Week of March 7, 2014

  • Citibank and Imperial College teamed up to produce Getting Ready for Digital Money:  A Roadmap, a new report that assess the current state of digital money around the world; it  includes a “Digital Money Readiness Index.”  This index links socio-economic development indicators to digital money adoption.
     
  • A new cryptocurrency called MazaCoin (inspired by Bitcoin) created by certain Native American tribes may have political implications for the financial future of their reservations.
     
  • According to the IFC,  about 80 percent of micro, small, and medium enterprises in developing countries operate in the informal sector and are often financially constrained. A new paper (and accompanying blog post) by Subika Farazi documents the financing patterns of informal firms and identifies the most significant characteristics of informal firms that are associated with higher use of financial services.
     
  • Could Starbucks be the next big bank?  Probably not but this piece in Wired describes how products like retail rewards cards, new “nonbank”, digital-only financial services, and digital wallets represent a possibly disruptive trend for the traditional banking sector.
     
  • The Alliance for Financial Inclusion traces the regulatory and legislative history of Peru’s approach to e-money as a tool for financial inclusion in a new blog post.
     
  • The Center for American Progress released a new report on an emerging investment trend –mortgage-backed security supported by revenue from single-family rental properties.  The report explores the questions around risk to tenants and communities if there is significant growth in this new asset class.
     
  • Mastercard announced it is testing a new security measure that links the geolocation feature on a smartphone to a customer’s credit card.  If the phone and purchaser are not in the same place, a security alert is sent to indicate possible fraud.

Week of February 28, 2014

  • Jake Kendall and Rodger Voorhies of the Gates Foundation discuss the potential impact of mobile phones on poverty reduction in the developing world, with a specific focus on their uses for increasing financial inclusion and providing financial services.
     
  • Each year, Mobile Money for the Unbanked’s State of the Industry report contains key findings and insights on the growth of the sector. This year, for the first time, the scope of the report has been extended to include not only mobile money, but also mobile insurance, mobile credit and mobile savings. Key findings show a rapid growth in mobile money industry and increased competition among providers. (Watch for further insights from the report in an upcoming blog post.)
     
  • Tigo, a subsidiary of the international telecommunications and media company Millicom, launched the first mobile-to-mobile remittance service with currency conversion for transfers between Tanzania and Rwanda. Following Orange’s announcement of a similar product last July in West Africa, the two providers show a growing interest in the South-South remittance market.
     
  • In more remittance news, Pew Research released an interactive map that shows 2012 remittance inflows and outflows for countries around the world.
     
  • The Federal Reserve Bank of New York released its Household Debt and Credit Report for the fourth quarter of 2013. This report provides a quarterly snapshot of household trends in borrowing and indebtedness, including data about mortgages, student loans, credit cards, auto loans and delinquencies. Outstanding household debt increased $241 billion from the previous quarter, the largest quarter over quarter increase since the third quarter of 2007.
     
  • Lisa Servon continues her “series” on financial services for lower-income households with a look at  the demand side of the payday loan industry, investigating the reasons why low-income borrowers are willing to pay high fees for small dollar credit products.
     
  • According to data from the Federal Reserve, less than 1% of all federally chartered banks are owned by African-Americans.
     
  • The New York Times featured an opinion piece on the potential for Obamacare to spur job creation through entrepreneurship.
     
  • PBS Newshour highlighted the work of Hunger Free Colorado, a nonprofit that recently sponsored a participatory photography project aimed at chronicling what it’s like to be hungry in America.
     
  • Freedom from Hunger CEO Steve Hollingsworth details the organization’s perspective on “what we know” about microfinance and where the industry should focus now  in a new blog post on NextBillion.net.   

Week of February 18, 2014

This week’s New and Noteworthy includes results of an RCT on behavioral economics and savings, an in-depth look at legal procedures for debt collection, and a review of new cash transfer research in sub-Saharan Africa.

  • A new report from Dean Karlan of Innovations for Poverty Action (and an FAI co-founder) discusses the role of nonprofit organizations in fostering financial inclusion. Karlan highlights innovations in microfinance delivery, draws attention to financially underserved groups, and provides recommendations for building client trust.
     
  • M-Pesa is pushing toward international transfers. Safaricom seems to be linking up with Skrill, a US-based remittances/online payment company, to allow people to send money directly to M-Pesa accounts from abroad. 
     
