October 25, 2012
What's All the Buzz About? (3:05)
Welcome, Julie Stackhouse (10:39)
Ray Boshara: Why Financial Inclusion Matters (18:23)
Opening Keynote: Melissa Koide (25:46)
Opening Keynote Panel (15:57)
Plenary Session One: Who are the Unbanked and Underbanked?
Moderator: Jennifer Tescher (8:36)
Presenter: Keith Ernst (22:33)
Presenter: Lisa Locke (12:10)
Presenter: Steven Shepelwich (8:36)
Plenary Session One Panel Discussion (36:26)
Introduction: Yvonne Sparks (3:31)
Luncheon Keynote: Clifford Rosenthal (38:45)
Session Two: What Products Exist to Meet Their Needs?
Overview: Louisa Quittman (5:26)
- Track One: Payment Products
Moderator: Terri Bradford (5:23)
Presenter: Haydeé Moreno (18:19)
Presenter: John Thompson (11:20)
Presenter: John Metz (14:57)
Track One Panel Discussion (26:10)
- Track Two: Credit Products
Moderator: Vikki Frank (13:01)
Presenter: Sheri Flanigan-Vazquez (13:36)
Presenter: Paul Woodruff (12:12)
Presenter: Laura Castro de Cortés (7:51)
Presenter: Jonathan Harrison (12:13)
Track Two Panel Discussion (9:32)
- Track Three: Savings Products
Full Session (1:11:25)
October 26, 2012
Day Two Opening Keynote Introduction: Ray Boshara (4:11)
Day Two Opening Keynote: Jennifer Tescher (30:24)
- Plenary Session Three: Distribution Channels – Mobile Financial Services
Moderator: Royce Sutton (4:17)
Presenter: Marianne Crowe (23:33)
Presenter: Jeanne Hogarth (19:02)
Plenary Session Three Panel Discussion (9:18)
- Plenary Session Four: Distribution Channels – Tech vs. Touch
Moderator: Sarah Gordon (5:33)
Presenter: Tina Lentz (6:30)
Presenter: Patricia Hasson (8:09)
Presenter: Laura Castro de Cortes (7:48)
Presenter: Suresh Ramamurthi (6:44)
Plenary Session Four Panel Discussion (34:50)
Closing Plenary: Reflection and Synthesis on Forging Pathways to Wealth-Building Financial Services (44:35)
Wrap-up and Adjourn: Ray Boshara (3:24)
Ray Boshara: All right, is that better? Sorry about that. I was just mentioning when Melissa talked about Simon and deciding whether or not he wants to study Russian literature, it reminded me of a paper that Jeanne Hogarth is an author on that will be presented at our February conference. It’s basically looking at what level of debt leads to what kind of asset later in life. You know, how does the overall balance sheet improve because of that investment in education and at what point does that not become worth it? I think that’s the kind of research that we want to be looking at. So thank you, Melissa. That was very interesting. Very forward looking. Just as you’ve always been looking around the bend. And I have to admit, I was one of those head scratchers when you first talked about the assets and transactions.
Melissa Koide: Yeah, there were a number of you.
Ray Boshara: Yeah, yeah, I remember that. I admit it. But she brought me around. And that’s what happens with innovators. So it’s very exciting.
But it does raise this question, you know, when you look at things like prepaid cards, you know, the new Blue Bird card and mobile financial services and kiosks and things like that. You know, clearly non-banks are playing a much more prominent role and an exciting role and potentially a very promising role in financial services, including, and potentially, especially for the people that most of us in this room care about. But what does that mean for The Treasury Department? You know, is there a way for Treasury to be involved in this? I mean, you mentioned the mobile apps, which I think is very interesting.
Melissa Koide: Right.
Ray Boshara: But could you say a little bit more about what this huge, this revolution means for The Treasury Department and how it can impact these developments?
Melissa Koide: So, yeah, I’m happy to. I mean, I have to pause and say that we just two years ago passed Dodd-Frank, and as a part of that this new Consumer Financial Protection Bureau was created. And what’s very notable about that new regulator is the fact that they are not setting out to assess consumer protections from the context of the type of entity that is offering the products. They are setting out to do it from what are the products that are being offered. And they are asking, are the consumer protections in place whether it’s a product that’s offered by a bank or a non-bank?
At Treasury we, in big part, because we are really trying to look around the bend, and we also, I think, are pretty pragmatic in saying what is happening in the marketplace right now? What are the products the consumers are using? And for those of us who are thinking a lot about under-banked consumers, what are the products that they’re turning to? And how do we make sure from a consumer protection and also a safety and soundness agenda that the products that exist are safe for consumers, safe for the entities that are offering it, and safe for the system overall?
