Week of February 7, 2014

In this week’s New and Noteworthy, we highlight responses to the USPS’ white paper on providing financial services, the impact of small dollar fees on the US health care system, and a new publication projecting the potential for digital payment markets in Africa.

  • A new McKinsey & Co. publication shows the gap between current levels of payment digitization and what levels in other African countries would look like if they matched Kenya. The report demonstrates that there certainly is a business case for supplying digital payment services if demand puzzles can be solved.
     
  • Last year on our blog Dan Rozas pointed out the risk of a substantial repayment crisis in Chiapas, Mexico. Hugh Sinclair has a new post laying out the case that Peru, and MiBanco in particular, is at high risk of a repayment crisis.
     
  • Now that the Affordable Care Act is in full swing, so is the Innovation Center, a research outfit funded by ACA to discover how to most effectively deliver health care. However, many researchers say the Innovation Center is missing out on key opportunities for deeper insights into health care policy by conducting demonstration projects and not RCTs.
  • In a post for NextBillion, FAI affiliate Ignacio Mas outlines three types of “money stories” people tell (or in other words, ways of mental accounting) and how providers can translate those stories into financial products that serve the needs of the poor.
     
  • Danielle Ofri, a physician and an associate professor of medicine at NYU, authors an opinion piece for The New York Times that discusses the impact of small dollar fees on low-income patients’ health. She asserts that it is “literally the pocket money, that often has the most profound and palpable effect on the concrete currency of health.”
     
  • Last week’s white paper from the USPS Inspector General exploring how the U.S. Postal Service could offer non-bank financial services spurred a number of interesting responses (many thinking the plan doesn’t go far enough), including articles from Adam Levitin for American Banker, Felix Salmon at Reuters, and David Dayden for The New Republic.
     
  • Is there value in microinsurance? Drawing on several years of original research as well as other evidence from the field, the MicroInsurance Centre’s MILK Project and the ILO’s Microinsurance Innovation Facility provide concrete insights into how, when, in what ways, and to what extent clients receive value from microinsurance in a new brief.
     
  • Transport for London announced plans to go completely cashless on its fare systems for central London buses, beginning this summer.
     
  • Last year, Rebecca Ackerman, a Code for America Fellow working with the San Francisco Human Services Agency, signed up for food stamps to view enrollment from the client’s perspective as part of a larger project to improve the program's retention. The Atlantic profiles her experience and the results of the project, which include an interactive timeline of over 20 letters she received in her seven months of benefits.

Week of January 31, 2014

This week’s New and Noteworthy includes resources to help distinguish between e-money and Bitcoin, find out more about the US Postal Service’s possible expansion of financial services, and explore the impact of the financial crisis on banking behavior in the US.

  • A new paper from Una Okonkwo Osili and Anna Paulson show that individuals who have experienced a banking crisis are 11 percentage points less likely to use banks in the US than their peers who emigrated from the same country but did not experience a crisis.
  • As Bitcoin gains in popularity, it’s easy to confuse the digital currency with other forms of e-money. CGAP’s new infographic provides a quick reference that contrasts these products.
  • PopTech profiles the Trust Card, a product developed by IPA with support from the Ford Foundation, designed to act as an “un-credit card” – establishing access to affordable credit coupled with debt consolidation and financial counseling with the goal of improving financial stability for cardholders over time.
  • In his annual State of the Union Address, US President Barak Obama advocated raising the federal minimum wage, a topic of recent debate in Washington. The Economic Policy Institute released data showing the value of minimum wage is 23 percent less than its peak inflation-adjusted value in 1968 but low-wage workers are more highly educated than they were in the late sixties.
  • Writer Dylan Love shared his experience with Slate of using an invitation-only, no fee, virtual bank called Simple. Spoiler alert – after two weeks, he swore off brick-and-mortar banks for life.
  • Piggy-backing on the success and rapid growth of M-Pesa, Safaricom now offers a number of additional mobile financial tools like savings tools and ways to pay school fees electronically.  But are these services reaching those who could potentially benefit from them the most?  NextBillion says no - research shows the poor or those in rural areas are currently the least likely to use these add-on products.
  • A new Postal Service Office of Inspector General white paper explores how the U.S. Postal Service could offer a suite of non-bank financial services (in addition to the current money order and transfer services) targeted to serve America’s unbanked populations.

Week of January 24, 2014

This week’s New and Noteworthy highlights the power of heuristics in decision making, a theory on the future trajectory of Bitcoin as a global currency, and the economics of strengthening payments security.

  • Antoinette Schoar of MIT’s Sloan School of Management and ideas42’s Saugato Datta released a new paper on using heuristics (or simple rules of thumb) to help individuals make “reasonably good decisions,” even in complex situations. The paper builds on Schoar et al.’s previous research that found evidence in the Dominican Republic that microentrepreneurs who received a rules of thumb business training curriculum fared better than those who participated in a more traditional accounting course.
     
  • FAI Affiliate David Roodman has a new paper reflecting on the current state of the microfinance industry and where it can and should go next: Armageddon or Adolesence? Making Sense of Microfinance’s Recent Travails.
     
  • In light of its recent customer information breach, Target leadership is calling on retailers and banks to strengthen credit card security by adopting a PIN credit card system, similar to what is used in Europe. However, The Washington Postexplores the economics behind digital payment systems in the US and argues that building a more secure payments system is not as easy (or as cheap) as one might expect.
     
