GUEST ARTICLE More financial institutions are focusing on improving financial inclusion as the pandemic continues to expose inequalities in access to services. Some institutions have already worked underserved, and under-banked communities are actively engaged in solving the issue, but others might be wondering how to get started. The challenge is identifying how to best serve underbanked and underserved consumers to effectively meet their needs and build trust in a risk-responsible manner. Serving these markets often means filling a crucial role and providing a better alternative to existing services. In many under-banked markets, there is an accessibility issue. Many consumers do not have access to financial institutions’ branches and instead use check cashing and payday lender storefronts, which may be more common in their communities. And while their rates and fees are often exorbitant, these companies thrive by providing extended service hours and displaying clearly defined fee structures right at the counter or window. Financial institutions that can find ways to offer their services while avoiding barriers like extreme minimumbalance requirements and traditional banking hours will be much better positioned to connect with those who want — and need — equal access to financial institutions. Partnering for financial inclusion One strategy many financial institutions are now employing is partnering with fintech companies specializing in financial wellness and inclusion. In recent years, partnerships have been on the rise, with the financial institution placed in the forefront and the fintech company operating more behind the scenes. However, with many of the partnerships related to financial inclusivity or wellness, the roles are often reversed. A good example is the credit builder accounts offered by fintech company Chime. These accounts provide a credit card with initially limited capabilities that grow over time with the account holder, based on usage. Though there is an FDIC- or NCUA-insured financial institution behind these accounts, the service and card are provided — and branded — through Chime. While these partnerships can prove beneficial for both, there are obligations for each to consider, such as whether a product or service is the right fit for a particular customer or member. Most financial institutions have the expertise (and the data) to understand that even if a borrower is qualified for a loan or credit product, a wider view of other factors like asset and credit data could indicate that it may be too much of a debt burden for the applicant to handle responsibly. If not, fintech companies are only creating more of a burden on these underserved communities. Before considering a partnership with a fintech, it is important that financial intuitions have a very clear vision and understanding of their financial inclusion and wellness programs and what they hope to achieve. This means creating policies with well-defined, measurable goals and sticking to them. Financial institutions sometimes commit to a program without first defining goals or even what success How Financial Institutions Can Support Financial Inclusion By Terry Ammons, CPA, CISA, CTPRP, Partner, WipFli 12 The Community Banker mibonline.org
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