Image credit: Voice of Detroit.
Toward the Better Banked
September 17, 2013
10:00am – 4:30pm
Maurice R. Greenberg Conference Center
New Haven, CT
On September 17th, 2013, with the support of American Express Serve and Innovations for Poverty Action, PopTech will bring together a diverse group of financial experts, technologists, behavioral scientists, antipoverty activists and social innovators to explore new ways to improve the financial lives of unbanked, under-banked and unhappily banked Americans.
We will convene at the Maurice R. Greenberg Conference Center on the Yale campus in New Haven, CT, for a daylong series of presentations and collaborative discussions, capped by an evening lecture event open to the Yale community.
Our goals for the Innovation for Financial Inclusion Salon are twofold:
- To share new insights and identify areas of untapped exploration, innovation and collaboration in the domain of financial inclusion.
- To form a network of future collaborators who might work together on these new opportunities.
The network of participants will be intentionally eclectic, with a mix of domestic and global subject-matter experts and innovators from beyond the normal boundaries of the field.
The challenging lives of financially marginalized Americans
For the past 40 years, financial stratification has increased remarkably in the United States. Between 1979 and 2009, the productivity (as measured by output) of U.S. workers doubled, but wages stagnated. Average incomes in the U.S. grew by a meager $10,401 over four decades, and a staggering 100 percent of those economic gains went to the top 10 percent of wage earners. Income for the bottom 90 percent actually declined during the same period.
In many communities, this led to a spiral of economic contraction, reduced employment, a shrinking tax base, outmigration, increased poverty and a decline in the quality of public services. Manufacturing jobs increasingly gave way to lower-wage service sector jobs with less mobility, limited employee protections and often no benefits. Americans also swapped income for record levels of debt. This trend has only accelerated since the financial collapse in 2008.
The traditional consumer banking system has been challenged to keep pace with these changes. More than 10 million U.S. households – 1 in 12 – don’t have an account with an insured, traditional bank, according to the Federal Deposit Insurance Corporation. Add the under-banked – those without checking accounts – and the figure rises to 28.3 percent of U.S. households, more than 68 million people. While access to safe and effective bank accounts and services is an important component of financial inclusion, the United States especially suffers from poor usage of these accounts once they are created: While many adults do have bank accounts, the value of their savings account is on average only 27 percent of their income. This indicates barriers beyond basic service delivery, relating to knowledge, behavior, and social interaction, that impede the appropriate and effective use of financial tools to improve welfare.
Reinventing finance for the poorly served
In many places around the world, the unbanked are now starting to utilize and benefit from novel financial service innovations. New financial tools such as mobile-phone-based payment and savings services for small-balance accounts are available in parts of Sub-Saharan Africa and parts of South Asia, where regulatory barriers to entry have been lowered to improve access to and usage of formal financial services by the poor. Internet and mobile technologies have transformed the way consumers interact with information and payments with various service providers, and with each other, and have reshaped ideas about what stored value is and how it is transacted.
Global financial inclusion advances are providing interesting models for new approaches to serve the unbanked and under-banked in the United States. In spite of significant regulatory compliance barriers, financial, technology and social innovators are developing new forms of payment, transfers and stored value for new kinds of savings and micro-lending products that ride on alleviating cost, information, behavioral and social constraints, for use by the poor in U.S. markets.
Harnessing behavioral insights
There is also a deep behavioral revolution underway in the social sciences. New research tools are revealing the critical psychological dynamics that are essential to understand and address in making financial products work. Among other things, this research guides the design of incentives and costs to ensure cognitive investment especially in future-oriented goals and activities, and provoke effective social network dynamics to help these products spread from person to person.
Questions we’ll explore
Here are just some of the questions we’ll explore at the Salon:
- What do the financial lives of unbanked, under-banked and unhappily banked citizens look and feel like? Why and how does the financial system fail the poor in the United States?
- What is the vanguard edge of new service delivery for this sector? Where is it likely to go next?
- What can American efforts learn from international successes and failures?
- What, if any, regulatory conditions have to change to enable greater domestic innovation?
- What can the behavioral sciences tell us today about financial inclusion? What can they not tell us?
- Where has behavioral economics been used effectively in analogous spaces outside of financial services?
- How can we better attract innovators from outside the financial space into the discussion?
Our partner organizations
PopTech gratefully acknowledges the support of this event's partners: