Sarah Gordon, Vice President, Advisory Services and Nonprofit Investments, was a recent guest contributor for CFED’s blog, The Inclusive Community. In her post, “CFSI Gathers Market Leaders to Discuss Successful Underbanked Strategies,” Gordon highlighted CFSI’s recent activities, including the Financial Capability Innovation Fund ...
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H&R Block–From Tax Prep to Tax Plus
Submitted by Jessica_Kumar on June 2013Since 1955, H&R Block has been known as the go-to company for income taxadvice and tax return preparation. What many consumers don’t know—but word is spreading fast—is that the company has been expanding its services significantly to become a “tax plus” company—preparing tax returns, plus offering year-round financial products and services.
See the Impact Brief below for more.
Bridging the Gap with Social Loans
Submitted by Jessica_Kumar on June 2013Mission Asset Fund (MAF) is dedicated to helping low-income, financially excluded consumers enter the mainstream financial system. One of MAF’s most successful initiatives is their Lending Circles program, a social loan program modeled after the lending practices often found in low-income and immigrant communities. Lending Circles has achieved such success that the program is being replicated nationwide. To learn more, see the Impact Brief below.
Financial Technology Trends in the Underbanked Market
Submitted by Jessica_Kumar on May 2013An emerging industry of financial services technology startups, known as FinTech, are creating a new wave of products for financially underserved customers. The underbanked market in the United States is currently estimated at $78 billion in annual revenue, serving 68 million consumers across 22 different financial product types. The Center for Financial Services Innovation and Core Innovation Capital co-released Financial Technology Trends in the Underbanked Market on May 7, 2013.
This report examines four key trends in emerging financial technologies impacting the underbanked marketplace today and highlights a selection of noteworthy companies capitalizing on these trends to improve consumer financial health and their own bottom line. The trends include:
- Harnessing Social Networks: The power of the crowd – online communities easily linked and self-sorted for mass communication and organization – can influence personal financial management, enable opportunities for peer-to-peer lending, and improve the quality and depth of data used to identify credit risk.
- Solving the Cash In/Out Problem: Digital payment networks can smoothly transition funds to cash and back again through secure loading, single-click purchasing, and other real-time touch points for the many consumers who continue to prefer cash in an increasingly electronic financial world.
- Leveraging Big Data for Better Risk Management: Advanced analytic tools for credit evaluation, account monitoring, and risk management are unlocking access to new sources of available capital and a wider field of qualified borrowers with greater accuracy.
- Scaling Up by Going B2B2C: Startup companies are exploiting B2B distribution channels to rapidly reach their target underserved consumer base through white label products and innovative partnerships between new and established industry players.
This paper has been sponsored by Morgan Stanley and has benefited greatly from the company’s strategic input.
Download Financial Technology Trends in the Underbanked Market below.
Piggymojo: The Thrill of Impulse Savings
Submitted by Jessica_Kumar on April 2013
Armed with a Financial Capability Innovation Fund grant from the Center for Financial Services Innovation (CFSI), Piggymojo is transforming the way people think about savings.
The goal of the technology startup is to help underserved consumers increase their savings, combining goal visualization, social commitments, and mobile and online technology to enable them to make “impulse saves.” The web-based savings tool helps users to instantly put money they would otherwise spend impulsively during the normal course of their day toward savings goals. When a user decides not to spend, he or she texts the amount to Piggymojo, which facilitates the transfer of funds from the person’s transactional account to a savings account.
Learn more about Piggymojo by downloading the PDF below.
Stretch Time: Continuing to Reach for Financial Capability- Trends from the FCIF II
Submitted by Jessica_Kumar on April 2013
Driven to help households better manage their finances and attain financial stability, a number of nonprofits, financial services providers, and government agencies have turned to the concept of financial capability in the search for effective solutions. Programs and tools designed to build financial capability focus on helping consumers adopt or improve upon good financial behaviors such as saving consistently and making good use of financial products.