  • According to the Federal Reserve, 40 percent of people in the prime working years of 25 to 64 have no current pension or retirement plan. Floyd Norris reviews the history of pensions and the future retirement options for the generation President Obama hopes to target with his new “MyRA” initiative.
     
  • On April 8th, Microsoft plans to end support for Windows XP, leaving about 95 percent of US-based ATMs open to security and compliance risks.
     
  • Grameen Foundation and ideas42 report findings from a behavioral design project on improving savings outcomes for clients of CARD Bank in the Philippines. When researchers linked a focus on saving through goal-setting and planning at the point of account opening, they saw a positive effect on savings balances over time.
     
  • This American Banker article exposes the common practice of “rocket dockets,” or unsupervised debt resolution conferences that exist in a legal gray area. They are being targeted by the CFPB since the proceedings may give debt collectors unfair advantages in court.
     
  • Markus Goldstein evaluates recent research on cash transfer programs in sub-Saharan Africa and their impact on productive activities such as agriculture and small businesses for the World Bank blog. 
     
  • Last year, the Reserve Bank of India unveiled new licenses that allow various financial institutions to act as banks. The New Yorker looks at the impact of this on financial inclusion, the microfinance sector, and the unmet demand of banking services for the rural poor.

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.

Week of December 20, 2013

Our last New and Noteworthy of the year includes new research on poverty rates in the US, racial disparities in retirement savings, and commitment savings devices in the Philippines.

  • The African Development Bank released a new report on the state of financial inclusion on the continent, highlighting opportunities and challenges for expanding access to financial services for the poor.
  • According to a new study from researchers at Columbia University, government safety net programs like food stamps and unemployment insurance helped reduce the percentage of Americans in poverty from 26 percent in 1967 to 16 percent in 2012. However, the economy by itself has failed to improve the lives of the very poor in that time period.
  • The National Institute on Retirement Security released a study on the racial disparities in retirement savings - fewer than half of black and Latino workers have retirement plans on the job or benefit from tax breaks and policy incentives designed to increase savings, putting them at greater risk for downward mobility in retirement.
  • In the latest installment of its Debt Inc. series, ProPublica explores the effect on payday loan recipients when their lenders decide to sue for money owed.
  • In case you didn’t make it to London in October for the Financial Inclusion 2020 Forum, CFI published a magazine with a roundup of key sessions and forum highlights.

Week of November 26, 2013

In this special Holiday (at least in the US) edition of New and Noteworthy, we take a look at the global status of bitcoin, analyze the gender gap in financial inclusion, and observe the intersection of the American military and the payday loan industry.

  • NextBillion has a two-part interview with Ideas42’s Alex Fiorillo. In part I,  “The Power of Choices,” she gives an overview of the principles of behavioral economics. In part II, “People-Centered Finance,” she describes how behavioral economics can be used to design better financial products and promote healthier decisions.
     
  • Coin, a new startup, has begun taking orders for its battery-powered electronic credit card. In essence it can alter its magnetic strip to mimic any of your credit or debit cards so that you only have to carry one card. While slick, it is an innovation for people who are already very well-served by formal financial services. At first glance it appears that the most value would be for people who are juggling lots of credit accounts and carrying 7 or 8 credit cards. What those people need most is likely credit counseling, not an easier way to carry multiple cards.
     
  • New York City’s Center for Economic Opportunity officially launched the enrollment phase for a new pilot project called Paycheck Plus, which adds to the annual amount that low-income workers without dependent children receive through the federal Earned Income Tax Credit (EITC).
     
  • Washington state can add “barrier to access for the unbanked” to the list of issues surrounding the launch of Obamacare.  While plan payment methods include money orders, the first payment must be made by credit card, debit card or electronic funds transfer from a bank account.
     
  • A website called fiatleak has a map drawing information from all the major online bitcoin exchanges, like Mt. Gox and BTC-e, and shows what country’s residents are buying bitcoins in real time. Much of the activity is concentrated in China, a point also noted in a recent New Yorker article on regulation of the digital currency.
  • This Economist article delves deeper into the global gender gap in financial inclusion and what can be done about it. One strategy could be the recent women-only bank launched in India – the first public-sector bank of its kind in the country’s history.
     
  • Nearly seven years since the Military Lending Act came into effect, government authorities say the law has gaps that allow the payday loan industry to target service men and women with potentially negative financial effects.