Shining a Light on “Shadow” Banking

Over 100 million individuals in the U.S. are underbanked — they can
not access or choose not to use traditional bank accounts and financial
services. Instead, they use alternative financial services, such as check
cashing services, prepaid cards, small dollar loans, remittances, and other
nonbank services to meet their everyday financial needs. These alternative
financial services, which may or may not be more costly than those offered by a
traditional bank, are often preferable for consumers who want convenient,
transparent, and easily accessible financial options.

As Congress reconvenes and the effort to overhaul the financial regulatory
system resumes, how do the financial services needs of underbanked consumers
fit into the broader policy discussion? How can federal policies support
responsible, innovative alternative financial services?

On September 18, the New America Foundation hosted an event, moderated by
Melissa Koide, that probed these questions and more.

Peggy Twohig, the Director for Consumer Protection at the U.S. Treasury
Department, provided the keynote address, discussing the Obama Administration’s
proposed Consumer Financial Protection Agency.

Following the keynote, a panel of progressive industry representatives and
experts, featuring Patrick Brown (NetSpend Corporation), James Gutierrez
(Progreso Financiero), Manuel Orozco (Inter-American Development Bank), Rachel
Schneider (Center for Financial Services Innovation), and John Thompson (Advent
Financial Services), illuminated who underbanked consumers are, and why they
choose alternative products.

Roy Sosa, the CEO of MPOWER Ventures, a socially responsible venture capital
firm, followed with a presentation on the economics of serving underbanked
consumers.

Finally, a panel of policy experts discussed policies to ensure that underbanked
households have both consumer protections and access to safe, reasonably-priced
products that meet their varied needs. The panel featured Melissa Koide (New
America Foundation), Edmund Mierzwinski (U.S. PIRG), and William Zavarello
(House Financial Services Committee Chairman Barney Frank’s office).

Participants
Keynote Speaker

Peggy Twohig
U.S.
Department of the Treasury

Featured Speakers
Patrick Brown
NetSpend Corporation

James Gutierrez
Progreso Financiero

Edmund Mierzwinski
U.S.
PIRG

Manuel Orozco
Inter-American Dialogue

John Thompson
Advent Financial Services

Rachel Schneider
Center for Financial Services Innovation

Roy Sosa
MPOWER Ventures

William Zavarello
U.S.
House of Representatives Committee on Financial Services

Moderator
Melissa Koide
New America Foundation