Discover Bank has launched a fund to support startups working to improve people’s financial health.
The $36 million Discover Financial Health Improvement Fund will back companies aiming to help low- and moderate-income people, communities and small businesses in the mid-Atlantic region, according to a Tuesday (June 13) press release.
“As technology continues to evolve, we want to fund entrepreneurs who have identified creative ways to benefit those of modest means,” Matthew Parks, vice president of Discover Bank, said in the release. “It is our expectation that these technologies can both be profitable and beneficial to the community.”
Discover said it will work with the Financial Health Network on the fund to evaluate startups with the most potential to improve financial health.
The launch comes at a time when the financial health of even higher-income consumers is in question. PYMNTS research showed that as of late last year, 16% of these consumers were having trouble making ends meet, a 45% increase year over year.
More recently, PYMNTS research found that 48% of high-income households live paycheck to paycheck, a situation fueled by medical bills, student debt, high discretionary spending and other variables. For people living paycheck to paycheck, any unexpected expense, even a minor one, can push their households into debt as they struggle to make ends meet.
“Record inflation and a high cost of living have made many American households less financially secure than ever, according to a recent survey,” PYMNTS reported Tuesday. “Currently, 58% of Americans live paycheck to paycheck. Another 70% report feeling financial stress, including insecurity about a lack of savings and concerns about credit card debt or job security.”
The financial health of small businesses is also under strain. PYMNTS research showed that just 25% of these enterprises have more than 60 days of cash to cover an emergency, while 17% of companies said that they had no cash cushion at all.
“These businesses depend on large-ticket spending from end consumers and are seasonal — and are certainly brick-and-mortar, which means that operating costs are high too,” PYMNTS wrote. “As to where they’re getting the funds? PYMNTS data revealed that roughly a third of them are tapping into personal credit cards — only about 17% are getting funding from banks.”