U.S. GOVERNMENT PUBLISHING OFFICE

35–693 PDF WASHINGTON : 2019

AN OVERVIEW OF DIVERSITY TRENDS IN 

THE FINANCIAL SERVICES INDUSTRY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON DIVERSITY 

AND INCLUSION 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED SIXTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 27, 2019 

Printed for the use of the Committee on Financial Services 

Serial No. 116–4 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MAXINE WATERS, California, Chairwoman 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

WM. LACY CLAY, Missouri 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

ED PERLMUTTER, Colorado 

JIM A. HIMES, Connecticut 

BILL FOSTER, Illinois 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

AL LAWSON, Florida 

MICHAEL SAN NICOLAS, Guam 

RASHIDA TLAIB, Michigan 

KATIE PORTER, California 

CINDY AXNE, Iowa 

SEAN CASTEN, Illinois 

AYANNA PRESSLEY, Massachusetts 

BEN MCADAMS, Utah 

ALEXANDRIA OCASIO-CORTEZ, New York 

JENNIFER WEXTON, Virginia 

STEPHEN F. LYNCH, Massachusetts 

TULSI GABBARD, Hawaii 

ALMA ADAMS, North Carolina 

MADELEINE DEAN, Pennsylvania 

JESU ́ S ‘‘CHUY’’ GARCIA, Illinois 

SYLVIA GARCIA, Texas 

DEAN PHILLIPS, Minnesota 

PATRICK MCHENRY, North Carolina, 

Ranking Member 

PETER T. KING, New York 

FRANK D. LUCAS, Oklahoma 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

STEVE STIVERS, Ohio 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

LEE M. ZELDIN, New York 

BARRY LOUDERMILK, Georgia 

ALEXANDER X. MOONEY, West Virginia 

WARREN DAVIDSON, Ohio 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

TREY HOLLINGSWORTH, Indiana 

ANTHONY GONZALEZ, Ohio 

JOHN ROSE, Tennessee 

BRYAN STEIL, Wisconsin 

LANCE GOODEN, Texas 

DENVER RIGGLEMAN, Virginia 

CHARLA OUERTATANI, Staff Director 

(III) 

SUBCOMMITTEE ON DIVERSITY AND INCLUSION

JOYCE BEATTY, Ohio, Chairwoman 

WM. LACY CLAY, Missouri 

AL GREEN, Texas 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

AL LAWSON, Florida 

AYANNA PRESSLEY, Massachusetts 

TULSI GABBARD, Hawaii 

ALMA ADAMS, North Carolina 

MADELEINE DEAN, Pennsylvania 

SYLVIA GARCIA, Texas 

DEAN PHILLIPS, Minnesota 

ANN WAGNER, Missouri, Ranking Member 

FRANK D. LUCAS, Oklahoma 

ALEXANDER X. MOONEY, West Virginia 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

TREY HOLLINGSWORTH, Indiana 

ANTHONY GONZALEZ, Ohio, Vice Ranking 

Member 

BRYAN STEIL, Wisconsin 

LANCE GOODEN, Texas 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

February 27, 2019 ............................................................................................ 1 

Appendix: 

February 27, 2019 ............................................................................................ 25 

WITNESSES 

WEDNESDAY, FEBRUARY 27, 2019 

Garcia-Diaz, Daniel, Director, Financial Markets and Community Investment, 

U.S. Government Accountability Office (GAO) .................................................. 5 

APPENDIX 

Prepared statements: 

Garcia-Diaz, Daniel .......................................................................................... 26 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Budd, Hon. Ted: 

Electronic Transactions Association White Paper entitled, ‘‘How FinTech 

is Addressing the Financial Needs of the Underserved,’’ dated January 

2019 ................................................................................................................ 47 

(1) 

AN OVERVIEW OF DIVERSITY TRENDS IN 

THE FINANCIAL SERVICES INDUSTRY 

Wednesday, February 27, 2019 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON DIVERSITY AND INCLUSION, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:05 p.m., in room 

2128, Rayburn House Office Building, Hon. Joyce Beatty [chairwoman of the subcommittee] presiding. 

Members present: Representatives Beatty, Clay, Green, 

Gottheimer, Gonzalez of Texas, Lawson, Dean, Garcia, Phillips; 

Wagner, Mooney, Budd, Hollingsworth, Gonzalez of Ohio, Steil, and 

Gooden. 

Ex officio present: Representatives Waters and McHenry. 

Chairwoman BEATTY. The Subcommittee on Diversity and Inclusion will come to order. Today’s hearing is entitled, ‘‘An Overview 

of Diversity Trends in the Financial Services Industry.’’ 

Without objection, the Chair is authorized to declare a recess of 

the committee at any time. Also, without objection, members of the 

full Financial Services Committee who are not members of this 

subcommittee are authorized to participate in today’s hearing. 

The subcommittee is meeting today pursuant to the notice to 

hear testimony on an overview of diversity trends in the financial 

services industry. I will now recognize myself for 5 minutes to give 

an opening statement. 

To the Members, I would also like to advise you that votes may 

be called around 2:20 or 2:30. We will proceed with opening statements from myself, from Ranking Member Wagner, and 5 minutes 

to our witness, if time allows, before recessing for votes. 

Thank you for joining me today for this first historic hearing of 

the newly established Subcommittee on Diversity and Inclusion. I 

would like to take time to thank Ranking Member Ann Wagner 

and the members of this committee for serving on the Subcommittee for Diversity and Inclusion, which I am proud to Chair. 

Diversity and inclusion issues are important to me. Before I 

came to Congress, I worked directly with government agencies, 

nonprofits, and major corporations, including financial institutions, 

on how to create more diverse workplaces. As such, I understand 

the challenges that both industry and government face in overcoming the obstacles that can prevent the full inclusion of diverse 

populations. I am honored to bring my experience on this issue to 

the committee. 

2 

Under the leadership of Chairwoman Waters, the Financial Services Committee created this subcommittee to institutionalize the 

consideration of diversity and inclusion issues, create a forum for 

discussing diversity data and trends, raise awareness, and review 

and assess how the financial services industry maintains and 

grows their inclusiveness of people of color, women, urban and 

rural persons, persons of disability, LGBTQ, millennials, Native 

Americans, and Active Duty servicemen and our Nation’s veterans. 

It is no secret that the lack of diversity and inclusion in our society leads to persistent income inequities and also growing the 

wealth gap, which we are prepared to explore. 

Now, let us look at some statistics. According to the U.S. Census 

Bureau, within the next 25 years more than half of all Americans 

are expected to belong to a minority group. 

Additionally, the Equal Employment Opportunity Commission, 

commonly known as the EEOC, reported in 2013 that while women 

represent 53.2 percent of the professionals, they make up only 

about 38.6 percent of employees at the management level. 

The EEOC also reported in 2013 that although African Americans and Hispanics collectively represent almost half of the service 

workers and laborers industries, they are disproportionately underrepresented in the professional and management ranks. 

A larger, more diverse talent pool should lead to a more diverse 

workforce, and yet, despite increased awareness of the business importance of diversity in the workplace and elsewhere in society, 

troubling disparities persist that affect recruitment, retention, and 

promotion. 

These disparities are very pronounced in the financial services 

industry in particular, as today’s hearing and our witness’ testimony will demonstrate. For instance, according to the U.S. Government Accountability Office (GAO), from 2007 to 2015, the percentage of African-American managers in the financial services industry decreased from an already low 6.5 percent to 6.3 percent and 

remained largely unchanged for women at 45 percent. 

As I look around this room, we are representative of different 

cultures, different regions of the country, and different views. As 

the Noble Laureate Maya Angelou has appropriately famously 

quoted, and I paraphrase, in diversity there is beauty and there is 

strength. We should know that diversity makes for a rich tapestry, 

and we must understand that all threads of that tapestry are equal 

in value, no matter their color. 

During the course of this Congress, we will analyze diversity and 

inclusion trends and data, exercise oversight of what regulators 

and industries are doing in this space, highlight best practices, and 

consider legislation that may be needed to change the culture in 

government and industry, and move the needle in a positive direction on the issues of diversity and inclusion in our Nation. 

Numerous studies have proven empirically that diversity increases productivity and the bottom line. Yet, the data on diversity 

and inclusion efforts in our Nation’s industries and government are 

not aligned. We need to find out why and we need to fix it now. 

I look forward to working with all of the members of this committee in a bipartisan manner and conducting this subcommittee 

with civility and respect for all members. 

3 

Now, I would like to say, welcome to the Subcommittee on Diversity and Inclusion. I look forward to hearing the testimony of today’s witness, Mr. Daniel Garcia-Diaz, who serves as Director in 

GAO’s Financial Markets and Community Investment team, and is 

an expert in analyzing and assessing diversity and inclusion. 

The Chair now recognizes the ranking member of the subcommittee, the gentlewoman from Missouri, Mrs. Wagner, for 4 

minutes for an opening statement. 