  • Social media sites like Facebook and China’s RenRen have a combined membership of almost 2 billion users worldwide – many of whom are in the developing world and might have profiles but no bank accounts. CGAP explores the potential of these sites to enter the money transfer sector and what that could mean for remittances.
  • T-Mobile announced a new personal finance service that integrates a prepaid debit card, ATM access, and mobile banking – free for wireless subscribers and fee-based for all others.
     
  • The New York Times featured an opinion piece on the impact of providing unconditional cash supplements to the poor. The author reviews a longitudinal study of a Cherokee community that divided profits from a casino to tribe members. The study found that income supplements had long-term mental health benefits, specifically for children and actually saved the community money over time.
     
  • The most recent Pop Tech features various perspectives on financial inclusion, in the US, including thoughts from FAI’s Tim Ogden on the US Financial Diaries Project.
     
  • Bitcoin is paradoxically one of the most publicized and least understood new technologies. Marc Andreessen explains Bitcoin, its potential as a digital currency, and why it matters for the future of online commerce.

Week of January 17, 2014

This week’s New and Noteworthy includes a history of the CFPB, reflections on the “war on poverty” in the US, and research showing a preference to receiving wages in cash over mobile money among garment workers in Bangladesh.

  • Barbara Ehrenreich, author of (among other things) Nickel and Dimed: On (Not) Getting By in America, explains in The Atlantic how it’s more expensive to be poor than not poor and the many restraints that low-wage jobs puts on workers’ lives.  
     
  • The New America Foundation reminds us that the troubled launch of healthcare.gov was not the first time bad technology created problems for individuals seeking government services - the digitalization of social safety nets has a history of unintended negative consequences, especially for the poor.
     
  • Fifty years after former US President Lyndon Johnson waged a “war on poverty,” Pew Research provides a demographic snapshot of who the poor are, where they live, and how far the nation has come in addressing this issue.
     
  • The Washington Post’s Wonk Blog published an in-depth history of the Consumer Financial Protection Bureau, tracking the evolution of the agency since its inception.
     
  • Sendhil Mullainathan (an FAI co-founder) and Eldar Shafir’s book, Scarcity: Why Having Little Means So Much, has gotten a lot of much-deserved attention (including from FAI). Alex Counts of the Grameen Foundation blogs his reaction, describing how insights from the book and behavioral have implications for microfinance and international development specifically.
     
  • When given the option of being paid with cash or via mobile platforms, garment workers in Bangladesh preferred the former because it allows them to meet pending expenditures immediately and reduce some risks like scams at agent outlets and cash shortages, say new research from Financial Inclusion Insights.
     
  • The New York Times reviews the pros and cons of using the elements of a lottery– savers are entered into cash prize drawings if they meet certain deposit criteria—to promote savings.
     
  • CGAP provides a roundup of ten data sources to measure financial inclusion, including both demand-side and supply-side sources.
     
  • Daniel Altman responds to a new book by Paul Polak and Mal Warwick that claims the potential profits from untapped markets at the bottom of the pyramid is in the trillions of dollars. Altman contends that if you adjust for local purchasing power and currency values, the number is a lot less. He also argues that inefficient markets in the developing world can obstruct scaling of products, therefore further reducing profit potentials.

Week of January 10, 2014

Our first New and Noteworthy of 2014 features different perspectives on financial literacy, an investigation into debt collection practices, and a resource for commentaries on global income inequality.

  • Tilman Ehrbeck of CGAP takes a different take on “financial literacy” forHuffington Post by exploring the intersection of language and finance when designing services for illiterate consumers.
  • Meanwhile, Helaine Olen explores the conventional definition of financial literacy (education around the basics of money management) claiming it is “both a failure and a scam.”
  • In India, the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households has published its long awaited report. We’ll be blogging about it soon.
  • In the past few months, there has been a lot of press on the pros and cons of unconditional cash transfer programs. This article from de Correspondent of the Netherlands investigates the history of similar initiatives in the US and Canada, including forgotten research pilots showing potential successes of minimum income programs.
  • Also from the Netherlands – an article wondering whether Bitcoin could lead to a future of low or no cost international remittances or if the risks are too great for feeless transfers to become reality.
  • Project Syndicate’s most recent “Focal Point” feature gathers a number of perspectives, policy recommendations, and commentaries around the issue of global income inequality.
  • A new report from the Kaiser Family Foundation explores the causes and consequences of medical debt among Americans who have health insurance. The report finds cost-sharing health plans (even when relatively modest) can prove to be unaffordable because expenses are often unexpected and most Americans do not have adequate savings to deal with the financial shock. 
  • 30 million Americans are currently being pursued by debt collectors. Of these, more than 100,000 report being subject to illegal tactics, an issue currently being investigated by the Consumer Financial Protection Bureau.  Al-Jazeera America reports on some of the more unscrupulous tactics of debt collection agencies in this investigative piece.
  • From The New York Times: a map of poverty distribution in America; highlights of a study that finds a correlation between diabetes-related hospital visits and times of the month when food budgets are stretched, and the use of psychometric testing by our friends at the Entrepreneurial Finance Lab to determine credit worthiness.