In this era of Big Data, it seems like financial services companies know everything there is to know about our lives as consumers – where we live, what we do for a living, how much we make, how much we have saved, what we buy and what we might want to purchase in the future.
But the reality is there are huge segments of the population in the U.S. and globally about which these companies know very little. Sometimes that’s because people have left very few data “breadcrumbs” offering clues about themselves – they’re unbanked or underbanked and lack a credit history. In other cases, consumers have left a trail, but it’s not accessible to the company or agency that needs it to asses someone’s worthiness for a credit card, a cell phone plan or an apartment.
And in still other instances, companies just don’t know what they don’t know. They haven’t put systems in place to really get to know or collect data about groups of consumers who don’t look like the people who populate the firms’ own front offices – people who aren’t white, aren’t straight, don’t live in a big city, who may lack college degrees or may have recently immigrated to their current country of residence.
“There’s a huge conversation to be had about how do we in the industry represent the spectrum in the U.S., or if you have global coverage, how do you represent the spectrum of people globally when all you’re looking at is a list of privilege” among top leadership, said Jane Barratt, chief advocacy officer of MX Technologies, a Utah-based firm that provides data to financial institutions and fintech firms.
Barratt and other experts discussed how financial services and fintech can become more inclusive and more empowering for consumers at the recent “Fearless in Fintech” conference at Wharton San Francisco. The conference was co-sponsored by Knowledge@Wharton and Wharton Executive Education and organized by Momentum Event Group.
What Do We Know About Jane?
To illustrate the importance of perspective in the sector, Adrienne Harris, a former special assistant for economic policy in the Obama administration, used the example of a fictional woman named “Jane” who makes about $60,000 a year. Harris described Jane’s life starting from when she gets her biweekly paycheck – with step one being a trip to a check cashing business.
“In 2018, 55 million adult Americans were unbanked or underbanked, or about 22% of households — in the age of fintech and mobile payments, almost a quarter of the population is underbanked,” said Harris, who is a member of the board of directors of the Financial Health Network (formerly the Center for Financial Services Innovation). “Jane goes to check casher and pays 3% or about $51…. If she does that all year, it will cost her $1300 to have immediate access to money she’s already earned.”
Jane’s month also included a trip to a payday loan business and having to draw late fees on a number of her utility bills because her paycheck doesn’t stretch far enough to pay them when they are due. More than three quarters of renters make these same trade-offs or strategic payments every month, Harris said.
“It is damn hard to be middle class or what we call middle class in the U.S.; in fact, it is almost impossible to be middle class and to make ends meet,” she noted. “It’s not about people not knowing how to manage their money or having the right tools, it’s just hard.”
And despite knowing all of that data about people like Jane, Harris said there are still wide gaps in financial services companies’ knowledge – and the gaps become even wider if Jane is a member of one or more minority or traditionally underserved groups.
“What if Jane is single? What if Jane is black? What if she’s an immigrant? What if she’s in a same-sex relationship? What if she’s black, gay, single, an immigrant and caring for family in the country she came from and has a little one on the way?” Harris asked. “What do we know about Jane? Now we know nothing — we don’t know anything about Jane.”
Fintech as an industry has made improving and democratizing consumer financial health a key aim, but in order to do that, the sector needs to commit to learning more about women and how they spend their money, Harris said. “Women are the financial decision-makers across all sorts of demographic combinations. It’s not just women and how they compare to men. We know they make less, we know they invest less, but my challenge for all of you is: What else you got?”