Mrs. WAGNER. Thank you so much, Madam Chairwoman. It is an 

honor to be with you this afternoon, holding the inaugural hearing 

of this new, very important subcommittee. I look forward to working with you and Chairwoman Waters as we examine how best to 

promote diversity and inclusion in the financial services industry. 

Women and minorities are growing their numbers and securing 

leadership positions on Main Street, Wall Street, and as elected officials. However, there is still much work to be done to ensure the 

financial industry, along with many other sectors of the U.S. economy, is reaping the benefits of our country’s diversity. 

While we need more data and information, research shows that 

diversity and inclusion can bring both social and economic benefits 

to the workplace. A study by the Milken Institute found that diversity in the composition of organizational groups affects outcomes 

such as turnover and performance. Several studies have revealed 

a connection between greater diversity and enhanced financial returns. Further, corporate scandals are less common on boards 

where women and minorities are represented. 

This subcommittee’s jurisdiction includes overseeing the effectiveness of the Offices of Minority and Women Inclusion, known as 

OMWIs, at Federal financial services agencies. Earlier this month, 

I contacted the eight regulatory agencies with Offices of Minority 

and Women Inclusion to further understand agency efforts to increase diversity and inclusion. 

Today, I do want to welcome Daniel Garcia-Diaz, who authored 

a November 2017 GAO report examining diversity in the financial 

services sector. 

We thank you, Daniel, for taking the time to share your results 

with us. 

The findings of the report show that industries’ good intentions 

are not necessarily resulting in increased diversity across the sector. This is an issue across the American economy, from the technology industry to the media. 

While there is no question that companies are committed to providing opportunity for all employees, and there are many success 

stories, the report demonstrates that the overall level of diversity 

within the industry did not significantly improve from 2007 to 

2015. 

After reading this report, it is clear that recruitment and retention are the primary challenges that companies face as they try to 

address diversity in their ranks. Talent among those with diverse 

backgrounds is equal, but we must do more to promote equality of 

opportunity. 

The financial services industry, led first by OMWIs, can find 

ways to better seek out and train promising diverse candidates at 

first-, mid-, and senior-level career stages. Opportunity starts early, 

4 

as we have seen in STEM-related professions. It starts early with 

education and finding ways to attract high school students and undergraduate and graduate students to careers in the financial services sector. 

I so look forward to working with my friend, Chairwoman Beatty, 

on these twofold initiatives: ensuring that the financial services industry is benefiting from America’s diversity; and ensuring that 

people from diverse backgrounds and all socioeconomic levels have 

the resources, access, and pathways to benefit from our robust financial services industry, an industry that has improved the quality of life for so many Americans. 

I thank you all for coming to this inaugural Diversity and Inclusion Subcommittee hearing. 

And I thank you, Director Garcia-Diaz, for your testimony this 

morning. 

I yield back. 

Chairwoman BEATTY. Thank you. 

The Chair now recognizes the ranking member of the full Financial Services Committee, Mr. McHenry, for 1 minute. 

Mr. MCHENRY. Thank you, Madam Chairwoman, and thank you 

for your leadership. 

I also want to thank the ranking member of the subcommittee, 

Ann Wagner, who is the Full Committee vice ranking member as 

well, for her leadership and commitment to this important issue. 

I support Chairwoman Waters’ decision to create this new subcommittee, and I continue to support her work on the issues facing 

diversity and inclusion in the financial services sector. 

Additionally, I want to commend Ranking Member Wagner for 

her diligence on this issue and leadership. Two weeks ago, the 

ranking member sent letters to all the Offices of Minority and 

Women Inclusion, better known as OMWIs, at the regulatory agencies to better understand their actions on diversity. The responses 

from these letters and the information gleaned from this hearing 

will help this subcommittee identify the appropriate role of Congress on a going-forward basis to facilitate greater diversity in the 

industry and at regulatory agencies. 

I look forward to the hearing, and I certainly appreciate all the 

work that the GAO does in a disciplined study at the direction of 

Congress. 

Chairwoman BEATTY. The Chair now recognizes the chairwoman 

of the full Financial Services Committee, Chairwoman Waters, for 

1 minute. 

Chairwoman WATERS. Thank you very much, Madam Chairwoman. 

Today, we are convening for the first time the Subcommittee on 

Diversity and Inclusion, which will examine and resolve the systemic economic exclusion of women, people of color, persons with 

disabilities, LGBTQ-plus individuals, veterans, and other members 

of our society who have to fight for a seat at the table. 

I am pleased that the subcommittee is beginning with this hearing on an issue that has stymied the financial services industry: including women and minorities in management. 

