Dealing with Unexpected Expenses
Over the last two decades, when working with financial services firms and their end-customers, we invariably encounter a common Customer Scenario: "I don't have enough money to pay for an unforeseen expense." Oddly enough, It doesn't matter how affluent the customers are. They may still have to scramble to pay for a kid's car repair, a large medical bill, or any unexpected large expense. Of course, we're all supposed to have a rainy day fund — savings accounts or liquid investments we can draw upon in the case of emergencies — but people are invariably caught short, and it's very stressful.
Most financial services firms profit from this customer "Moment of Truth" by extending lines of credit on maxed out credit cards, providing short-term loans (often backed by home equity), or offering payday loans.
One enlightened bank president had another idea--which he came up with in one of our Customer Scenario Mapping customer co-design sessions with middle-income parents: a "Life's Exceptions" account. This was a quickly-triggered rainy day fund that automatically moved money from savings to checking and added quick access to a pre-approved-for-all-existing-customers' low-interest loan, if necessary, to make up the difference. Triggering a "Life Exception" generated a budgeting/cash flow management application that would automagically appear to help the couple repay the emergency money they had needed. The budget and proposed repayment plan would be pre-populated based on the customers' income and expense history (even if they weren't already using a budgeting or cashflow management tool). For a variety of reasons, the bank chose not to implement this innovative idea that their customers and their execs co-designed almost 10 years ago. Too bad.
Dealing with Uneven Cashflow
What caught my attention this week was a write-up about a soon to be launched mobile app, called Even. It's designed to help people who have a reliable source of income, but uneven cashflow. So, for example, people who work at Starbucks or at another retailer that varies workers' hours every week. People know they'll be working, but they don't know exactly when they'll be working or how much pay they'll receive each week. This is a common problem for a growing percentage of the global workforce.