In the wake of the financial crisis, many American households have taken a critical look at their financial situation and sought to learn more about how they can better protect their financial health. A 2009 survey by Mintel Comperemedia found that three out of four American adults had taken steps to improve their financial literacy in response to the economic downturn. We at CFSI turned our attention to the financial education world as well, assessing the landscape in an effort to discover what types of interventions were effective in not only improving financial knowledge, but also in helping consumers to change their financial behavior for the better. Our research efforts led us to the "financial capability" approach, a method of intervention that focuses on helping consumers more directly adopt those financial behaviors that can lead to tangible positive outcomes, such as an improved credit score or increase in savings. We believe the approach is gaining momentum as both nonprofit organizations and financial services providers create more programs and tools that help consumers reach these goals.

 

While the financial capability approach has applicability for Americans across the income spectrum, it can be an especially helpful means of supporting underbanked consumers in their pursuit of financial stability and prosperity. Core to the financial capability approach is the pairing of financial guidance with access to well-structured, complementary products. For instance, while educating consumers on the benefits of building savings to prepare for short-term financial emergencies, nonprofit organizations can also offer an opportunity to open a savings account with a partnering bank or credit union. This link creates a gateway for the underbanked to access financial products while also providing the information and support needed to use them in a way that builds financial security. The link between education and access to product is often created through the formation of cross-sector partnerships - nonprofits in the financial education or counseling field working with for-profit financial services providers. For underbanked consumers, these programs offer the best of both worlds: guidance from a trusted nonprofit with whom they may have an existing relationship and access to products that can be used to benefit their financial lives.

 

Going forward, we hope to see more nonprofit organizations and financial services providers adopt the financial capability approach.  By focusing on helping consumers better their financial behavior, adopters can help consumers achieve meaningful improvements in their financial health. For the underbanked in particular, the financial capability approach can play a major role in accomplishing this goal by providing consumers with helpful financial guidance and the products they need to put that guidance into action.  In implementing the financial capability approach, nonprofits and financial services providers should consider forming partnerships with one another to create programs and resources that can help to bolster the financial stability of underbanked consumers.

On April 1 CFSI hosted a Congressional event in partnership with the National Endowment on Financial Education (NEFE) on financial capability. Senator Daniel K. Akaka, Congressman Rubén Hinojosa and Congresswoman Judy Biggert were honorary co-hosts of the event. In his keynote address, Senator Akaka called attention to the financial services needs of lower income consumers.

 

The event, "Making the Grade: Improving the Financial Capability of Americans," was held in the historic Kennedy Caucus Room, brought attention to CFSI's Financial Capability Innovation Fund, and showcased new strategies that combine the delivery of personalized, timely, financial information and advice with high quality financial products and services.

Did you miss Making the Grade: Improving the Financial Capability of Americans? Click here to download the presentations as well as a video recording of the event.

 

 

Call for Entries: Deadline April 30, 2011 

CFSI invites ideas for financial products that could benefit from a FREE MAKEOVER by a panel of financial capability experts. We are looking for ideas for financial products that you believe are well-suited for use by underbanked consumers and that could be extremely beneficial to this market segment, but that could still be improved with some expert help. At the conference, the panel will offer thoughtful suggestions on how technology and behavioral economics can be applied to improve the design, marketing approach, distribution strategy, and ongoing customer support built around the product. Don't miss this unique opportunity!

 

Click here to enter and win a free conference registration.

 

CFSI, along with the National Community Tax Coalition, Doorways to Dreams Fund and the Corporation for Enterprise Development, has issued a letter to Secretary Geithner demonstrating grassroots and national support of the launch of the MyAccountCard Pilot Program for Low-income Tax Filers on March 25, 2011. The program will provide thousands of low-income tax filers with prepaid debit cards to receive their income tax refunds electronically. We believe that this pilot program is a modest, but important step towards better serving the estimated 60 million Americans who are underbanked according to the FDIC. Click here to read more. 

 

Walmart, Kroger, Kmart, and other retailers have all made serious forays into financial services over the last several years. Walmart has the greatest visibility and is the most established retailer in the space. As the Washington Post recently reported, Walmart has "opened roughly 1,500 MoneyCenters that process as many as five million transactions each week." Customers can cash payroll and government checks, transfer money, pay bills, and purchase or reload a general purpose prepaid account.

Dean Karlan, Keynote speaker at our 4th Annual Underbanked Financial Services Forum and Professor of Economics at Yale University, has released a book with co-author Jacob Appel about how a new economics is helping to solve global poverty. In this pioneering, book Karlan and Appel combine behavioral economics with worldwide field research in villages across Africa, India, South America, and the Philippines, where economic theory collides with real life. They show how small changes in banking, insurance, health care, and other development initiatives that take into account human irrationality can drastically improve the well-being of poor people everywhere. Click here for more information or to purchase the book.

• Micro Branch, Macro Payoff As part of its strategy for reaching out to the un- and underbanked, CFSI Grantee Self-Help Federal Credit Union has opened a Micro Branch in east San Jose, CA ...