How the emergence of fintech can ease the burden of unpaid caregiving

By: Courtney Leimkuhler & Brian Nguyen

In the US, there are an 44 estimated million caregivers providing more than 24 hours a week of unpaid care to adults or children. Almost 80% of them provide care to an adult over 50. And while this care of course includes support for daily living, 90% of them also deal with bills, bank accounts, insurance claims, tax filings, and investment assets of those they care for. On top of that, 75% of those caregivers spend over $7,000 per year of their money supporting those they love, as calculated by AARP.

At the same time, mobile lending app Zirtue estimates that $200 billion dollars in personal loans are taken out each year between friends and family to help loved ones cover basic bills like groceries, rent, and doctors visits, making friends and family currently the largest bank in the United States.

So while the jury may still be out on whether money can buy you love or happiness, there is no doubt that across eldercare, childcare, and healthcare — money is at the center of how we take care of each other.

Despite the big money involved, innovation has been scant when it comes to both the products and the tools to support this market. For example, where are the financial products to help parents smooth the costs of early childhood education over a longer period of time or insure against the costs of IVF or even childhood disability — costs of which can ruin families? Or what about long-term care insurance? 20 years ago more than 100 insurers were selling long-term care policies; today it’s around a dozen and the cost is prohibitive for most. While that long-term care insurance product of yesteryear had fatal flaws, very little has arisen in its place even as we live longer but not necessarily healthier lives.

On the tools and services side, most of the care economy still operates on old school systems of cash and checks, under-the-table arrangements, shared log-ins, and maddeningly clunky payment flows. And that’s even before we talk about accessing government benefits for families and caregivers, a large percentage of which go unclaimed in large part due to complexity.

At the same time that the world of caregiving is relying on archaic technology, fintech is revolutionizing almost every other corner of our daily lives. From tap-to-pay options almost everywhere (including my local farmers market), peer-to-peer payments, embedded travel insurance, and more. The use of these types of embedded financial services are only expected to continue to grow in capabilities and adoption. So how do we get fintech to pay attention and solve this critical backwater of our economy called financial caregiving?

To be clear, this will not be an easy task. Financial caregiving solutions will have to contend with a few core challenges. Financial caregiving is almost by definition multi-player. It requires permissioning, shared access, and often has multiple payer sources. This is complex for legacy players like government agencies and insurance companies and even for start-ups building from scratch. Solutions that overcome these challenges and positively impact the financial side of caregiving will have a few hallmark characteristics:

User experience is critical.

As digitally native younger millennials move into the sandwich generation — caring for both kids and aging parents at the same time — their expectations about how they will interact with embedded finance tools for care will mirror those they’ve developed in the rest of their digital lives. Splitting the cost of mom’s medication among her adult children should be as seamless as splitting brunch with friends. For those not digitally native like those looking to age in place, design plus thoughtfully curated access to humans will be essential.

Think broadly about who will pay for solutions.

There are major secular trends that support tremendous increases in sources of funding for care businesses apart from just caregivers paying more. We expect, for example, that employers will increase their spending by 10x over the next 10 years on care-related benefits for their employees which could include subsidies or stipends for care. And we also see that both private and public (Medicare Advantage and Medicaid) funded insurance plans are increasingly willing to pay for care-related services for those who care for their members. Given the dramatic shortages of care workers, it is essential that payers find ways to support family caregivers and extend the ability of aging adults to live healthily at home. This will open up new money flows for start-ups and their caregiver users.

Financial solutions will trump pure financial education.

While it is true that Americans are often cited as being insufficiently financially literate, it is also widely cited that most financial literacy education doesn’t work because it is not sufficiently embedded in the actual money flows and activities of the person receiving the education. Financial caregiving will mean embedding bite-sized, “just-in-time” education for caregivers inside of solutions. An adult son will only really learn about reimbursements available for dad’s care when he is paying those hospital bills. The best tools will embed education and products or tools at the point-of-pain.

While there is so much work to do when it comes to utilizing fintech to support financial caregiving, we are already seeing promising examples of its potential. Propel is a breakout company making it much easier for families to utilize EBT and SNAP benefits from their app. Start-ups like Givers are helping caregivers access government benefits that allow them to get compensated for the work they already do. Offerings like Cocoon make it easier for employers and employees to access money they’re entitled to for paid leave. Companies like Carefull make it easier to monitor and eventually take over an aging loved one’s financial accounts. Juno Kids and Parento are pioneering new insurance products specifically tailored to the needs of families. And Savvly is thinking about how to insure against the risk of living long, not dying young.

The financial stress of caregiving is a problem we can solve for all American families, but there is real optimism to be had in the promise that emerging fintech brings to the table. We hope that 2023 will be the year we see this as a leading category of investment.

Reach out to Courtney Leimkuhler or Brian Nguyen if you’d like to chat.