Rebuilding America’s Safety Net: Always look for the helpers

By Theodora Lau and Bradley Leimer of Unconventional Ventures 

Between the thin veil of the stock market rally lies the tale of two Americas with a growing inequality: the privileged and the poor, the overbanked and the underbanked, the silver spoon and the safety net.

With the unemployment rate in urban centers hovering around 20%, hardship has hit major metropolitan areas, including Los Angeles and New York, with 1 in 5 Americans in the labor force unable to find work.

Even during a pandemic, it seems that the poor always suffer the most — especially Black and Latinx communities, as well as women — who have less wealth to fall back on.

Rebuilding America’s Safety Net

The impact of growing poverty and inequality will likely get worse, before it gets better.

“According to new research from Columbia University’s Poverty Center, poverty levels in the U.S. could be the highest they have been in 50 years, including during the Great Recession. And the rates are expected to rise twice as much among Black Americans, widening already skewed economic disparities.”

With more than 30 million workers collecting unemployment benefits, according to the Labor Department, the U.S is experiencing the first increase in new state jobless filings since early in the pandemic. Many of those impacted are receiving safety net benefits for the first time. But with the $600 federal unemployment boost from the CARES Act gone, the average American will see 65% drop in unemployment benefits; some workers are now left with just $5 a week.

The average American household is still adjusting to this new economic normal, and the reduction in cash benefits will have significant impacts — with many households struggling to pay rent or getting enough food to eat, even prior to losing the additional $600. What more should the public sector do? What more should the private sector do? What more can we do in our own communities?

A critical lifeline

For 40 million low-income individuals and households, SNAP (Supplemental Nutrition Assistance Program) is the largest program fighting food insecurity in America. While technology alone cannot solve poverty, it can play a much larger role in building safety net services and restore financial health.

And therein lies the mission of Propel with its Fresh EBT app, which is used by Americans across the country to manage their SNAP benefits. With many low-income families concerned with the stability of their housing and the ability to put food on the table, this New York-based fintech startup saw their active monthly users increase to 3 million Americans.

Shortly into the pandemic, Propel collaborated with Stand for Children and GiveDirectly to form Project 100, with the goal to raise $100 million in order to provide $1,000 cash directly to Fresh EBT users, with no strings attached.

This effort has been the most ambitious COVID-19 private direct payments initiative to date in the United States, helping those families most in need pay for rent, cleaning supplies, and food. The program met its milestone two weeks early, and the team has since started Project 100+ to continue the effort through additional public and private donations.

Forging a more purposeful path

Real empathy for people who have a different background from us requires real work. Understanding the needs of our diverse society requires a diverse team with a heightened awareness of what it’s like to truly struggle financially. If we have learned anything from this pandemic, it is that we must have more respect for those who are less fortunate.

For profit business models must be reconfigured to better address the needs of the people who need help the most. Banks and more fintech providers must think differently about how they can help the working poor. This goes beyond simply having digital onboarding with a slick UI or access to a bank account; the financial services industry has a role to play in addressing the needs of those who can barely put food on the table.

Those who dismiss the poor or underbanked as unprofitable misses the fact that collectively, this segment of the market still spends billions of dollars in financial services, requires similar financial instruments, and still has just as complex financial needs as every other household.

And yet there remains systematic neglect for those most in need, even in trying times like now when the economy is not working for average Americans.

There is much more work to be done. Banks and fintech startups need to challenge assumptions and biases about the working poor in this country. Improving our safety net matters. Direct cash distributions to the poor work.

We never know what this and the next economic downturn will do to our industry long term.

Empathy suddenly becomes very real when tragedy strikes home.

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Tune in for an inspirational episode of One Vision, where Theo and Bradley of Unconventional Ventures  chat with Jimmy Chen, the founder and CEO of Propel, about his startup journey, how Propel helped make this critical safety net program more user-friendly while improving consumer financial health, and how Project 100 became the most ambitious private direct payments initiative during the COVID-19 pandemic. Listen on iTunes, Spotify, and Google.

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Unconventional Ventures helps drive innovation to improve systematic financial wellness. We connect founders to funders, provide mentorship to entrepreneurs, strategic advisory services to a broad set of corporates, and broaden opportunities for diversity within the ecosystem. Our belief is that anyone with great ideas should have a chance to succeed and every voice should be heard. Visit unconventionalventures.com to learn how you can partner with us today.

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