The COVID-19 pandemic has widened the financial divide among Americans, placing the most vulnerable in an even more precarious position while the wealthiest have flourished. But if there’s one silver lining to this trend, it is that the growing divide has also forced financial services companies to expect to do more to reach the hardest-hit consumers. That is the crux of a conversation with Even Financial Founder & CEO Phillip Rosen and TransUnion SVP, Chief Product Officer Hilary Chidi.
According to a TransUnion hardship case study, 52% of Americans are financially affected by the pandemic, for example due to a loss of income and increased spending on childcare. “The impact is significant. There are families desperately trying to make sure they keep making ends meet, ”Chidi said. This increased hardship manifests itself in a number of ways, but the main result is an increased reliance on credit. “There are a couple of different Americas,” said Rosen. “If you are a homeowner and you are in good shape right now, then there are very low interest rates out there that you can take advantage of. So they look to the credit markets to actually improve their financial wellbeing. But that’s not the majority of people. The majority of people have been negatively impacted and are looking for loan products to help them stay afloat ”.
How financial services are developing
Just as the last financial crisis spawned a number of new types of financial services, this crisis is causing financial services companies to rethink how they address consumers. For example, TransUnion recently added some of Even’s finance APIs to its website in order to offer more personalized offers.
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“If you’re shopping to travel anywhere, will you compare Delta Air Lines (NYSE: DAL) to American Airlines (NASDAQ: AAL) and Southwest Airlines (NYSE: LUV) on their brands? Or will you do it based on the pricing for a particular place you want to visit and the experience they can offer you to get you there? These are two different ways of shopping. “But financial services required a level of personalization that went well beyond just shopping on a website. Which is a huge difference in financial services products in both credit and insurance products. Not everyone can buy what they want to buy ”.
Hope for the future
Looking beyond the pandemic, both Chidi and Rosen are hopeful that the increased digitization of financial services will lead to a net plus for consumers in the long term. “I am encouraged and hopeful that moving towards digitization as we go through and out of this pandemic will accelerate access to financial services in ways that we have not had in the past,” said Chidi.
“As things get more and more digitized … we will be able to bring more products to market that will help with savings, construction loans and education,” added Rosen.
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