As the Financial Technology Association (FTA) continues to mark National Financial Capability Month, we sat down with Delicia Hand, Director of Financial Fairness Advocacy at Consumer Reports, an independent, non-profit organization that works to create a fair and just marketplace for all.

Our Fintech Explained Q&A with Delicia focused on the ways digital tools can help improve financial literacy and well-being. Delicia spotlighted Consumer Reports’ vision for a Fair Digitized Financial System, explained how technology “nudges” can remind people to make a payment on time or take advantage of the best features of a financial product, and shared her financial literacy advice for consumers (“Don’t be afraid of finance”).

Read our full conversation below and check out FTA’s resources for financial literacy to learn more

Q: Let’s start with the basics. How do you define financial well-being, and what role does financial literacy play in helping people live healthier financial lives?

Financial well-being as a concept is explicitly and intentionally a subjective measure. How people feel about their personal finances affects their economic activity in ways that are not predictable through numeric indicators of financial status such as income and net worth. People with low income may have high levels of financial well-being if they manage their finances well and are happy with what they have. Conversely, people with high income may have low levels of financial well-being if they have no savings and maintain revolving debt. Our definition of financial well-being is partly based on the CFPB’s definition. The CFPB has defined financial well-being as a subjective state of one’s perceived financial health when there is control over daily finances, the capacity to meet a financial shock, the ability to achieve financial goals, and financial freedom to make choices. 

In addition to being a valued and necessary skill for everyday life, financial literacy can significantly contribute to one’s sense of financial well-being. A strong foundation can help a consumer set the stage to achieve various life goals, such as financial security and saving for retirement. However, financial literacy alone cannot help an individual achieve a sense of financial well-being. There is an additional role that can be played by financial service providers, which is the offering of products and services and the integration of product design features that support consumers in their journeys to achieve financial well-being.  As applied to indicators we look for in fintech product features, we look to see whether products center user needs and experiences and whether there is an articulated commitment, backed by data-driven metrics, to build financial wellness and to demonstrate that a product or service supports financial well-being.

Q: Technology has made it easier and cheaper for many Americans to access financial services, from banking to credit, investing, and money management. What are some of the ways digital tools can help people become more financially literate and capable?  

Experience is the greatest teacher, and the integration of features and incentives into technology can provide many ways to help consumers connect directly and simply with the basics of financial literacy and build financial well-being. To facilitate literacy, for example, technology can help to gamify certain concepts or build in steps that consumers can complete before signing up for a financial product or before taking certain steps within an app. Additionally, features like smart defaults within an app – which automatically default to the best options for consumers paired with educational pop-ups which explain the default settings and the recommended settings – can help consumers become more financially literate. Behaviorally informed design, such as “nudging,” to remind a consumer to make a timely payment, for example, is also another example of beneficial actions which can both improve a consumer’s sense of financial well-being and also become more financially literate. The development of new digital tools means that there are more opportunities to improve the consumer experience and increase financial literacy.

Q: Consumer Reports recently launched a new effort to evolve its traditional product testing and ratings work to evaluate digital financial products. Tell us about your approach to this project and how it will help consumers navigate their financial options. 

Consumer Reports’ vision for a Fair Digitized Financial System is one where consumers are in the driver’s seat through identification of the most responsible practices in financial innovation helps to facilitate this. We want consumers to be able to spend, save, borrow, and invest safely, privately, and without discrimination or predation, and improve their financial outcomes. To achieve this vision, we have evolved CR’s testing and ratings model and have developed evaluation standards for digital finance. In addition to meeting traditional regulatory principles – Safety, Privacy, and Transparency – financial products can and should go further and facilitate inclusion, financial well-being, fairness, accessibility, and user-centeredness. We have developed criteria for all of these principles, which we then apply to fintech products in the marketplace through a range of methodologies, consumer research (non-probability consumer surveys, focus groups, discussion boards, user experience), document review, and product engagement and testing (network traffic analysis and engagement with the fintech app). In addition to helping consumers better navigate the number of digital finance products on the market, we aim to identify best practices to drive standards for responsible innovation in financial services; and to work with companies to engage around our findings to improve products and services. 

Q: You have a strong background in consumer education, having spent 10 years at the Consumer Financial Protection Bureau and now leading financial fairness efforts at Consumer Reports. What is your number one piece of financial literacy advice for consumers?

Don’t be afraid of finance. We wouldn’t drive a car that we knew was unsafe or eat food that we knew would make us unwell. So, apply the same level of curiosity and scrutiny to your financial situation. The best way to manage our inherited financial fears is to understand our own finances. When we understand something, we build confidence and diminish fear. Once we are more confident, we can then feel more comfortable interrogating our finances and being in the driver’s seat.