Navigating Alternative Financial Services and Products – Live Captioning Transcript

> Thank you for joining us today for our webinar on Navigating Alternative Financial Services and Products. My name is Michael Roush, and I am with the National Disability Institute. I'm the manager of financial empowerment and innovation. Today, I'm joined by Tanya Ladha, manager of advisory services for the center for financial services innovation and Brenton Peck, also with the center for financial services Center for Financial Services Innovation. Before we get started, we do have a few webinar housekeeping tips to go over. And I'd like to introduce my colleague, Nakia Matthews, who will go over these details with us. Nakia?

> Good afternoon, everyone. The audio for today's webinar is being broadcast through your computer. Please make sure that your speakers are turned on or your headphones are plugged in. You can control the audio broadcast via the audio broadcast panel, which you see below. And if you accidentally close this panel, you can reopen it from the top menu communicate and choosing join audio broadcast. If you do not have sound capabilities on your computer or you prefer to listen by phone, you can dial the number you see here, the toll-free number and you can enter this meeting code. You do not need to enter an attendee ID. I will paste this code into the chat box for those that are currently not able to dial the number. Realtime captioning is provided during this webinar. The captions can be found in the media viewer panel which appears in the lower right-hand corner of the platform -- the webinar platform. If you'd like to make the media viewer panel larger, you can do so by minimizing some of the other panels like chat, Q&A and participants. Conversely, if you do not need captions, and you can minimize the media viewer panel. We will have a question and answer portion at the end of today's webinar. Please use the chat box or the Q&A box to send any questions that you may have during the course of the webinar to either myself or Michael Roush -- sorry, -- yes, myself or Michael Roush. And we will direct the questions accordingly at the end of the webinar. If you're listening by phone and not locked into the webinar, you may also ask questions by e-mailing Michael directly at . Please note that this webinar is being recorded and that the materials will be placed on the NDI website at If you experience any technical difficulties during the webinar, please use the chat box to send me a message. Or you may also e-mail me directly at .

> Great. Thank you, Nakia. So today's webinar is about having the conversation on effective strategies and navigating the wide variety of alternative financial services and products. During the webinar, we will define and highlight these financial services and offer examples of these products. We will also explore prepaid debit cards and tools that are connected to prepaid cards to help individuals build their financial helm -- health. After today's webinar, we hope that each of you will have a better understanding of defining financial services, defining prepaid debit cards, identifying appropriate and affordable financial products and services for the individuals you work with as well as identify strategies for using these products and services to help improve the financial health of persons with disabilities. I would like to thank our sponsor for their support of our webinar series. I'd like to thank Walmart, Bank of America, Acorda Therapeutics, the Burton Blatt Institute, and the Internal Revenue Service. Before we get started, for those of you who are new to the National Disability Institute, I'd like to share with you information on our organization. The National Disability Institute is a national nonprofit organization dedicated to building a better economic future for Americans with disabilities. We are the first national organization committed exclusively to championing economic empowerment, assets development and financial stability for all persons across the full spectrum of disabilities. The National Disability Institute affects change through public education, training, technical assistance and policy development to help the one in three Americans with disabilities living in poverty, except for -- [Indiscernible] brighter financial future. To learn more about the National Disability Institute, please go to To join the conversation on building a better economic future for persons with disabilities, we encourage you to join the National Disability Institute's Real Economic Impact network. Is there -- the network is an alliance of organizations and individuals dedicated to advancing the economic empowerment of people with disabilities. It consists of more than 900 partners in more than 100 cities across the country. It includes nonprofit, community tax coalitions, assets development organizations, financial education initiatives, corporations, private sector businesses, federal state and local governments, and individuals and their families. All partners are joining together to embrace, promote and pursue access to and inclusion of people with disabilities. Today, we're fortunate to have Tanya with manager of advisory services, Center for Financial Services Innovation, and Brenton Peck, for information on how we navigate nontraditional financial services and products. With that, I'm going to turn it over to Tanya. Tanya?

> Great. Thank you so much, Michael. Good afternoon, everyone. Brendan and myself are thrilled to be here to have been invited by Michael and his team to share knowledge and research with all of you around alternative and nontraditional financial products and services with a specific focus on prepaid. Just working out the ability to scroll forward.