Beginning in February of 2005, 14 years ago, the Financial Services Committee requested that the GAO review diversity trends in 

5 

the financial services industry. In 2006, GAO looked at diversity 

from 1993 to 2004 and reported that the percentages of minorities 

in management rose from 11.1 percent to 15.5 percent, with the 

percentage of African Americans rising from 5.6 percent to 6.6 percent. 

GAO has since updated its report several times. In GAO’s most 

recent report covering 2007 to 2015, minority representation increased from 17 percent to 21 percent. However, the percentage of 

African Americans in senior roles decreased from 6.5 to 6.3 percent, 

and all minorities continued to be underrepresented. 

For years, policymakers, diversity advocates, and diversity professionals in the financial services industry have sent the message 

that diversity and inclusion must be more than words. They require action and resolve. Unfortunately, the data shows that the financial services industry lacks both today. 

This subcommittee begins the process of shining light on these 

trends and begins its work to improve the industry so that our financial system works for everybody. 

And I am so pleased that Mrs. Beatty has taken the leadership 

on this Diversity Subcommittee. There is nobody, no one else who 

could do the job better than she can. 

I yield back the balance of my time. 

Chairwoman BEATTY. Thank you. 

Today, we will welcome the testimony of Daniel Garcia-Diaz. Mr. 

Garcia-Diaz is Director of Financial Markets and Community Investment at the United States Government Accountability Office 

(GAO). He is also the author of the GAO report, ‘‘Trends in Management Representation of Minorities and Women and Diversity 

Practices, 2007–2015.’’ 

The witness is reminded that his oral testimony will be limited 

to 5 minutes. And without objection, his written statement will be 

made a part of the record. The witness is reminded to turn on his 

microphone and abide by the three lights in front of him: green 

means go; yellow means wrap it up; and red means stop. 

Mr. Garcia, you are now recognized for 5 minutes to give an oral 

presentation of your testimony. 

STATEMENT OF DANIEL GARCIA-DIAZ, DIRECTOR, FINANCIAL 

MARKETS AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE (GAO) 

Mr. GARCIA-DIAZ. Chairwoman Beatty, Ranking Member Wagner, and members of the subcommittee, thank you so much for the 

opportunity to be here today to discuss GAO’s work on trends in 

workforce diversity in the financial services industry. I am especially pleased to be participating in the first hearing of the newly 

established Subcommittee on Diversity and Inclusion. 

Over the years, GAO has worked with the Financial Services 

Committee to share information on the extent that minorities and 

women are making headway in the financial services industry, particularly at the management level. 

My statement today draws from our most recent report, issued 

in November 2017. Specifically, I will focus on trends in minority 

and women representation among managers in financial firms from 

6 

2007 through 2015, and practices these firms have identified to address challenges in increasing diversity. 

Unfortunately, the trends are clear: Management-level representation of minorities and women showed marginal to no increase 

from 2007 through 2015. 

The situation is more worrying when we look at representation 

at the senior level. Specifically, minority representation increased 

from about 11 percent to 12 percent in this period. In addition, African-American representation decreased not only in percentage 

terms, but also in absolute numbers. 

Among first- and mid-level managers, that is just right below the 

senior level, minority representation increased from 19 to 22 percent in this period. 

When we look at women representation, we found that it remained unchanged at the senior level, at around 30 percent. However, women representation was much stronger among first- and 

mid-level managers, at almost 48 percent. 

We also looked at representation by different sectors within the 

financial services, and generally banks and lenders had greater 

representation of minorities than the other sectors, such as insurance and securities. In fact, the insurance sector lagged banks by 

almost 3.5 percentage points. 

Women representation in management tended to be the highest 

in the insurance sector. The security sector tended to have the lowest level of women representation. 

For today’s hearing, my team examined EEOC data for 2016, the 

most recent available at this time, and we observed little or no 

change since 2015 across many of these measures for minorities. 

And we also noticed some growth in women representation among 

first- and mid-level managers. 

Many firms recognize that an inclusive workforce can help attract the best and the brightest and can contribute to innovation 

in products and services. But simple aspiration for achieving a diverse workforce is not enough. Diversity management requires intentional and strategic action that is sustained over the long haul. 

For this reason, we consulted with financial firms, industry 

groups, and others to understand the types of practices that they 

have identified to improve upon current trends. We consistently 

heard from experts that firms should engage in broad-based recruitment. In other words, firms need to cast their nets wider and 

not limit themselves to the same schools and the same academic 

disciplines. 

