Expanding Financial Access Through Mobile Banking

8122019 Expanding Financial Access Through Mobile Banking

httpslidepdfcomreaderfullexpanding-financial-access-through-mobile-banking 13

1 Center for American Progress | Expanding Financial Access Through Mobile Banking

Expanding Financial Access

Through Mobile Banking Testimony before the Consumer Financial Protection Bureau

New Orleans Field Hearing on Mobile Financial Services

Joe Valenti

Director of Asset Building

Center for American Progress

June 12 2014

Good morning Irsquod like o hank Direcor Richard Cordray and he Consumer Financial

Proecion Bureau or CFPB or inviing me o speak here oday abou mobile banking

My name is Joe Valeni and I am he Direcor o Asse Building a he Cener or American

Progress in Washingon DC My work ocuses primarily on policies ha expand access o

he financial sysem or low- and moderae-income Americans and I believe mobile bank-

ing can be a successul approach o reach he underserved i done righ

Approximaely 28 percen o American households eiher lack bank accouns991252a groupknown as he unbanked991252or are underbanked meaning ha hey have accouns bu

are no ully inegraed ino he financial sysem1 In oher words hey rely on nonbank

financial services managing heir money by going o check cashers and purchasing

money orders or paying bills in person Here in Louisiana he number is much higher

42 percen o households are eiher unbanked or underbanked including more han

200000 households in he sae ha donrsquo have bank accouns a all2

A he same ime cell phone availabiliy has increased dramaically over he pas decade

o he poin in which more Louisianans have cell phones99125291 percen3991252han bank

accouns Tis makes Louisiana one o seven saes as well as he Disric o Columbia

in which cell phones are more prevalen han bank accouns according o a repor ha

we released las year4 Based on new daa abou cell phone ownership his has increased

o nine saes and he Disric including several saes in he Gul region




As radiional banking has become less accessible and convenien due o branch closings

and oher naionwide rends mobile banking is an opporuniy or consumers o beter

manage heir money wihou needing o rely on bank branches Perhaps he mos sig-

nifican recen developmen is remoe deposi capure he abiliy o deposi a check jus

by aking a phoo o i using a smarphone camera Tis sep alone can effecively give

millions o consumers who currenly rely on check cashers a raise saving anywhere rom

2 percen o 5 percen or more in check-cashing ees5 Smarphones coninue o becomemore popular and are already he majoriy o cell phones in use in he Unied Saes6 As

a resul we will likely see more innovaions ha enable consumers o manage money on

heir phones in he coming years

However his doesnrsquo mean ha consumers wihou smarphones are necessarily lef

ou Even on a radiional cell phone ex alers can provide balance inormaion and

reminders o help consumers avoid overdraf ees when balances are low991252an imporan

ool when he median overdraf ee naionally is now $357 And one pilo in Philadelphia

has aken ex alers one sep urher Consumers who are receiving credi counseling

have a new opion o hold hemselves accounable or paying down deb I hey miss apaymen heir amily or riends will receive ex alers oo8

Tere is no shorage o creaiviy in he developmen o mobile banking ools alhough

mobile banking does pose hree major challenges ha mus be addressed as well

Firs he disclosure ools ha we currenly offer on paper have no carried over o he

mobile environmen Credi cards are a prime example Te Credi Card Ac o 2009

mandaes ha saemens include he amoun a cusomer would need o pay monhly

o be deb ree in 3 years991252a provision ha may save consumers as much as $71 mil-

lion each year9

Bu a leas one-hird o all Americans donrsquo receive paper saemensor credi cards because hey rely on mobile or online ools and miss his inormaion10

Cusomer disclosures mus be adaped or mobile ools wihou being overwhelming

QR codes and web links are no sufficien

Second daa securiy ears and hurdles mus be addressed Tere is no clear chain o

responsibiliy when mobile financial producs ail wih muliple firms and regulaors all

in play Abou 40 percen o all consumers repor ha hey are unsure wheher mobile

banking is sae or no11 Consumers should no be liable or unauhorized charges and

hey should be able o saeguard heir financial daa i heir phone is los or solen

And hird mobile banking producs mus be banking producs firs based on underly-

ing regulaed and insured devices such as checking accouns and prepaid cards No

ldquokiller apprdquo should circumven regulaions i he objecive is o expand access and build

rus Insead mobile financial ools should build off regulaory plaorms ha are

already in place o proec consumers rom abusive pracices

Tank you I look orward o your quesions




Endnotes

1 Susan Burhouse and Yazmin Osaki ldquo2011 FDIC NationalSurvey of Unbanked and Underbanked Householdsrdquo(Washington Federal Deposit Insurance Corporation 2012)available at httpwwwfdicgovhouseholdsurvey2012_unbankedreportpdf

2 Ibid

3 Stephen J Blumberg and others ldquoWireless SubstitutionState-level Estimates from the National Health InterviewSurvey 2012rdquo National Health Statistics Reports 70 (2013)1ndash15 available at httpwwwcdcgovnchsdatanhsrnhsr070pdf