> There you go. You got it.

> Yeah. So for those of you that may not be familiar with the CESSI, who we are and what we do, I wanted to quickly go over -- overview of who we are. We are the nations leading authority on consumer financial health. We lead a network of financial services, innovators and providers that are committed to better consumer products and practices. We have four different lines of business in which we accomplish this. We connect folks. We host a series of convening throughout the year, different sized providers, different types of providers, really fostering dialogue and collaboration. We have a robust research arm in New York primarily. Insights and analytics, that provide the deep consumer insights that we use in different lines of work, some of which we'll be sharing with you today. We have an innovation blog. Some of you might have seen recently, the launch that we are really excited to turn the work we've been doing in the innovation space for years into something a little bit more formal and larger sized. So we seed and spur new promising ideas within the financial health and financial services field. And we also advise. Brenton and I sit on our advisory services team where we offer consulting services and technical assistance services to both for-profit and nonprofit financial service providers. Quick run through of our agenda today. I want to start with framing the idea of financial health. I think this term is becoming more popular, but it's still emerging a little bit. There's a lot of language around the underserved, the unbanked, and we're trying to move towards financial health. I want to spend time talking about here -- how we at CSSI are looking at that. Then move into an overview of consumer challenges and this marketplace as a whole to get a sense of how people are t ransacting, where people are g oing, what kind of pain points they are facing. Then we're going to focus in like we mentioned on prepaid specifically, really do a landscape analysis, what is out there, what are the functionalities and different features? Then we will take questions.