In addition, establishing mechanisms to hold managers accountable can help firms move towards their workforce diversity goals. 

As we have noted in our past work, leadership commitment to diversity is essential, but experts tell us that middle managers may 

not be as committed as leadership. 

Accountability measures to ensure that leaderships’ and managers’ efforts are aligned can be established in a variety of ways. 

For example, one firm representative stated that linking managers’ 

compensation to diversity goals has been an effective practice for 

retaining women and minorities. Establishing such accountability 

measures could help ensure that leadership’s vision is carried out. 

7 

Finally, firms and stakeholders we met with agreed that data 

analysis to assess the diversity of their workforce and spotting potential bottlenecks and problems is a key part of effectively managing workforce diversity. 

Before I conclude, I would like to highlight for the subcommittee 

GAO’s completed and ongoing work in this area. We have issued 

eight reports related to diversity in the financial sector. We also 

have completed a recent report on Board diversity at the Federal 

Home Loan Banks and are currently examining the diversity of 

these banks’ workforce and business activities. Building on this 

wealth of experience, we look forward to assisting the subcommittee. 

This concludes my opening remarks. Thank you again for the opportunity to speak today, and I will be glad to answer any questions you have. 

[The prepared statement of Director Garcia-Diaz can be found on 

page 26 of the appendix.] 

Chairwoman BEATTY. Thank you, Mr. Garcia-Diaz. 

I now recognize myself for 5 minutes for questions. 

Mr. Garcia-Diaz, I have a series of questions, but to get through 

my 5-minute time period, I am going to reference a study. The 2015 

international management consultancy firm McKinsey & Company 

first published a report entitled, ‘‘Diversity Matters,’’ which makes 

the business case for diversity. That report has since been updated, 

and the most recent version was published just in January of 2018, 

entitled, ‘‘Delivering Through Diversity.’’ 

The most recent report used a dataset of over 1,000 companies 

in 12 different countries, using two measures of financial performance: earnings before interest and taxes to measure profitability 

and economic profit margin to measure value creation. 

This data was used in a combination of diversity and inclusion 

efforts of 17 companies from around the globe to study where diversity matters most and how leading companies have used it successfully. 

Are you familiar with this report? 

Mr. GARCIA-DIAZ. With the body of work that McKinsey has 

done, yes, and it seems to build on what we have seen in the past. 

But this particular report, no, I have not evaluated it. 

Chairwoman BEATTY. So let me give you a little more data before 

I ask you to respond. 

The report found that companies in the 25 percent for executivelevel gender diversity were 21 percent more likely to outperform on 

profitability and 27 percent more likely to have superior value creation. 

Additionally, the report found that companies in the top 25 percent for executive-level ethnic and cultural diversity were 33 percent more likely to have industry leading profitability. 

Conversely, the report found that the less diverse executive 

teams were 29 percent less likely to achieve above-average profitability. 

In your report, there is a section on research on potential benefits of workforce diversity, and I believe it is on page 7. Can you 

briefly discuss your findings in that section and how they support 

the findings that I gave you in the McKinsey study? 

8 

Mr. GARCIA-DIAZ. We scanned the literature for the 2017 report 

and generally found studies that certainly support the idea that a 

more diverse culture at a firm can contribute to product innovation, 

idea generation in groups. It also can contribute to higher levels of 

satisfaction at work, which of course can be correlated with better 

performance. 

In terms of the association between diversity and financial performance, for the studies we looked at there have been attempts to 

make an association. Often, the challenge with those studies is the 

causation part. It may be correlated, but we don’t know the direction of causality. 

But, again, generally there is a consistent story that is being conveyed through these studies that financial performance can be positively impacted by a diverse workforce. But of course that is an 

area where I would say that continued study and research would 

be needed to really pin these issues down. 

Chairwoman BEATTY. Okay. Thank you. 

As you know, in our larger Committee on Financial Services, we 

deal a lot with banks and credit unions and securities and other 

activities, insurance and funds and trusts. In your report, you provided a breakdown of financial services industries in those same 

sectors. 

There was also some alarming data of decreasing numbers, and 

you can pick a minority group, whether it is women, whether it is 

African Americans, or whether it is Hispanics. 

Did the GAO explore some of these trends in the data and why 

they exist? Or can you tell me if there are specific diversity management practices that could help us address these discrepancies? 

Mr. GARCIA-DIAZ. Yes. The challenges with the data that we are 

working with from EEOC is it is hard to figure out what is going 

on behind the numbers. So we did consult with experts in the field 

and industry representatives and firms to get an idea of what is 

going on. And some of the issues that we heard are certainly kind 

of, if you have been working in diversity and inclusion issues for 

a while, sort of the same set of issues are behind it. 