The Center for Financial Services Innovation (CFSI) has been a proponent of financial capability since 2009, when we assessed the landscape of promising strategies for affecting consumers’ financial behavior. Inspired by the opportunities for innovation, we launched the Financial Capability Innovation Fund in 2010. Through the Fund, CFSI provided technical assistance, strategic guidance and a total of $1.5 million to five nonprofits whose projects proposed to test new strategies for building financial capability.
In 2012, CFSI launched the Financial Capability Innovation Fund II (FCIF II) to support another round of innovative nonprofit-led efforts to help low-income and underserved consumers build financial capability. With the support of a collaborative of funders led by the Citi Foundation and also including the Capital One Foundation, NYSE Euronext Foundation, Charles Schwab Bank, Charles Schwab Foundation, and Experian, the FCIF II will provide eight projects with a total of $2.5 million in addition to valuable non-monetary support (full descriptions of the projects are provided in the Appendix).
While we were only able to select eight projects for the FCIF II, the application pool contained many high-quality proposals and provided valuable insights into how nonprofits are promoting financial capability. Though opportunities for further growth and innovation remain, many nonprofit organizations appear to be making significant strides toward creating effective solutions for helping consumers take better control of their financial lives.
Download below Stretch Time: Continuing to Reach for Financial Capability- Trends from the Financial Capability Innovation Fund II.
Double Duty: Payments Cards as a Doorway to Greater Financial Health
Submitted by Jessica_Kumar on March 2013On March 28, 2013 CFSI and the Hudson Institute Released Double Duty: Payments Cards as a Doorway to Greater Financial Health.
Electronic payments are growing by leaps and bounds, overtaking paper as preferred payment mechanisms. Governments at all levels have embraced this change, often not just encouraging a move from paper checks but even requiring it. Electronic payments have advantages for all parties. Governments lower the cost of distributing benefits. The payments industry realizes further economies of scale and greater revenue from wider use of the payments network. For individuals, electronic payments lower the incidence of lost checks and potentially improve efficiency and convenience.
Electronic payments 1.0 is a success story. Electronic payments spare government the cost of writing and distributing checks while delivering funds to recipients more safely and reliably. But electronic payment methods can do more—and defining “more” will be the next chapter in the story.
By far, most recurring government electronic payments, such as Social Security and unemployment benefits, are made via direct deposit. However, direct deposit does not work for people without bank accounts. Payment cards—prepaid debit cards with a 16-digit number, magnetic strip, and network logo—are an electronic option that does not need a bank account. When state and federal governments require recipients to receive their benefits electronically, those who do not choose direct deposit receive the default choice instead—a prepaid debit card. And this is where the next chapter begins.
Electronic government payments can serve as an entry into lower-cost, broader-function payment tools that support recipients’ financial lives. They can offer increased choice among financial services and a range of financial service functions. Above all, they have the potential to help people improve their financial health and capability, whether through access to more information or a transition to greater use of higher-quality, more effective services. The same systems that made electronic payment possible can also help people understand and plan their financial lives.
Download Double Duty: Payments Cards as a Doorway to Greater Financial Health below.
American Banker: Government Benefit Cards Can Open Doors to Banking System
Submitted by Jessica_Kumar on March 2013Government Benefit Cards Can Open Doors to Banking System
by JENNIFER TESCHER
This month, the federal government will largely stop issuing paper checks for Social Security and other recurring payments. The shift to electronic payments has been a long time coming, with a campaign that started in the late 1990s and a U.S. Treasury Department that was ahead of its time. Today, all 50 states are disbursing most, if not all, benefits electronically.
While we have reached the end of the line for government checks, policymakers are just beginning to consider how to leverage government payments as an onramp to broader financial engagement.
Government opinion on addressing the needs of unbanked consumers is mixed. In a recent survey of state and local government decision-makers by Governing Magazine, 46% believe government has no obligation to provide financial services to the unbanked beyond the delivery of benefits.
