Innovating Financial Services through Technology and Corporate Commitment

CFSI held their 6^th Annual Underbanked Financial Service Forum last week, bringing together about 600 financial services providers, government regulators and program managers, and consumer advocacy organizations together in New Orleans. The forum highlighted a wealth of financial services innovations, primarily technological, that have potential to improve access and financial-capability building in underbanked communities. The innovations spanned the full spectrum of financial services from transaction vehicles to credit services. On the asset building front, there were three initiatives specifically targeted to enhance personal savings:

• Self-Help MicroBranch’s My Piggy Bank Savings Accounts: A concept credit union branch that tailored its store services and products to match the low-wage, Latino community in San Jose, CA.  One of its products, which has been a surprisingly useful transition product for consumers who have traditionally relied upon alternative financial services, is the My Piggy Bank Savings account, a modified “Christmas Savings Account” that requires customers to set a date before which funds cannot be withdrawn.   


• GoalMine: A small dollar savings and investment company currently offered with Mango Financial prepaid cards.  GoalMine allows people to choose a savings goal and investment vehicle (mutual fund or savings account), fund the accounts starting at $25 and track the investment through the linked prepaid provider’s web portal.  GoalMine was selected by the Underbanked Forum’s audience to be the Core Underbanked Innovators Challenge’s $10,000 award winner.        


• PiggyMojo: A web-based savings tool that utilizes text messages, social networks and linked transfers from checking to savings accounts to create a system of “impulse savings” instead of impulse spending.  PiggyMojo is currently being tested in Brooklyn, NY as a grantee of the CFSI Financial Capability Fund.

 In addition to putting the spotlight on innovations, Jennifer Tescher, President and CEO of CFSI, unveiled the organization’s newest initiative, The Compass Principles, a set of aspirational guidelines envisioned to create “a financial services marketplace where all services are safe and contribute to making people’s lives better.”  The hope of the Compass Principles is to create a standard of what companies “should do,” not just what they “must do” by regulatory standards.  CFSI is currently soliciting feedback on the principles before going on the road to get industry buy-in and adoption.  The Compass Principles are a nicely-packaged manifestation of CFSI’s mission to transform the US financial services industry to better match the underbanked consumers’ needs and preference.  

While the Compass Principles is an excellent rhetorical mechanism to encourage commitment to socially responsible business practices, its potential effectiveness to achieve safe financial services for lower-income Americans brings to mind other attempts to create a culture of socially responsible business practices — like the UN Global Compact.  The Global Compact is a voluntary initiative to encourage businesses worldwide to adopt sustainable and socially responsible practices by signing on to a set of ten principles in the areas of human rights, fair labor, the environment and anti-corruption.  The Global Compact has achieved amazing reach with over 8,700 corporate participants including multi-national conglomerates like Nike and Shell.  However, it is often criticized, most recently by an independent external oversight body of the UN, as being nothing more than a public relations mechanism with no accountability for those that have signed on to the principles.

The effectiveness of CFSI’s Compass Principles will largely depend on the details of how corporate participants specifically define the principles as they figure out what it means for their business to “do no harm” or “create upward mobility.”  Additionally, the ability of the principles to hold once competition in the field gets tighter and providers must operate on smaller margins will no doubt be tested at some point.  For now, the hope is that corporate and consumer interests can be aligned with the stewardship of leaders like CFSI so that the financial services marketplace can function as it should.  At the same time, the complementary role of government regulation and enforcement should not be forgotten as there will be instances where the market will fail.  So, as the saying goes, “hope for the best and prepare for the worst,” the challenge moving forward in re-inventing a more inclusive financial services marketplace will continue to be about striking the right balance between business innovation and government intervention.