How firms can thrive by taking a stand in closing the divide

Firms will need to revisit their business strategy, products and services to achieve profitable financial inclusion. 

In brief

• Financial services providers will be on the front lines in ensuring the availability, affordability and equality of access to financial products and services for underserved communities.
• As the focus on equity and financial inclusion increases, stakeholders are demanding more action from organizations.

The COVID-19 pandemic and other recent events have highlighted and exacerbated many of the country’s long-standing economic and social inequalities. Notably, underserved communities were hit disproportionately by job losses and infections. Consequently, societal, regulatory, shareholder and related stakeholder pressure to right these and related economic wrongs is on the rise and will have lasting impact.

One of President Biden’s top priorities is to promote financial inclusion and consumer protection. For many industries and businesses, this will be a relatively new realization and development. But for financial services, this discussion began long ago, starting with the Community Reinvestment Act of 1977, which has been updated numerous times since but for the first time in 25 years in June 2020. Consumer protection and fair-lending regulation and policies have also played a prominent role, and while these concepts have been woven into the fabric of the industry, firms are refocusing on their financial and nonfinancial commitments to promote equity and financial inclusion.

Financial services: on the front lines

Businesses of all kinds, but especially financial services providers, will be on the front lines in ensuring the availability, affordability and equality of access to financial products and services for underserved communities. The industry has more than just a responsibility but also an essential opportunity to lead the charge and help define the future of economic growth.

As the focus on equity and financial inclusion increases, stakeholders are demanding more action from organizations. Firms will need to revisit their business strategy, products and services to achieve profitable financial inclusion. Those who embrace technology-led innovation stand to lead the effort.

Achieving financial inclusion begins with these five key areas:

1. Strategy, products and disclosure
2. Inclusive analytics and fair use of data
3. Consumer education, affordability, access and protection
4. Digital access and innovation
5. Inclusive action and recovery

Societal, regulatory and related stakeholder pressures are driving a focus on financial inclusion:

• The FDIC says nearly 50 million people in the US have limited banking — and just over 20 million are completely unbanked.
•  In the US alone, roughly 35 million across these aforementioned segments spend approximately $147 billion annually on high-cost alternative financial services, such as payday loans and check-cashing services that are often predatory and under-regulated.
• Another 30 million nonelderly, Hispanic, Black, American Indian, Alaska Native, Native Hawaiian, other Pacific Islander and people with low incomes are uninsured — at rates significantly higher relative to non-Hispanic white counterparts.