Now that both federal and state governments have achieved the initial goals of cost savings and increased efficiency, it is time to place greater emphasis on how electronic payment tools can provide broader benefit for recipients.
Federal and state governments reach tens of millions of households each month, providing a range of benefits including unemployment insurance, child support, food stamps, cash assistance, disability benefits and retirement and pension payments. In January alone, 62 million people received $70 billion in Social Security and disability benefits. States pay out nearly $13 billion of food stamps benefits annually to 23 million households.
While the specifics vary by state and by benefit, recipients generally are given the option of either having funds directly deposited into an account of their choosing or using a government-selected payment card. Those who choose the government card are far more likely to be unbanked.
The quality of those debit cards varies widely, and there are few clear standards. A recent report by the National Consumer Law Center, for instance, evaluated 42 different state unemployment cards. Eighteen received a "thumbs up," 3 received a "thumbs down," and the rest were deemed neutral.
Government payment cards can be viewed as potential bank accounts waiting to be opened by people with the fewest quality opportunities to connect to the financial mainstream. For government payment cards to be part of the solution, policymakers should design them with three critical elements in mind: choice, reloadability and capability.
Choice: Unbanked benefit recipients have little choice about the payment card they are provided because governments generally enter into contracts with a single card provider. Moreover, some states make it difficult for consumers to have their benefits directly deposited into a bank account, effectively steering them to the state-provided payment card.
Policymakers should consider other ways to guide the development of high-quality products that increase marketplace innovation and competition and increase consumer choice. For instance, they could focus on setting criteria for product providers and enabling consumers to choose from the range of products that meet the criteria.
Reloadability: Today, government payment cards serve a single purpose – to deliver benefits. Cardholders cannot deposit money from other sources into their card accounts, making them of minimal use. Governments should be leveraging payment card platforms to provide recipients with a more robust financial vehicle.
Making cards reloadable raises a number of legal and regulatory issues, and increases the risks to providers. One possible intermediate step would be to enable a single government payment card to serve as a gateway to two accounts, one for government benefits and another for other funds. This would minimize the risk of improper garnishment of government benefits that arises when funds from multiple sources are commingled.
Capability: Most government payment cards provide minimal functionality beyond making purchases at the point of sale and withdrawing cash at the ATM. Yet we live in an era where technological innovations are spurring a new generation of money management tools and techniques that can deepen the customer experience and help improve financial well-being.
One of the most exciting developments on this front is the Treasury Department's decision to add a web- and mobile-based financial education hub to Direct Express, the default payment card for federal benefit recipients. Cardholders will have the chance to win cash prizes by engaging in financial education modules.
The effort, a partnership between the government, card issuer Comerica Bank, MasterCard, and technology start-up PayPerks, represents the kind of public-private collaboration that will be required to turn government payments into a teachable moment.
The first step, though, belongs to the government. Government benefits alone don't create financially healthy citizens and communities. Leveraging disbursement platforms to provide broader financial access and a more meaningful financial experience can turn government payments into a powerful strategy for community development and consumer empowerment.
See the original article here on American Banker.
MyMoneyAppUp Wrap Up Paper
Submitted by Jessica_Kumar on February 2013The MyMoneyAppUp Challenge was a contest offering cash prizes intended to motivate American entrepreneurs, software developers, the public, and students to propose the best ideas and designs for next-generation mobile tools to help consumers make smart financial choices, access high quality financial products and services, and ultimately control and shape their financial futures.
Download the wrap-up paper below to learn more about the contest, judges, finalists, and winners.
To learn more about MyMoneyAppUp Challenge, see the website http://mymoneyappup.challenge.gov/.
American Banker: Products for Unhappily Banked Can Win Over Underbanked, Too
Submitted by Jessica_Kumar on February 2013Products for Unhappily Banked Can Win Over Underbanked, Too
Next-generation banking products are here, but knowing exactly what to call them is a challenge. They bundle transactions, payments, savings, and money management tools in ways that fundamentally reimagine the banking relationship.