One thing I would just highlight in the few seconds here is that 

one thing maybe that we heard was the impact of the financial crisis having on the trends in diversity, and in particular, firms’ ability to continue some of the efforts they had in place prior to the 

financial crisis, to ensure that there were adequate recruitment 

and retainment efforts and seeing through the promotion process 

to higher levels of management. 

Chairwoman BEATTY. Thank you. 

I now recognize the gentlewoman from Missouri, the ranking 

member of the subcommittee, Mrs. Wagner, for 5 minutes. 

Mrs. WAGNER. I thank the Chair. 

Mr. Garcia-Diaz, it is important to understand, I think, the data 

in your report. Can you tell me briefly, how do you define diversity 

for the purposes of your report? And what were the parameters 

that you identified? Are those consistent with other diversity and 

inclusion evaluations? 

Mr. GARCIA-DIAZ. Yes. So diversity is actually a very broad concept. It can include racial and ethnic characteristics, male/female. 

9 

Those were the ones that we focused on in this study in particular, 

because that is what was available in the data. 

When we think about diversity and inclusion, these are certainly 

very important components of it, these characteristics, these dimensions, but not the only ones. So when we think about diversity, 

we need to think about diversity in veteran status, age, and things 

like that. And that is the way we at least envision it. 

There is no one picture of what a diverse organization looks like. 

If you can imagine a credit union in Maine versus a global bank 

in New York City, diversity might be interpreted differently in 

those situations. 

Mrs. WAGNER. There is a need to do, I think, outreach and education in STEM at the undergraduate level. 

A 2018 Bloomberg article cited testimony from the founder of the 

Women in Technology and Entrepreneurship in New York, Judith 

Spitz, who was the CIO of Verizon. And Ms. Spitz stated that their 

research showed that although there are increasingly higher numbers of women in undergraduate institutions, there are only about 

1 percent of them who are studying, for instance, computer science. 

Computer sciences and similar disciplines are becoming increasingly crucial to the financial services sector. 

I believe this is a major impediment when it comes to gender diversity in the financial sector. How do you suggest we remedy this 

situation? 

Mr. GARCIA-DIAZ. That certainly speaks to the original kind of 

pipeline of potential candidates that you have to apply for a financial services job. 

And as the industry has moved to look at other programs beyond 

MBAs, but looking at math programs, engineering programs, there 

is this balancing concern, that while you may be getting disciplinary diversity, you are not necessarily getting, for example, gender 

diversity, particularly because in some of the sciences, math, and 

engineering, it tends to skew towards male representation. 

Mrs. WAGNER. Our subcommittee is striving to promote increased 

diversity and inclusion in the financial services sector. There are 

two ways, I think, that this can be accomplished, through punishment or through incentives, the carrot and the stick notion, so to 

speak. 

Your research has spoken to the advantages of incentives. Why 

do you think the current set of incentives is not really working? 

Mr. GARCIA-DIAZ. Well, I think there has been over the years a 

shift from this notion of diversity is the right thing to do, we need 

to do more of it. But how do you make that compelling and 

incentivize that behavior for managers to promote diversity at all 

levels of their organization? 

So I think this is where the business case argument or framework comes into play, where you find real business reasons why diversity contributes not only to the bottom line, but to the wellbeing of the organization, employee satisfaction, and things like 

that. 

Once you have achieved an organization that is inclusive of people of different backgrounds, race, religion, and so on, ultimately 

that makes it more inviting for candidates to apply for those types 

of jobs and you get this virtuous cycle going that according, at 

10 

least, to some of the conversations we have had with experts, 

doesn’t necessarily exist right now in the financial services. 

Mrs. WAGNER. Any specific incentives that have been proven to 

increase diversity in these financial firms, do you think? 

Mr. GARCIA-DIAZ. It is one of those things where I wish I could 

say that there are two or three things. But when we talk to the 

experts, they have to try all different methods— 

Mrs. WAGNER. We talked about flex time. We talked about lifestyle issues, mentorship. I have gone through your GAO study, and 

do any of those kinds of things come to mind? 

Mr. GARCIA-DIAZ. Yes. Our work highlights, actually, things like 

mentorship, outreach to the community and schools to introduce 

students to the financial services, that it is a viable career path. 

Mrs. WAGNER. We see that in STEM quite a bit, but we would 

love to see that more so in the financial services sector. 

Mr. GARCIA-DIAZ. I think a lot more can happen in that space. 

