Last week I attended a conference – not a credit union conference – but a financial services conference attended by all different kinds of financial service providers. Payday lenders, check cashers, bankers, regulators, community group, foundations and credit unions all gathered The Center for Financial Services Innovation (CFSI) annual conference.
The CFSI is a group that works to “transform underbanked strategy” by “develops and distributes real-world tested research and strategy, provides funding to promising companies, and facilitates cross-sector business collaboration” (quoted from their site).
In short: The conference was fascinating. The talk of the day was prepaid cards as the hottest new financial tool. With me was Field Coach Bill Myers, was kind enough who share his notes.
From the Notebook of Bill Myers:
The Center for Financial Services Innovation Underbanked Forum is noted for two things: its eclectic attendees and being the first place leading edge financial products for the underbanked are introduced. The CFSI byline correctly calls the Forum “the best single place to learn from and connect with the people transforming the financial services landscape.”
The attendees at this June’s Forum included banks and a few credit unions, foundations, university researchers, money service businesses (as check cashers and payday lenders like to be known), vendors, international NGOs, large retail corporations, consumer advocates, regulators, non-profit lenders, and venture investors.
The Center for Financial Services Innovation is active in research, strategy, funding (both investment and grant) and collaboration. By their definition, the total underbanked population consists of 106 million adults or 49% of the population 18 and older.
The Forum was useful background information, useful for finding the extreme leading edge, useful for making contacts, but it’s a little rarified for on-the-ground bankers.
The new is commonplace. Behavioral Economics still holds sway (SmartyPig was a hit).
Dean Karlan, of Yale University and Innovations for Poverty Action (IPA) and Financial Access Initiative, presented StickK.com , a web site to document and enforce your goals (one wag called StickK a libertarian paternalism commitment device).
Peter Tufano has reimagined financial education as “financial entertainment.” He described work on South Africa, ROSCAs, the British premium bond, and in this country Save To Win at D2D. Interesting factoid: each US household spends $514 per yr on lottery. Peter is working to get state lotteries to offer a savings option. His analysis of six methods of encouraging savings is a powerful framework.
On the international front, David Porteus has done piles of work on the underbanked internationally, much of which has application in the US.
Prepaid cards are still the next big thing, as they have been for several years. GreenDot, PreCash, and AccountNow were well represented.
I only saw one Credit Union speaker, Steve Zuckerman the director of the California Self Help program. He already has a lease to open four Micro Branches that will offer check cashing, prepaid cards, remittance, bill payment, but no short term small dollar loans. This is Self Help’s answer to payday lenders. Can they build a migration strategy without comparable products? Can they build systems and staff from scratch?
WIBP, Walk in Bill Payment, highlights the need for payment services for the underbanked. In Lane Bill Payment (at retail stores) plays up the trend towards services delivered away from depository branches.
Nexxo was offering an early generation of a Kiosk based Remittance system. What next?
Best Overheard Quotes from the conference
“We are emphasizing growth to achieve scale at the cost of eroding human connection.”
“Insured Depositories don’t rule the underbanked world. They are just a link in a supply chain; back end support with occasional front end.”
“There are many non-productive reactions to the financial dislocation: Dazed by near death experience they hunker down, ride out the storm; they long for the pale of normal business.”
Best Breakout Session
This is the second year CFSI offered Extreme Networking. This fast paced process is based on Extreme Dating. Based on a pre-conference survey, each participant is matched with another attendee for a four minute session. Practice your elevator speech and have your business card ready, because the four minutes goes quickly. Follow your chart, change partners, and repeat ten times.
Just like regular dating you sometimes get stood up.
Don’t forget Payday lending
Errol Damelin, of the UK’s Wonga made a prolonged pitch that his web based small dollar loan program in the United Kingdom has nothing in common with the American payday lenders.
He argued that Wonga is transparent about cost and the borrowers know what they are getting into and love the program. Damelin says interest rates are irrelevant and transparency is enough. In any case APR is not the correct statistic to measure cost of a short term loan.
Wonga has a high turndown rate, doesn’t allow rollovers, and has many satisfied customers. Wonga (slang for cash) provides some financial. Wonga is a high margin business. But, is it predatory?
One of the key disagreements among participants at this conference was, “Are there interest rate limits to what is helpful lending? Is thirty six percent enough? Is there such a thing at ethical non-prime lending?”
As diverse as the representation was, I heard agreement on three board issues.
- Prepaid is still the next thing
- Bill Payment is a sticky cost
- Direct Deposit is the Holy grail
CFSI has produced a new video, similar to the AECF series: http://www.cfsinnovation.com/news-latest-detail.php?article_id=330601“Innovation in action” contains three consumer profiles:
- Prepaid Netspend card from ACE
- Consumer credit with Progresso Financiero loan
- Community banking from Key Bank’s check cashing program
CFSI is releasing a pamphlet, Nonprofit guide to Prepaid Cards, supported by NBCPA and NetSpend. – http://www.cfsinnovation.com/research-paper-detail.php?article_id=330606