Banking and Finance Law Daily Wrap Up, FINANCIAL STABILITY—Financial metrics designed with intentionality will put vulnerable people first, (May 21, 2026)

By Sherri M. Schroeder, J.D.

“We have the data infrastructure, analytical tools, and behavioral insights to measure and meaningfully improve financial health at scale,” stated Fed Governor Barr.

Federal Reserve Board Governor Michael Barr delivered remarks entitled, “Measuring Financial Health,” at the EMERGE Financial Health 2026 conference in Atlanta, Ga., on May 20, 2026. Barr used his time to comment on the evolution of how financial health has evolved and where it stands today. Urging his listeners to focus on impact and outcomes, especially those for lower-income households, Barr urged them to realize the potential of new tools and practices such as better access to data, using behavioral science to understand consumer decision making, and using analytical tools, including those making use of artificial intelligence (AI).

“The question is not whether to embrace these tools, but how to ensure they deliver on their promise,” stated Barr. “Imagine a world in which financial institutions use financial metrics to design, with intentionality, products and services that put vulnerable people first. The Fed stands ready to help meet this opportunity.”

Measurement. According to Barr, currently around 96 percent of American adults have a bank account, which is up form 92 percent 15 years ago. “This progress is the result of sustained, coordinated efforts from the private and public sectors,” he stated. However, this is not sufficient, as only roughly 31 percent of Americans report feeling “financially healthy.” Because having a bank account does not mean a consumer’s financial needs are being effectively served, the measurement of financial health outcomes matter. Barr sees a focus on impact and outcomes as a step forward for financial inclusion.

Evolution. Tracing the evolution of how financial institutions measure customer financial health from early efforts such as the triennial Survey of Consumer Finances, which began in 1983, to 2013’s launch of the Survey of Household Economics and Decisionmaking, Barr then noted the “new opportunities” created by better access to data, behavioral science, and analytical tools. Better data access “has opened new horizons for research,” while behavioral science is helping to better explain consumer decision making and analytical tools, some of which are AI, are helping researchers gain deeper insights. “Together, these innovations are moving the study of financial health beyond self-reported preceptions to more granular, quantifiable, and actionable metrics that can provide insight in near real time,” claimed Barr.

More work. Barr then noted that there is more work to do in realizing the potential of these new tools and practices. Per Barr, such tools require careful design using behavioral science. Firms studying how different customer segments interact with new product features, such as prompts to transfer small amounts into saving, typically find that the interventions work as intended. However, there have also been instances where measurement identified unintended consequences. This type of insight—“possible only through rigorous measurement”—can help institutions refine their products to better serve their customers.

The promise. Barr has found promise in financial health metrics. Firms report they are more accurately measuring new product impacts and customer interventions and better identifying customers’ needs, such as institutions offering short-term, small-dollar loans using financial health metrics to track increasing savings buffers, reduced overdrafts, and positive trends in credit scores. Such metrics are also being used to power consumer-facing tools, such as alerts giving customers time to respond before they face overdrafts or other problems.

Firms are also reporting that financial health-oriented innovations are popular with customers and can potentially increase revenue, reduce costs, and increase profitability of these services. Barr sees this as crucial because these services will only be offered by the private sector if they can be operated profitably. There is also data indicating that financially health customers might cost less to serve.

“This kind of operational efficiency, combined with increased deposits and usage of other services, suggests that helping customers achieve financial health need not just be good for consumers—it can also be good for the bottom line,” said Barr.

Challenges. Barr outlined four main challenges that must be dealt with before financial health metrics can realize their full potential. Developing measurement standards will be key. A second challenge is posed by the “tension” between data access and privacy. The need to maintain methodological rigor is essential if businesses are to trust financial health metric data. “By this I mean using consistent, transparent, and evidence-based methods for collecting analyzing, and interpreting financial data so the resulting assessments are reliable and comparable over time,” said Barr. The fourth challenge per Barr is helping consumers use financial health data. He believes “timely, actionable guidance that connects a specific metric to a concrete goal and a behavior that makes the goal achievable” will work best.

However, focusing solely on metrics will not be enough. “Customers can understand their numbers yet still struggle to improve them because of income volatility, rising living costs, behavioral biases, and the complexity of financial products,” stated Barr. Metrics can also encourage short-term optimization over behaviors that create long-term stability.

Conclusion. Barr closed his remarks by noting that the key will be for all stakeholders to work together. Financial institutions must prioritize creating products and services that “help vulnerable customers;” they must also commit to measurement and sharing best practices. Vendors and technology providers need to enable measurement through data portability and standardization. Nonprofits will be a key player by providing financial education and connecting consumers to trusted providers with products that meet their needs.

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