And, again, if you take my comment earlier that had some of those 

efforts slowed down since the financial crisis, then it would be a 

useful area for a lot of firms to focus on. 

Mrs. WAGNER. My time has expired. I yield back. 

Chairwoman BEATTY. Thank you. 

The gentleman from Texas, Mr. Green, the chairman of our Subcommittee on Oversight and Investigations, is now recognized for 

5 minutes. 

Mr. GREEN. Thank you, Madam Chairwoman. I am so honored 

to be a part of this subcommittee. I am especially honored because 

you are the chairperson and you have always been involved with 

the committees with which I have been associated. And I wanted 

to make sure that I was here today to be a part of this historic 

meeting. This is unprecedented, and I am proud and honored to be 

associated with this subcommittee. 

Let me quickly indicate that I believe the tone and tenor are set 

by the persons at the top. And if you have a diversity mentality, 

you are likely to understand recruitment and retention. You are 

likely to understand unconscious bias. You are likely to understand 

why you have to intentionally move forward in your recruiting efforts to acquire and maintain diversity. And you understand that 

it is important to train your managers and your employees about 

inclusion and unconscious bias. 

So let me just ask this question, if I may. Have we, in our efforts 

to diversify, placed emphasis on bonuses for the people at the top 

who can cause diversity to be reflected throughout the organization? Bonuses. 

Mr. GARCIA-DIAZ. Yes. And I think you are touching on issues 

that we have highlighted as critical, not only the leadership commitment to diversity, but to begin to set those goals and priorities 

for the whole organization. Then, how do you carry that out? How 

do you ensure that people are taking actions to address that? 

In our 2017 report, we reiterated here in the testimony is the 

issue of introducing accountability for middle managers, to ensure 

that they are living up to this vision, which includes linking managers’ performance at meeting diversity goals to their compensation. That would be one method, for instance. 

11 

Mr. GREEN. And to what extent is this being done throughout the 

industry? 

Mr. GARCIA-DIAZ. We don’t have data on that. It is strictly at this 

point anecdotal, what we have heard, that some firms are doing 

this. If it is widespread, we just don’t have the data on that. 

Mr. GREEN. And have you found in your research that where it 

is implemented, you get greater results, better results? 

Mr. GARCIA-DIAZ. Yes. And so for the firms that did report using, 

they thought it did actually contribute positively to their ability to 

not only recruit but also retain talented minorities and women. 

Mr. GREEN. And is it true that you found—I think you have said 

as much, but I will just ask and then I am going to yield back because I know that time is of the essence—that when you have a 

person who intentionally, who is at the top, who intentionally 

wants to recruit and diversify, that you get greater results? 

It seems that the answer would be a simple ‘‘yes,’’ but I would 

like it for the record. 

Mr. GARCIA-DIAZ. Yes. It is a simple answer. Yes, that is a practice that in our interviews with experts and researchers have identified that it needs to be intentional. 

Mr. GREEN. So the reverse of that would be then that if you find 

places where you don’t have the balance that we seek, the diversity, there is a good likelihood that someone at the top is not emphasizing it appropriately. 

Mr. GARCIA-DIAZ. That is one possibility. 

Mr. GREEN. I thank you. 

Madam Chairwoman, I will yield back, because I understand 

time is of the essence. 

Chairwoman BEATTY. Thank you. The gentleman yields back. 

To the Members, votes have been called on the Floor, so the committee will pause for votes and resume immediately after votes. 

The committee stands in recess. 

[recess] 

Chairwoman BEATTY. The committee will come to order. 

The gentleman from Ohio, Mr. Gonzalez, is now recognized for 5 

minutes. 

Mr. GONZALEZ OF OHIO. Thank you, Madam Chairwoman. 

Let me first start by saying how much I am looking forward to 

working with my fellow Buckeye, Chairwoman Beatty, and also 

Ranking Member Wagner on this subcommittee. In my short time 

in Congress, I have learned that these two women have an unmatched commitment to improving the lives of their constituents 

and are both excellent choices to lead this subcommittee. 

Mrs. Beatty, in particular, I have followed for many years and 

know that this important issue is one that she has been championing in my home State, and I look forward to working with her 

on helping make Ohio a shining example of a diverse and inclusive 

financial sector and workforce. 

Lastly, I want to thank Chairwoman Beatty and Ranking Member Wagner for starting this subcommittee in what I consider to be 

exactly the right place, which is a thorough review of what the 

data tells us about our present situation. I think we start with 

data, we start with an open, honest dialogue about what our current position is, how we got here, what the trends are. And then, 

12 

as we are grounded in data, we consider policies, their effects positively or negatively, and how that will stay foremost in our mind. 

