April 28, 2011
CFSI releases it latest research paper: The Future of Financial Services: Recommendations for Asset Building
CHICAGO -- The Center for Financial Services Innovation today released The Future of Financial Services: Recommendations for Asset Building, a report detailing the results of a year-long study to understand how current and impending trends will affect the structure of the financial services industry with recommendations for how the asset-building field can respond.
Overwhelmingly, current trends show that the need to help low and moderate income Americans save and invest for the long-term is more important than ever. "Many people are facing unprecedented short-term financial challenges - extended unemployment, declining home values, damaged credit scores - but these challenges must be tackled simultaneously with building long-term financial health," says Rachel Schneider, CFSI's Vice President of Innovation and Research. "Doing so requires solutions that holistically address both short-term and long-term needs."
With the generous support of the Mott Foundation, CFSI has analyzed how key current trends will impact the financial services industry over the next 7-10 years. The goal of this inquiry was to make recommendations about what those trends mean for the underbanked, particularly for policies and programs that help underserved individuals to save and invest for the long-term. CFSI reviewed the literature analyzing the impacts and future implications of the crisis; interviewed policy experts, business executives, academics, and thought leaders; and convened a series of small group discussions on this topic.
On the basis of this analysis, CFSI recommends several ways that current trends can be leveraged to help underserved individuals achieve long-term financial health.
Demographics in the U.S. are shifting, and as the population ages and immigrant populations grow, financial services providers that want to serve the underbanked with savings solutions should leverage these trends with targeted consumer research and smart market segmentation strategies.
Policy change will continue to be a major driver for the financial services industry, but government budgets will continue to be tight; so advocates looking for incentives for low income families to save should focus on near-term consumer needs such as emergency savings, leverage behavioral economics knowledge about the small "nudges" that help people to save, and seek connections to workforce development and education-related policies.
Credit-building services will be a crucial building block for the foreseeable future, necessary to prepare current debtors and spenders to be future owners and investors.
While traditional banks and credit unions will always be key partners in helping underserved consumers to save and build their financial health, the newcomers on the scene - retailers, prepaid card companies, alternative payments vehicles - are growing and innovating at a pace that makes them attractive and important distribution channels. Those focused on helping low and moderate income individuals save must engage these new players in the effort.
Finally, building financial capability is at the heart of any strategy to help consumers manage their financial lives better: it is time to pair all financial products with tools that help consumers build their ability to navigate the financial services landscape.