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The Unsolved Financial Emergency
As someone who had a front row seat to the ‘08 credit crisis, the past week of news involving Silicon Valley Bank has felt familiar in all the worst ways. There are short-, medium-, and long-term considerations for what happened and what will unfold over the months to come. But I want to focus on something below the surface of the topic.
For a lot of people in the banking space and the fintech space, this week may have been eye-opening. I don’t mean in a technical or financial sense; this was an education in what it feels like to EXPERIENCE a financial emergency. And it’s important to talk about it.
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Founders, bankers, and countless employees woke up to a reality that they did not expect to encounter. Out of nowhere, they were suddenly face-to-face with a financial emergency, and they needed to solve it. Immediately. They scrambled to figure out how big their problem was, how much time they had to solve it, and what would happen if they didn’t.
They messaged contacts, both professional and personal, to see if there was anything they could do to help. While sympathetic, most were constrained or dealing with their own similar issues.
They canvassed as many potential sources of assistance as they could find, though many proved fruitless or too slow to help in time.
They shuddered at the costs of the immediate solutions they could access.
They tried to guess if a solution might miraculously appear and fix things.
They worried about what would happen to the people that depend on them.
The weight of trying to solve this impacted their health. Their relationships. And while all of this was happening, they thought to themselves:
How did I end up here? How did something completely out of my control come to disrupt our financial existence? What price will I pay, now and in the future, for something that I had nothing to do with?
Why isn’t there something in place to help people like me through an emergency? I tried to do everything right, and this still happened to me.
In Silicon Valley Bank’s case, an 11th hour solution saved the day for depositors. But it was a harrowing experience - and the weight of what happened will linger long after it’s over. There will be policy changes, regulatory updates, and best practices developed to try to remedy this for banks and businesses. And that’s a good thing.
Now think about this: 127 million people1 in the U.S. can’t afford a $400 emergency expense. 148 million people2 can’t afford a $1,000 emergency expense. They go through everything I described above when something happens to them, often more than once a year. And in 2023, the cost to borrow is going up, banks and credit unions are pulling back on “risky” lending, and the economy appears poised to slow. Where is their 11th hour solution? Who is saving the day for them?
Emergency funding has always been an urgent problem. We will build better banking solutions to help regional banks and uninsured depositors in the future. But we need to harness the perspective we’ve gained - perspective on a situation we may not have understood before now. Our solutions can’t ignore 148 million people.
Let’s remember everyone who struggles with access to emergency funds - everyone whose struggles didn’t dominate the headlines this week. They deserve a better solution too - and we can choose to build it for them.
“49% of Americans Couldn’t Cover a $400 Emergency Expense Today.” Maurie Beckman, May 2022. https://www.fool.com/the-ascent/personal-finance/articles/49-of-americans-couldnt-cover-a-400-emergency-expense-today-up-from-32-in-november/
“Bankrate’s 2023 Annual Emergency Savings Report.” https://www.bankrate.com/banking/savings/emergency-savings-report/#n3i