In today’s times of economic stress – driven and accentuated by the effects of the Covid-19 Pandemic – financial inclusion has become ever more important. Financial inclusion addresses society’s need to help all global citizens obtain financial services
and products at affordable prices.
From deposits and loans, to fund transfers, it’s imperative we at FIS assist financial institutions in meeting the needs of the “underbanked” – those who believe they aren’t able to access the traditional services of a financial institution.
Recent government action creates opportunity
In the United States, recent federal legislation has created new opportunities to reach out and help individuals and small businesses in distressed, economically challenged areas.
In passing the
Omnibus Appropriations and Covid-19 Relief Bill in December 2020, the U.S. Congress included USD $3 billion of funding directed to Community Development Financial Institutions (CDFIs). CDFIs
are financial institutions that strive to foster economic opportunity and revitalize neighborhoods in low-income areas.
The good news for bankers is that approximately $200 million of this funding is available to all financial institutions
– and your institution need not currently be designated as a CDFI to obtain this portion of the funding. Availability of these funds offers a means of promoting financial inclusion, with government backing of your institution’s assistance efforts.
Charting a path toward inclusion
The path to building a financially inclusive world involves a concerted effort to address many historic and systemic issues. There’s no simple guidebook for this type of expansive, inclusionary change – but having the right technology available is a good
Banks and fintechs should revisit their product roadmaps and re-assess their innovation strategies, to ensure they are building new technologies that can empower all Americans with access to vital financial services. For example, providing financial advice
and education can extend a bank’s role as a trusted advisor while helping the underbanked improve their banking aptitude and proficiency.
Whether your institution is a CDFI, or simply wants to better reach the underbanked, we at FIS want to help you – as you help advance financial inclusion. We plan to continue supporting standards, providing relevant inclusion research, and helping educate
our partners on inclusion opportunities.
Support of Bank On standards
As previously announced in the press, FIS actively supports the Bank On effort to ensure Americans have access to safe, affordable bank or credit union accounts. The Bank On program,
Cities for Financial Empowerment Fund, certifies accounts that are public-private partnerships to help drive financial inclusion. Banks and fintechs should continue to join these
efforts and help identify the new features and capabilities that can provide more Americans with affordable access to financial services.
Through this effort, banks can provide simplified accounts to their unbanked customers. These customers can identify and enroll in safe, low-cost transactional products that meet the following
Bank On standards (as certified by the national nonprofit organization).
Understanding the needs of the underbanked
Recent research conducted by a team at the FIS Impact Labs highlights the extent of the challenge of financial inclusion as they seek to answer the question:
How do the underbanked engage with key components of banking and approach education around financial health?
Key findings indicate a significant underbanked population exists and that they require a nuanced approach to support their financial health. Financial services products for the underbanked should address the following concerns:
Time. Customers would like to decrease time spent on, or increase efficiency
of, engaging with their personal finances
Trust. Consumers trust banks to secure their money, but are less inclined to trust them with their financial health
Literacy. While respondents often use their institution’s digital tools, they
rarely use third-party finance apps, such as Mint and Acorns
Guidance. The underbanked desire financial guidance to help them reach their financial goals
Financial institutions must address both the transactional and emotional needs of the underbanked to accommodate the distinct characteristics of these consumers.
Effective research that can help guide new product investments that promote financial inclusion – such as financial institutions surveying prepaid card users to discover those needing checking accounts and exploring merchant-offer subsidies for digital banking
products – can be accelerated by banks’ technology partners.
Other potential banking product categories that can help to serve the underbanked include:
- Financial services education programs
- Financial wellness services and apps
- Digital-only banking offerings
FIS will continue to track government initiatives that drive financial inclusion to help inform clients on any new developments.