‘We see more and more nonprofits adopt the fintech model’: Prudential Financial’s Sarah Keh
- Large financial organizations are increasing their work in their communities and with inclusivity.
- Prudential's Sarah Keh joins us on the podcast to talk about her work with nonprofits and the city of Newark, New Jersey.
During the pandemic, many for-profit companies and startups started creating digital tools to help people manage and save their money — things like getting access to products and services that support their financial health, like financial coaching.
At the same time, underserved and low-income consumers — typically left out of traditional banking — are increasingly gaining access to mobile and online technology, creating opportunities for nonprofits to participate in fintech.
Sarah Keh, vice president of inclusive solutions at Prudential Financial, believes that nonprofit fintechs provide critical services to underserved communities that have otherwise been marginalized. She joins me on the podcast to talk about the impactful work that’s going on in the sector. We discuss how they’re combining revenue sources through enterprise customers in order to grow and scale their business without solely relying on philanthropic funding, which can be unreliable. Sarah shares more about her role at Prudential and the work her firm is doing in the space.
Sarah Keh is my guest today on the Tearsheet Podcast.
My name is Sarah Keh, and I’m a vice president of inclusive solutions here at Prudential Financial. Prudential is a global financial services firm. We have really been founded in the principle of equity. From our starting point, our founder, John Dryden, created a product that was [previously] inaccessible for people from low income communities: burial insurance. He really created a social enterprise when he first started the company. That ethos of social responsibility still remains within the company.
The group that I work in — inclusive solutions — helps the company drive inclusive economic growth by leveraging our talent and our investments in the capabilities of our businesses. And we leverage a couple of different resources, which includes philanthropy, corporate contributions, employee engagement opportunities, but also leading the inclusion and diversity strategies and approaches within the enterprise — all working to ensure that we are helping everyone achieve financial security, that we’re helping to close the financial divide.
We are really looking at ways where profits and social progress don’t suffer, but work together to benefit our shareholders, customers, employees and communities.
Inclusivity across the enterprise
It’s a model that I see a lot of companies moving towards. Maybe a decade or so ago, inclusive solutions, whether it be corporate social responsibility, inclusion, or diversity, used to be kind of on the side of the business as a nice thing to do. You need to be a good corporate citizen, but really didn’t have much engagement with the rest of the enterprise.
What we’re seeing with our team, and especially with other companies, as well, too, is that we’re becoming more and more embedded in the overall business strategy, the operating model, really thinking about how it can’t just be profit for profit sake, but really thinking about how you drive social progress. How do you really think about the societal challenges that can have business returns and provide business value at the same time.
So we work really closely with all of our business partners, whether it be our individual business lines, like individual life insurance or international insurance, business or asset management, or some of our corporate functions, whether it be human resources or external affairs, to really make sure that people are thinking about the purpose of why we are in this business and to think about how we build better consumer insights. How do we customize the products and services — really –so that we’re driving both progress and financial returns at the end of the day?
Prudential in the non-profit sector
The work that I specifically oversee is our strategic philanthropy, what we call our shared value partnerships, of embedding the work that we do within our businesses, and our employee engagement efforts. We have a strategy around four pillar areas. One is about making sure that people are connected to high quality skills training programs. We know that people from low income communities often don’t have the financial means or access to high quality skills or training programs. So really making sure that that connects to a good job. We really think about the ways of incentivizing employers, whether they be small to medium sized businesses or large corporations, to provide good benefits for workers. Then we look at where the portfolio of work that’s most aligned with credentials, on products and services, and making sure that people from low income communities have access to responsible financial products that build their wealth and protect their assets.
Then we take a localized view. We were founded, and we are still headquartered, in the city of Newark, New Jersey. And so really thinking about how we make sure Newark overall is a thriving and vibrant city. We work very closely with the mayor’s office and city agencies to improve public education, public safety, workforce development, building up the small business ecosystem, affordable housing development — really anything that you can think of when you’re thinking of a thriving and vibrant city.
The fourth area that we focus our efforts on is disasters and humanitarian crises. Especially in those locations, where Prudential has a presence globally, we support the immediate relief efforts, but then also recovery and redevelopment. So in today’s time, right now, with everything going on in the world — with a crisis in Afghanistan, the earthquake in Haiti and all of those other issue areas that we’re looking at — how do we provide immediate support?
One of the organizations in our inclusive workspace is Social Finance, which is a nonprofit organization that’s really been a pioneer in outcomes based financing models. Outcomes based financing really ties success metrics to the investment that you’re making upfront. So in the workforce development space, oftentimes, particularly when it’s public funding, governments will support workforce development organizations to provide the training and they’ll provide the funds upfront. But there are no consequences if the people that they trained did not actually get a job at the end of the day, so that it was just training for training sake.
What these outcomes based financing models are doing is that they’re tying the investments to say you actually have to make sure that these people are being placed into good jobs to actually receive the full value of the investment. So whether it’s split up in the terms of how much money is given up front, or career impact bonds, where private investors put up upfront money to cover the tuition costs for low income individuals to participate in some high quality training programs. And if, and only if, they receive a job at a certain salary rate, do they start paying back that tuition, so it helps defray a lot of the student loan crisis that we’re seeing, really making sure that it’s being tied to outcomes, and people are actually receiving jobs at the end of the day. That’s one example.
On the talent side of things, another example is in our hometown in Newark. We helped launch an organization a couple years ago called the Newark Community Street Team that’s really working in the public safety space, looking at how we make sure that we’re creating safe passage ways. That communities are not being overwritten with violence and crime. What the Newark Community Street Team does is they take people who have been recently released from prison, or community members from that local neighborhood, to help them police the neighborhood to really say, like, we’re going to be here, especially when a crime is committed. They make sure that a person will not retaliate against a crime that was committed against them. They help make sure that students have safe passageways from their homes to their schools. And they’ve done so much good work that last year. I don’t know if you saw the national news that no police officer in the city of New York fired their gun during all of the protests of Black Lives Matters. There was no violence during those times in Newark. And that was a result of a lot of the work that the team had done in building trust with the community and the police officers on the ground.
This last year has really laid bare the vulnerabilities and the fragility of the public and individual workers here in this country. We know 67% of employees report being financially stressed while they’re working. Close to 40% of Americans don’t have $400 in emergency savings, and 60%, don’t have $600 in emergency savings. So most people in this country are one crisis, or one accident, away from being in financial crisis. The reason why we’re so focused in this space is that so many individuals require support services and solutions that meet those needs — they have been traditionally excluded from products that have been designed to build wealth in larger institutions.
We have found over the last five years, we made an intentional effort to really work with nonprofit organizations to think about how they can shift some of their services and products and solutions in a digital platform. That was incredible in hindsight. This was something that we had not pre-planned, but during the Covid 19 pandemic, they were easily able to switch so many of their services because they had already been working on their digital platform.
A couple examples that I would provide in our portfolio is tha we work with an organization called SaverLife, and they utilize gamified saving challenges and digital financial tools to help people save, because one of the top financial concerns we always hear about is the lack of emergency savings. We know that just having $250 to $500 makes people less likely to fall into debt. SaverLife uses this digital platform that anybody can access online or on their mobile phone to start saving and get incentivized to these private saving programs. They have become so successful that many companies now — Intuit, Kentucky Fried Chicken, Levi’s, credit unions, and nonprofits — provide this type of savings program to their employees.
Another example that I’ll give is that Neighborhood Trust Financial Partners has been a longtime partner of ours, as well. They initially started in New York City. They provide live financial coaching to individuals, and it was one for one in person. We worked with them to create a tech enabled platform called Trust Plus that provides workplace-based financial coaching, but virtually over the phone, online, on your mobile. They help individuals create their financial plans to reduce debt, build savings, and pursue goals, like higher education or home ownership. They have been able to triple, quadruple the number of people they’re serving now. They’re not only serving people in New York City, but across the country. They’re now in about 46 states. They work with large employers like Cigna and benefit platforms like the National Domestic Workers Alliance. They also partner with fintech companies to provide financial coaching with emergency savings.
The last example that I’ll give is another organization called Moneythink. What they’re really looking at is how we help with the student loan crisis. We know that less than 5% of four year colleges are considered affordable for low income students. And 70% of college dropouts leave school because of financial concerns. Moneythink created a digital tool called DecidED. It’s basically an online or mobile app that once students get accepted to colleges, they can upload their acceptance letters and their financial aid packages, because we know that oftentimes, they’re quite confusing. They have a lot of information. And you can’t necessarily decipher them because colleges and financial aid service providers provide different information.
DecidED takes all of that information for the student, and they let them know exactly how much it will cost you over the four years to attend that college. They’ll also take information about your household income and say, here are your best affordable matches. Because we know that that’s a big decision for students to better understand their own financial circumstances and get a sense of which colleges are best meeting their needs around that area.
