Marrying Financial Transactions with Asset-Building Opportunities

This paper discusses the approaches to link transactional services and products with asset building for the benefit of the low income families.

The paper analyzes the experiences of Individual Development Account (IDA) programs and brings out factors responsible for building a sustainable model:

• Provision of financial component at scale;
• Design and delivery strategy of products and services;
• Leverage of non traditional cash flows and investment in traditional financial vehicles;
• Clarity of roles between financial institutions and non-profit organizations.

Exploring the alternative models for linking savings and investments to transactional products, the paper describes a handful of approaches that show promise in the near future:

• Refund splitting of taxes that opens up a possibility of some part of the refund going into transaction account and savings account;
• Stored value cards;
• Reward programs offering incentives to consumers.

The authors opine that new approaches are needed for realization of potential synergies. These include:

• Alternate pathways apart from providing basic financial services;
• Improvement of cross divisional communication;
• Bringing the topic of asset building for lower income families to the forefront of public dialogue.

The paper concludes by stating that the IDA have shown that

• Lower income and underbanked consumers can save and invest.
• It is for the private sector to provide innovative offerings to these consumers.