By JENNIFER TESCHER and RACHEL SCHNEIDER
The trend last summer began with the private launch of Simple, a tech start-up that promises to replace the hassles of a bank account with an elegant white card and a mobile app. Then Chase made a splash with Liquid, the bank's card-based checking account designed to imitate prepaid.
Next, American Express grabbed the headlines with its Bluebird card, sold in Walmart stores and online. This month, GreenDot entered the fray with a beta launch of GoBank, its attempt to leverage its new bank charter to mimic traditional banking services in a more 21st-century package.
While each of these products is structured differently, they all combine elements of checking and savings accounts and prepaid debit cards. The common denominator is a focus on building customer relationships.
Consumers must apply for these products. The bar is set far lower than it is for opening a traditional checking account at a brick-and-mortar bank, but a bit higher than for traditional prepaid products, which are nearly universally available.
Getting the risk screening right is important because consumers can deposit checks into these accounts, primarily by snapping a picture with their mobile phones. These new products are not built around the good-funds model of traditional prepaid, in which the only ways to load the card are with cash or direct deposit. In this way they act more like a checking account, without the ability to overdraft.
What truly sets these new products apart is the overall customer experience. They have intuitive designs and improved user interfaces that are meant to help consumers make sense of their finances while having some fun. Marketing materials are clear and simple, with little bank-like gobbledygook to be found. Mobile access is a major part of the equation.
Simple, for instance, categorizes every transaction, and users can search recent transactions by category to understand spending patterns. They can set savings goals and have funds automatically swept into savings daily. The company has also created a "safe to spend" measure to help customers understand exactly how much money they have available, a dramatic improvement over the inscrutable "available balance" that banks typically provide.
GoBank is going for a lighthearted touch in money management. Through a feature it calls Fortune Teller, GoBank will warn customers when a desired purchase is about to blow their budget: "Remember that time you won the lottery? I don't either."
The price for all of this functionality and fun? In most cases, free.
Bluebird and Simple have no monthly fees. Chase charges $4.95 per month for Liquid, compared with $12 per month for its Total Checking product. GoBank lets customers choose their own monthly fee using a sliding scale from zero to $9, regardless of the services provided. (Think of the "pay what you want" model Radiohead used to sell an album online a few years ago.) By comparison, monthly fees for most traditional prepaid cards range from $3 to $10 per month, plus additional costs for loading funds via channels other than direct deposit.
The storyline is that these products are meant to appeal to unhappy bank customers and to the younger, tech-savvy set, a more "upmarket" segment. But why stop there? Marketed effectively, these products should hold great appeal for underserved households.
Young hipsters aren't the only ones who want to conduct business with their mobile phones. The underserved are also heavy smartphone adopters, and they are more likely than others to use them for banking and payments. Moreover, the business models of these products are focused less on balances than on the interchange revenue from transactions.
More than most, underserved consumers are likely to appreciate the money management bells and whistles that these newfangled products offer. And while consumers may not rate savings as high on the priority list when asked about it in a market research survey, Simple and GoBank each offers intuitive and fun savings features that small savers would appreciate.
To cast a wider net, the new entrants will have to calibrate their underwriting models to make sure they are weeding out fraudsters without inadvertently cutting off access to consumers with nontraditional credit histories.
They also will need to contemplate consumer cash flow issues. Some cash-strapped consumers need immediate access to their funds. A growing number of prepaid providers are offering check cashing via mobile phone. The customer takes a picture of the check, the check is immediately cashed for a fee, and the proceeds are deposited on a prepaid card. Why not offer customers the choice, after they have snapped a picture of their check, to either deposit the check or cash it?
Some will argue that underserved consumers don't want a financial relationship. While that may be true for some, we shouldn't confuse consumer behavior with consumer preference. Both banks and prepaid companies lament their high churn rates, but their products are often designed and priced in ways that encourage that churn.