Racial wealth gap
When the fintech sector initially boomed, nonprofits had some trepidations and thinking about whether this would be applicable for their constituents. But we see more and more nonprofits embracing the fintech model, then also partnering with for profit fintech companies to bring their products and services to their constituent base. I think it’s a great match — there’s sustainability and scale with fintech models. I gave the example of the Neighborhood Trust Financial Partners, where they were only able to serve people in New York City when they were doing live coaching. But because they were able to switch to this digital platform, now they’re serving over 100,000 people across the country. And so that scale, that exponential, is in embracing the digital platform.
I think there is a misconception that nonprofits should only provide services and never return a profit in any way, shape, or form. We firmly believe that nonprofits should be thinking about program revenue streams, social enterprises within their model, because they’re not making the profit to grow as an organization, but they’re using the profit to then reinvest in the programs and services, to better meet the needs of their constituencies. A lot of times when they have these fintech models embraced by these organizations, they’ve been able to bring in additional revenue streams, grow their business model or products or services to be able to serve more people.
In terms of closing the racial wealth gap, we know that mainstream financial institutions are not necessarily well equipped to meet the financial challenges from people from low to moderate income levels. People oftentimes think that low to moderate income individuals are a monolith. There are quite big differences whether you’re looking at it from a racial or ethnic demographic, a gender lens, or if you’re looking at it from just pure life events where a young mother is going to have very different challenges than an elderly individual who has been under employed for quite some time. Nonprofits can be really close to their constituent base. A nonprofit, if they are successful, has the trust and credibility in their communities where communities can be a little bit cautious about fintech companies or new startup models. How do you make sure that these two sectors are working together — whether to create products together or really thinking about the solution in a more holistic manner?
Growth and scale
Digital infrastructure is a major barrier for nonprofits to really embrace that fintech model. Oftentimes, because nonprofit organizations are so much on the ground working with each constituent one on one, they haven’t had the time or the capacity to build up a digital infrastructure, because you can’t just develop a product and say, it’s great, and people will utilize it. There’s so much that goes behind the scenes and maintaining it, ensuring that it’s being distributed. That’s been one of the major barriers of more nonprofits embracing the fintech model.
I think there are also digital barriers. For nonprofits working in low income communities, not everybody has access to broadband, not everybody has access to mobile phones. How do you understand what your constituents need? Even if you build a really successful digital product, are you actually going to be able to have people accessing that? In general, there’s still some unawareness about the field regulatory issues. And then, ultimately, concern around security and privacy — how do you safeguard the trust that these nonprofit organizations have earned with their constituents? We hear all about data leaks and all of that kind of stuff around cybersecurity. People sometimes are cautious about entering into a fintech type of product or solution. But on the flip side of that, the opportunities to grow and scale is pretty limitless in the sense of, if you’re able to build the right infrastructure, if you’re able to make sure that your communities have access to these digital tools, the ability to gather data, the ability to provide really customized solutions when you’re looking at data analytics, instead of also just creating monolith products. I think there are so many opportunities to make sure that your products are thought about in a really customized way with the consumer at the heart of it.
I think the core of what they do is really looking at how you make sure that policies at financial institutions that have historically excluded people of color are creating pathways to wealth building opportunities. These type of income inequities compound with generations and the lack of access to home ownership and retirement savings. So these nonprofit organizations, whether they’re embedding these fintech models or working with fintechs on these types of products and solutions, are democratizing that in ways that we haven’t seen before. Previously, you could only get a bank account at large financial institutions. And now we have all these digital payment apps and ways for people to save and also build up their credit. Those are things that were oftentimes out of reach for so many people.
What these nonprofits and tech models are really looking at are what had been systemic barriers that had limited ability to service people of color and low income communities. How do we make sure that they’re building up their assets so that it is moving from one generation to the next? I think nonprofit fintech models have a unique space where they are so close to their constituent base.
We support another organization called the Financial Health Network, which has a fintech incubator arm called the Financial Solutions Lab. And one of the programs that they actually piloted a couple years ago is the Nonprofit-Fintech Exchange. And that’s taking for profit fintech organizations to work with nonprofit organizations, whether it’s because the nonprofit is building up its own fintech model, or they’re helping that fintech reach an increased customer base through their relationships that they have.
I think that’s so incredibly important because, oftentimes, [for-profit fintechs] also have an impact investment arm — for profits and nonprofits are often working towards the same goal, but they never talked to each other. They’re working on these parallel paths.
So how do we bring the two sectors together to really make sure that we are solving this great need that’s out there?