4 Joe Valenti ldquoBanking by Hand(set) Using Mobile Banking toExpand Financial Accessrdquo (Washington Center for AmericanProgress 2013) available at httpwwwamericanprogressorgissueseconomyreport2013061366305banking-by-handset

5 Joe Valenti and Deirdre Heiss ldquoFinancial Access in a BraveNew Banking Worldrdquo (Washington Center for AmericanProgress 2013) available at httpwwwamericanprogressorgissueseconomyreport2013101677016financial-access-in-a-brave-new-banking-world

6 Nielsen ldquoAmericarsquos New Mobile Majority A Look At

Smartphone Owners in the USrdquo May 7 2012 available athttpwwwnielsencomusennewswire2012who-owns-smartphones-in-the-ushtml

7 Susan K Weinstock and others ldquoStill Risky An Updateon the Safety and Transparency of Checking Accountsrdquo(Washington The Pew Charitable Trusts 2012) availableat httpwwwpewtrustsorgour_work_report_detailaspxid=85899396977

8 Center for Financial Services Innovation ldquoFinancial Capabil-

ity Innovation Fund Mid-Term Reportrdquo (2012) available athttpwwwcfsinnovationcomsystemfilesEarly20Learn-ing20e-version_1pdf

9 Joe Valenti ldquoProtecting Consumers Five Years After CreditCard Reformrdquo (Washington Center for American Progress2014) available at httpwwwamericanprogressorgissueseconomyreport2014052290198protecting-consumers-five-years-after-credit-card-reform

10 Javelin Strategy and Research and Syndicated ResearchCustom Research Strategic Consulting ldquoKey Takeaways fromPayItGreen 2010 Surveyrdquo (2010) available at httpmultivuprnewswirecommnrpayitgreen43756docs43756-PayIt-GreenSurvey_2010pdf

11 Board of Governors of the Federal Reserve System ldquoCon-sumers and Mobile Financial Servic es 2013rdquo (2013) availableat httpwwwfederalreservegoveconresdataconsumers-and-mobile-financial-services-report-201303pdf




As radiional banking has become less accessible and convenien due o branch closings

and oher naionwide rends mobile banking is an opporuniy or consumers o beter

manage heir money wihou needing o rely on bank branches Perhaps he mos sig-

nifican recen developmen is remoe deposi capure he abiliy o deposi a check jus

by aking a phoo o i using a smarphone camera Tis sep alone can effecively give

millions o consumers who currenly rely on check cashers a raise saving anywhere rom

2 percen o 5 percen or more in check-cashing ees5 Smarphones coninue o becomemore popular and are already he majoriy o cell phones in use in he Unied Saes6 As

a resul we will likely see more innovaions ha enable consumers o manage money on

heir phones in he coming years

However his doesnrsquo mean ha consumers wihou smarphones are necessarily lef

ou Even on a radiional cell phone ex alers can provide balance inormaion and

reminders o help consumers avoid overdraf ees when balances are low991252an imporan

ool when he median overdraf ee naionally is now $357 And one pilo in Philadelphia

has aken ex alers one sep urher Consumers who are receiving credi counseling

have a new opion o hold hemselves accounable or paying down deb I hey miss apaymen heir amily or riends will receive ex alers oo8

Tere is no shorage o creaiviy in he developmen o mobile banking ools alhough

mobile banking does pose hree major challenges ha mus be addressed as well

Firs he disclosure ools ha we currenly offer on paper have no carried over o he

mobile environmen Credi cards are a prime example Te Credi Card Ac o 2009

mandaes ha saemens include he amoun a cusomer would need o pay monhly

o be deb ree in 3 years991252a provision ha may save consumers as much as $71 mil-

lion each year9

Bu a leas one-hird o all Americans donrsquo receive paper saemensor credi cards because hey rely on mobile or online ools and miss his inormaion10

Cusomer disclosures mus be adaped or mobile ools wihou being overwhelming

QR codes and web links are no sufficien

Second daa securiy ears and hurdles mus be addressed Tere is no clear chain o

responsibiliy when mobile financial producs ail wih muliple firms and regulaors all

in play Abou 40 percen o all consumers repor ha hey are unsure wheher mobile

banking is sae or no11 Consumers should no be liable or unauhorized charges and

hey should be able o saeguard heir financial daa i heir phone is los or solen

And hird mobile banking producs mus be banking producs firs based on underly-

ing regulaed and insured devices such as checking accouns and prepaid cards No

ldquokiller apprdquo should circumven regulaions i he objecive is o expand access and build

rus Insead mobile financial ools should build off regulaory plaorms ha are

already in place o proec consumers rom abusive pracices

Tank you I look orward o your quesions




Endnotes


2 Ibid















Endnotes


2 Ibid












Documents

Expanding Financial Access Through Mobile Banking