCFT20 alum Zogo Finance, for example, is a financial literacy app that offers gamified solutions for banks and credit unions, and Commonwealth leveraged our deep experience collaborating with credit unions on launching prize-linked savings products to help Zogo deepen their thinking around tying gamified financial literacy to action taking. With MCFT20 alum Summer, a platform to simplify student loan repayment, we discussed how they might help users re-imagine reductions in student loan payments as funds that could be used to build up an emergency savings account. Conversations like these are key to the future of inclusive and accessible fintech solutions.
Opportunities for MCFT21
As MassChallenge FinTech and Commonwealth look toward our second year of partnership, savings and financial security will continue to play a central role. Together we are excited to work with MCFT’s corporate partners to double down on these efforts in 2021, alongside startups, investors, and the broader innovation ecosystem. Several partners, from AARP to Fidelity, are focused on increasing financial literacy and access for their customers, and this year Commonwealth and John Hancock have collaborated to release a joint challenge centered on driving financial diversity, equity, and inclusion by improving accessibility of insurance and wealth solutions for the underserved consumers.
The growing attention on financial security as it relates to racial disparities in wealth and access to financial products offers startups and corporates the opportunity to lead with their values and demonstrate business value. This is a pivotal moment for fintech startups to build greater trust with their users and bring more people into the financial system; it is also an opportunity for MCFT corporate partners to make an inclusive recovery a key business priority.