THE DIGITAL BANKING INDUSTRY LEADERS FORUM ™

Marcell King has enjoyed a long career in financial technology, most of it in the payments space. However, in June, 2023, he took on the role of Chief Commercial Officer at digital banking provider Tyfone. This move to digital banking, said King, was very intentional.

“One of the things that excited me about coming to work at Tyfone is the opportunity to take on the challenges of the state of financial health for consumers in the United States,” King told Finopotamus.

King said that approximately 60% of all US households live paycheck to paycheck and that only 40% of consumers have at least $400 set aside to mitigate any short-term emergency that might arise.

“It could be a car repair, a medical bill – any type of small-dollar emergency,” said King. “When I think of digital banking, I think of it as a way to help consumers and their families simplify their financial lives and improve their financial health.” He noted that because financial health is not taught in any level of school, consumers are forced to seek that knowledge either from the people around them or by studying the works of financial experts like Suze Orman or Dave Ramsey. While consumers may achieve varying degrees of success with these strategies, King added that community financial institutions are both well-positioned to assist in their accountholders’ financial health and have a vested interest in doing so. But they need to offer the right technology tools.

The New Role of Digital Banking

According to King, there are four key components of financial health: spending, saving, investing, and planning. However, legacy digital banking platforms have never intentionally addressed any of these. That, he said, is changing.

“Digital banking has traditionally looked at how much money you have in your account today and how you spent your money in the past, with no particular eye to the future,” explained King. “We need to look at how you interrogate and evaluate that consumer's history to predict what their financial health is going to look like in the future if they continue with that same behavior. We also need to be able to tell them what things they can do to improve their financial future based on set benchmarks regarding their spending, saving or investing.” This, he added, leads to better planning.

This all points to digital banking evolving from a transactional ledger to an essential two-way communication tool between accountholders and their financial institutions.

“It has to evolve that way,” said King. “Think about the interactions that consumers, especially the younger demographics, have through their technology. That becomes their primary way of communicating at a personal level, whether it's chat, social channels, whatever it may be.” This, he added, it why it makes perfect sense to promote financial wellness through digital banking.

Money When You Need It

There’s more to financial wellness than effective planning and then executing on that plan. Cash flow is another major issue for many consumers. Consumers need funds on a daily basis, but may only get paid once or twice a month. This disconnect has given rise to predatory payday lenders.

Until recently, the whole idea of earned wage access – where employees have access to their earnings as often as daily or sometimes even in advance – was technologically impractical. There was no way to move money that quickly. That all changed with the introduction of The Clearing House’s RTP instant payment network and more recently with the introduction of the Fed’s more accessible FedNow Service. With instant money movement technology in place, employees really can have immediate access to their wages.

“Payroll cycles have remained static for decades,” noted King. “It could be monthly, semi-monthly, bi-weekly or whatever. The point is, when you consider that 60% of Americans are living paycheck to paycheck, just a little bit higher utility bill, for example, could take money out of today’s paycheck that was budgeted for groceries. These are people who are trying to pay their bills on time, but have to make difficult choices to do so.” That all changes, said King, with earned wage access.

“Earned wage access and real-time payroll represent the fastest growing use case for instant payments,” said King. “Workers can receive their pay before their scheduled payday, or on the same day they work, providing immediate liquidity to workers who need to pay bills, provide food to the family, or pay for an emergency expense.” He warned that financial institutions that choose not to participate in an instant payment service like FedNow are potentially cutting their accountholders off from this important benefit.

“You may not want to be able to send yet,” King said of the FedNow Service, “but for every institution in the country, receiving via FedNow will be table stakes within the next few years.”