So similar to the CFPB, I don’t think that we are coming, and we’re not coming at it from is it a depository or isn’t it a depository, but merely are consumers getting good benefit? Are they high quality products? Are they safe? Are they affordable? And putting aside the question of what, is it a bank or a non-bank that’s offering them?
Ray Boshara: So I’m hearing a little bit of anostosis if you’re not really making a huge distinction here.
Melissa Koide: That’s correct.
Ray Boshara: You know, about who’s actually providing the service, but whether or not it’s appropriate for consumers, if there’s protections, if there’s safety and soundness.
Melissa Koide: That’s right. That’s right. And I also think it means that we, policymakers and regulators have to get smarter to understand what are the underlying economics of the offering of these products. We need to understand these business models. They are different than what we have seen in the past. And we have to understand to ensure that there is safety and security with those offerings. But there’s a lot of work for us to do to understand what are these emerging trends. What are the current trends now and where are things headed?
Ray Boshara: And I’m sure you would welcome the input of the folks in this room?
Melissa Koide: I would welcome the input. I’m looking forward to hearing it.
Ray Boshara: And what would be the best way for them to convey their ideas and suggestions?
Melissa Koide: Reach out to us. I feel in some ways like we are a little bit on a listening tour, because we are trying to get educated. And I know this is a roomful of people who are both on the ground, practitioners who are working with consumers, I’m sure who are coming in some cases and saying, “Help me assess which product is better? Where should I be going to get my financial service?” It would even be helpful to hear that perspective. What are you seeing in your engagement directly with consumers? You know, to the folks from the bank who are, I think, grappling with some of these questions too and engaging in your own research to understand what these trends are. Reach out to us at Treasury. I could give my e-mail address, but that might be overkill.
Ray Boshara: I think you’ll get a lot of responses.
Melissa Koide: Good.
Ray Boshara: So sticking with technology just for another moment here. You know, direct deposit and electronic funds transfers, you know, is often thought as a real route to increase financial access for low and moderate income households. Especially for those receiving government payments. And I believe that Treasury actually implemented a pilot a few years ago, you know, that offered low and moderate income families a card.
Melissa Koide: Hm-hmm (affirmative).
Ray Boshara: And how did, you know, to get their refunds on, to get their tax refunds on.
Melissa Koide: Yep.
Ray Boshara: Potentially in anticipation of the 2013 Go Direct mandate, which requires everybody to shift to an electronic payment, either direct deposit or a card. What did you learn from that demonstration?
Melissa Koide: So we learned a number of things, some of which I can share, and some of which I won’t. What I will share is, what I can’t share are some of the politics that were involved, just to be clear. What I will share though is the fact that we went into this, we Treasury went into this, My Account Card pilot for two purposes. One was because Treasury is going electronic with the distribution of federal payments across the board. By March of next year the plan is for all Social Security, Railroad Retirement benefits, federal payments, non-tax payments to be delivered electronically on another prepaid card product, Direct Express. And that’s because we want to save money. Because it’s a lot cheaper to distribute payments electronically than it is via a paper check. It also, by doing it electronically, offers a level of security for the recipient getting the payments.
So one was cost savings and efficiency. The other was because there was the understanding that this could be an opportunity to provide unbanked tax filers a way to access an affordable financial service instrument. So the pilot was undertaken and I would say what’s really important is the intention, the intended learnings from the pilot were really to understand the mechanics. How would we put this together? There are a lot of pieces to do in order to figure out how the individuals are who you want to be targeting, who may not have accounts already. How you go about verifying their identities to open up the accounts so that you can then distribute the refunds into it. So it really was an effort to understand the mechanics.
But at the same time, there was an opportunity to test out, well, what would be most appealing about a product that would actually tip unbanked tax filers into the account? And so there were three things that were tested. One was the message, or messages. The messages there were convenience and safety, does convenience outweigh safety? The other thing that was tested was, well, if there was a savings account affixed to the prepaid card, would that induce more uptake? And then the other was, well, if there’s a fee with the card, a $4.95 fee, would that affect uptake?
So there were a lot of goals in designing the pilot, and we did learn some useful information. We, for some of the mechanics, weren’t able to make it as seamless as possible in terms of soliciting people for the card. But nevertheless we had enough people who participated that we ended up with some statistically significant research, which showed that unbanked tax filers were three times more likely to take the card than those who had bank accounts. We learned that, and this is sad for those of us who have been in the asset building field, savings account didn’t make a difference. We don’t quite know what that’s about. But it was notable. And we did see that fees matter. The cards without the fees, and I want to give you the exact information, the data shows that monthly fees affected participant take-up and the use of the accounts. Specifically the $4.95 monthly maintenance fee reduced account applications by 42 percent.