While we may yet lack the language to neatly categorize the new products coming to market, it is clear that they represent the future of finance. Let's ensure they are marketed and structured in ways that make them a part of all consumers' futures.
See the original article here on American Banker.
Redstone Federal Credit Union- Thinking Outside the Branch
Submitted by Jessica_Kumar on January 2013
In 2009, Peter Alvarez of Redstone Federal Credit Union attended his first Underbanked Financial Services Forum, an annual conference held by the Center for Financial Services Innovation (CFSI) and SourceMedia, to learn more about the underserved market. He sat in on a session led by Self-Help Federal Credit Union, in which the credit union discussed its efforts to provide customers with check cashing services. Alvarez, Redstone’s Manager of Emerging Markets, was taken aback. “It blew my mind,” he said. “I was not ready to hear that.” Redstone would never offer check cashing, he thought.
But the idea stuck with him. Alvarez learned even more about the underserved market after Redstone joined CFSI’s Underbanked Solutions Exchange, an industry network for smaller financial institutions looking to develop profitable, high-quality products for the underserved. He soon realized there was no way to serve these consumers without offering check cashing, as well as other products and services that were outside of the credit union’s bailiwick.
The business case of reaching out to underserved consumers was not difficult for the Huntsville, Ala.-based credit union to make. Indeed, FDIC data shows that nearly 193,000 Alabama households lacked a checking or savings account in 2011 and that nearly 40% of all households in the state use non-bank financial services like check cashers. If the credit union focused on how to best reach and serve these consumers, such an effort was likely to result in new member growth, an increase in non-interest income, and a sufficient return on investment.
Download the Impact piece below to learn more.
Centris: Using Technology to Build Relationships
Submitted by Jessica_Kumar on January 2013
In June 2012, the credit union launched Centris Express as its solution to the problem of how to reach and better serve underserved consumers. Centris
Express offers users a complete suite of products and services through a bank-in-a-box kiosk powered by Nexxo Financial Corp. Set up in eight locations around Omaha, in both Centris branches and grocery stores, as well as in a specially designed Express Money Center adjacent to a branch, Centris Express enables customers to cash checks, buy money orders, transfer money, pay bills, buy cellphone minutes, and reload prepaid cards, all with the touch of a few buttons.
The kiosks integrate with the credit union’s backend processes, so users can make deposits and withdrawals from their Centris checking and savings accounts.
See below to download the Impact piece.
Centris: Using Technology to Build Relationships
Submitted by Jessica_Kumar on January 2013
In June 2012, the credit union launched Centris Express as its solution to the problem of how to reach and better serve underserved consumers. Centris
Express offers users a complete suite of products and services through a bank-in-a-box kiosk powered by Nexxo Financial Corp. Set up in eight locations around Omaha, in both Centris branches and grocery stores, as well as in a specially designed Express Money Center adjacent to a branch, Centris Express enables customers to cash checks, buy money orders, transfer money, pay bills, buy cellphone minutes, and reload prepaid cards, all with the touch of a few buttons.
The kiosks integrate with the credit union’s backend processes, so users can make deposits and withdrawals from their Centris checking and savings accounts.
See below to download the Impact piece.
Sunrise Community Banks: Navigating the Learning Curve
Submitted by Jessica_Kumar on January 2013If there is one lesson David Reiling takes away from all the ups and downs he has faced over the last eight years at the helm of Sunrise Community Banks, it is the need to offer consumers “quality through and through.” For Reiling, the general purpose reloadable prepaid card is an excellent avenue to provide such quality service to customers.
The prepaid card “is the only model that I’ve been able to find that can facilitate a sustainable method to provide [financial] access to low-balance, high transaction consumers and do it in a convenient and transparent way with fair pricing,” said the chief executive of the Minneapolis-St. Paul-based bank. “The fact is there are a lot of different uses and flexibilities that can happen. In and of itself, a prepaid platform can be a very convenient access point for underserved consumers.”
See the case study below for more information on how Sunrise Bank has served consumers with new prepaid offerings.