> Like I said, we're going to start with financial health. Financial health really is a bridging of the immediate short-term needs of a consumer and the long-term needs of a consumer. The day-to-day financial system of any particular individual needs to be functioning well, needs to serve the actual financial demands that that person faces on a day-to-day basis. But at the same time, the foundation, set up that particular consumer for long-term financial resilience and opportunity. So the way we're looking at this -- rather than from an underserved market, it's like, how do we achieve stability, health, and overall economic empowerment for the consumer? Financial health matters in a variety of ways. CSSI has long prided itself in creating win-win services in the financial services space. We want to create products and designs -- design services that are beneficial to the consumer but also motivate the provider to continue offering it to broaden their targets. So all of us are trying to look for the mutual beneficial outcomes for both consumers and providers. Financial health is no different. Starting with the individuals, their communities, their country, financial health is necessary for succeeding in any other part of one's life, mental and physical health, family stability, e ducation. It's necessary for upward financial mobility. This idea of long-term planning and stability. Then it has a positive trickle effect in communities. Economic, local economies, r egional, national, and then like I said for the financial provider, there is really incentive to provide appropriate products and services for this often overlooked target. There's long to revenue potential. There's increased loyalty from the customers and there's new opportunities for engagement. Going to move now to the actual marketplace. We're going to talk about demographics, P trends with specific focus on the persons with disability population. So this is somewhat startling slides if you aren't familiar with all of the facets of what makes up the underserved marketplace. What we've done here is collect and quantify all the fees and interests that consumers who are unbanked, under banked or underserved our spending. We've categorized it into different types of transactions and behaviors starting from the left. We have very short-term credit, short-term credit, which is typically over 30 days, payments, deposits and others. You will see -- there's an obvious leader in the number of fees being charged for short-term credit, which we will get to later. We're talking about almost $100 billion in fees and interest in this market. From the financial provider perspective, there's a huge appetite here for revenue generation. From the consumer side, there is just an exorbitant amount wasted on fees and interest unnecessarily. Demographically, we'll go through this quickly. About a quarter of all US households are financially underserved. Combining both unbanked and underbanked, underbanked as -- defined as having a bank account, whether checking or savings but using an alternative financial service sometime within the last year. You will see in the upper right, we've broken it down by ethnicity. And at the bottom we have broken it down by income. And I'm sure we'll get this question a lot. From the front end I'd like to say that this presentation will be sent out in a PDF form. So you don't have to worry about scrambling to take notes. You will have access to all of this. So I'm sure most of the people on this call are aware of the financial capabilities that NDI just published last month. Really brilliant report, first from snRNA -- financial capability or stability survey from FINRA. We wanted to point out a couple things that we found striking in the report as we talk about financial services for the underserved and specifically with the disability population. We have about 75% of the disability population making less than $35,000 a year compared to just about half that with the nondisabled population. This is a really striking number, something we want to keep in mind. The dollars that are being made, you could be budgeted and should not be wasted on fees, interest, -- interest. The dollars madeneed to be really consciously doled out. No surprise that on those incomes covering monthly expenses, is very difficult. Just also wanting to do a comparison between disability and non-disability population. We have three quarters again, same amount that is under $35,000 annual income that have very or some difficulty covering monthly expenses. Satisfaction with financial condition. As you might imagine, 70% of disabled population is somewhat or very dissatisfied compared to just 59% of the nondisabled population. I appreciate that this audience is probably aware of these distinctions, but as we move into our general conversation setting the stage, I want to frame that distinction and keep it top of mind for us. So what is the what that we're talking about here? Financial services, we're going to take a deep dive into these four areas of challenges that CSSI uses to categorize a consumer's life and talk a little bit about the realities and some of the products and trends and behaviors within each one before we hit the section on prepaid. So most basically, all consumers need to transact. Every day, we all transact. We buy things, we save money, we hopefully are making some money, we might be borrowing money. All of those things -- the day-to-day financial transactions. As we've seen, there's a lot of folks that either are not using banks at all, or have a bank account but don't use it for the totality of their transactions. So this is just a quick rundown of common themes from consumers who are not at a bank. There's many different reasons. These are the three that tend to repeat themselves. One, a lot of people feel -- perceived or real -- don't have the money to make an account useful. There's a lot of minimum balance requirements. There's different types of requirements that make people feel intimidated or lacking the funds to make it useful. Tied to that, accounts are costly. There's often just monthly holding fees, not to mention overdraft fees or check-cashing fees, any kind of fees associated with it. A lot of people have a very negative perception about bank fees and try to stay away from those. And then a general lack of trust in banks. We see this often with immigrant community but also the domestic population might have felt slighted or overcharged or had some kind of negative experience with a bank and therefore don't trust something as important as their money in those institutions. So where are people going? They have to be transacting, right? You'll see that bottom line, there are a lot of people going to banks. But there are just more and more options and alternatives for this particular consumer. And we are really devolving from the days of these kind of shady pawnshops or payday loans. You'll see both those numbers are really low. Can't get much lower than 0%. So folks like Walgreens, folks like Kroger, just grocery stores or convenience stores, department stores, they are starting to realize that this consumer is frequenting their establishment on a daily basis. So starting to offer some of the products and services that meet -- not only daily but financial needs. So we're seeing an exciting evolution of options. And in the alternative financial product space landscape -- we're going to move now to savings. So this is an interesting topic. It takes a couple of different shades. I know I only have a few minutes. We could talk for an hour about this alone, but you're probably wondering, with the lower incomes and a lot of money spent on fees, how people think about savings. So the primary reason to save for all of us is to cope with any financial shock or surprise that might come up. However, coming up with the $2000, which is a regularly used amount to whether some kind of financial storm -- whether -- to weather the storm, half Americans -- half of Americans are unable to come up with that kind of money in 30 days. The perceived ability to do so is not matching up. 62% of households with no emergency savings indicated they would be able to save $25 a month. So again, with this seven -- idea in mind of financial products and services appropriate to the needs of consumers, if there's a feeling of an ability to save $25 a month, then maybe given the right product or being exposed to the right service of budgeting or set it, forget it type methods, that could really improve a consumer's ability to save and then be able to -- to weather the storm. Which leads to our next challenge of borrowing. Different types of borrowing. We all know credit can be good. There can be a history established. Often times big purchases for cash -- does not make that much sense but the type of borrowing they are talking about with this particular consumer is short-term, small dollar credit. Most of the time I encourage you to think back to that first call him where we cited the market and the $50 billion of fees and interest going to short-term credit. So who are these small dollar short-term credit consumers? We've estimated that there's about 15 million Americans that are small dollar credit consumers.