So we learned some things. Our move, Treasury’s move towards all electronic by March of next year does not include tax payments. But that is the last big tranche of federal payments going out, and we are thinking about what comes next and how can we get to an electronic means of distributing those payments at some point in the future. So it was insightful, and I think a valuable undertaking for us to have done.
Ray Boshara: Very interesting. And just a note, as you might have seen in the program, we have a couple of roundtables that will dig a little bit deeper into some of these sessions.
Melissa Koide: Oh, good. That’s great.
Ray Boshara: We have Rourke O’Brien and Barbara Broomly [phonetic 0:11:01], one of the roundtables is on government payments and public benefits and how those are leverage points for financial inclusion. And then, of course, we have another one on tax time featuring McCall Greenstein Vice [phonetic] from Washu talking about some real innovations she’s undertaking with Intuit and Turbo Tax. So I encourage you to attend those. I know I would have a hard time choosing among the four if I had to. But just a little shout-out since we’re talking about this topic.
Well, very interesting. Well, you know, as you all know, we have a panel tomorrow, I think a very interesting one, on tech versus touch. What’s the right balance? And speaking of touch, I know that, as Julie mentioned, you know, there are several successful bank-on efforts, both within our district as well as in the Kansas City district, and indeed nationwide. And these efforts have been largely, I think, successful. We’ve learned a lot. It’s very labor intensive. But thousands of accounts have been opened around the country. And now I know that Treasury has been, really amped up its efforts to support these bank-on efforts around the country. Many of them have been led by cities of all sizes. Heidi Goldberg from the National League of Cities is here. And, again, at another great roundtable she’ll talk more about that, as well as some of the others who have been involved in these efforts.
So what exactly has, you know, what’s Treasury’s take on the bank-on and what are you guys doing to support it?
Melissa Koide: Yeah. So I’m sure—How many in the room have been a participant in a bank-on program? I’m just—So many of you. That’s great. So we have an authorization for a bank-on program in Dodd-Frank. And the President has included the bank-on program in his budget. We, unfortunately, as I’m sure all of you know, have not seen an appropriation for bank-on yet. I’ve been with Treasury six months and I can tell you that without question expanding consumers’ access to financial services is critical. And it is instrumental to what my office is about. If we are fortunate to get an appropriation we would be very enthused about how we could leverage that money to expand consumers’ access. But even if we don’t get those resources, by all means, we are really focused on one, really understanding what are the impediments to access, both from the consumer side, what are the challenges in terms of getting into an account in the first place. But also really trying to understand the impediments to access from the supply side, from the banks themselves. And also really wanting to understand how cities and communities are helping to play that bridge role and overcome the challenges both from the consumers and from the industry. So it continues to be something that is core to the work that we’re doing in our office and we would like to see an appropriation.
Ray Boshara: That’s great. As many of you probably know, cities have launched bank-on campaigns, save campaigns. Cathy Mann, who is with Saving YC is here, and now with the National Federation of Community Credit Unions. They’re really exciting, you know, these campaigns embedded in cities doing the hard work of trying to build financial access. And it’s great that your office is trying to learn from those.
Melissa Koide: Absolutely.
Ray Boshara: That’s very exciting.
Melissa Koide: There are a lot of people here I’ll be learning from, I’m sure.
Ray Boshara: Yes, there’s some great things going on here in our district. We have, I think, the third oldest bank-on program in the country in Evansville, Old National Bank. And Bob Jones will be talking about that tomorrow.
Melissa, we have just a couple of minutes. Is there anything else you didn’t quite work into your remarks that you’d like to share with everybody?
Melissa Koide: Nothing new to add other than it’s just really, really not only a pleasure to be here and to learn from a lot of you. And I think it is so important to have people who play different roles in terms of promoting consumers’ access to high quality products and services in one room to have a conversation so that we can learn from each other. So it’s a real pleasure and a real value to be here and be a part of this dialogue. So thank you, Ray.
Ray Boshara: Well, everybody gets an extra three minutes then.
Melissa Koide: All right.
Ray Boshara: So, Melissa, we are thrilled you made the effort to come here. We thank you.
Melissa Koide: Thank you.
Ray Boshara: And all the leadership your office is providing. And Louisa and everybody else. It’s great to be working with you, and we look forward to seeing how we can work together as well here. Thank you.
Melissa Koide: That’s great. Thanks.