So I think that is an excellent way to start, and I thank both of 

you for that leadership. 

I am proud of two great examples in Ohio, one is KeyBank, 

headquartered right outside my district in Cleveland, Ohio. They 

have received the designation as one of DiversityInc.’s Top 50 Companies for Diversity, having a board of directors that is 50 percent 

diverse by gender and race. This includes implementing a mentor 

program for senior and junior employees, focusing on holistic benefits packages, and training management employees in unconscious 

bias. 

Huntington Bank, also headquartered in Ohio, has also made tremendous strides in diversity. In 2018, Huntington invested $142 

million in the economic success of diverse businesses. Huntington 

is also committed to encouraging a diverse workforce, with a board 

of directors that is 30 percent diverse, a senior management team 

that is 42 percent diverse, and a total workforce that is 64 percent 

diverse. 

The progress made at Key and Huntington show that the industry has made strides forward, although I recognize that there is 

certainly much work to be done. 

So, Mr. Garcia-Diaz, first, I want to thank you for waiting out 

our votes, and everybody else who stuck around. I think the data 

that you presented is obviously important data, and what we have 

seen today is primarily aggregate data. 

When you drill down into regions, subregions, different sectors of 

the industry, are there certain areas where we are seeing bright 

spots that we can be excited about, that we can say, hey, this area 

or this part of the industry is doing a really good job on this front 

and maybe we need to kind of study them a little bit? 

Mr. GARCIA-DIAZ. Yes. If you look at the data even in our 2017 

report—we actually have an appendix that goes down to State-level 

reporting, not just national—you see actually a dramatic variance 

across States. And that shouldn’t surprise us. So you can look at 

California and Florida, and they have obviously a large Hispanic 

population, and as a result you do see higher than average. 

Mr. GONZALEZ OF OHIO. Did you control for that in the data at 

all? 

Mr. GARCIA-DIAZ. No. We are just reporting—we are not doing an 

econometric kind of analysis where we are controlling for other features. It is more of descriptive statistics. 

Mr. GONZALEZ OF OHIO. Okay. 

Mr. GARCIA-DIAZ. But I think that is an area that does provide 

actually some good areas for future work, to look at that kind of 

variation not only across region but types of industries. 

Mr. GONZALEZ OF OHIO. Okay. Great. 

And then a second question, kind of in the same vein. When this 

has been done well and when folks have kind of achieved meaningful outcomes in diversity, what best practices are you seeing, or did 

you not go into that much in the reporting? 

Mr. GARCIA-DIAZ. We did consult with firms and industry groups 

to identify what seemed to be promising practices. You mentioned 

some of them in your remarks. Those include mentoring programs. 

13 

We also, to add to some of the items that you mentioned, familyfriendly policies are especially is useful for women to be able to 

stay in the organization long enough so that they can get promoted 

to the higher levels. 

Mr. GONZALEZ OF OHIO. Great. Thank you. 

And I yield back the balance of my time. 

Chairwoman BEATTY. Thank you. 

The gentlewoman from California, the chairwoman of our full Financial Services Committee, is now recognized for 5 minutes. 

Chairwoman WATERS. Thank you very much, Madam Chairwoman. 

I do have a question that I would like to raise about recruiting. 

Mr. Garcia-Diaz, since 2005 this committee has asked the GAO to 

review diversity in the financial services industry. In multiple reports, GAO has continued to emphasize that, and I quote: ‘‘Without 

a sustained commitment among financial services firms to overcoming challenges to recruiting and retaining minority candidates, 

limited progress will be possible in fostering a more diverse workplace.’’ Unfortunately, GAO’s conclusions are correct. 

Now, what barriers, if any, exist that prevent financial services 

firms from increasing minority recruitment? What more could financial services firms do to improve their recruitment practices? 

What can Congress do to hold them accountable? 

Mr. GARCIA-DIAZ. In order to make that recruitment more effective than it has been, financial services institutions need to look beyond their traditional sources of talent—and we identified just 

looking beyond the typical schools, academic programs, and things 

like that—to identify new sources of diverse candidates for their recruitment. 

In addition, firms can do more in terms of reaching out to the 

communities, to schools, to get students and potential candidates 

connected and realize that this is a potential career path for them 

and to start that process of stimulating interest in the industry. 

Chairwoman WATERS. I think you have indicated in your report 

that the talent pools from which financial services firms could hire 

individuals are diverse. Specifically, you found that one-third of the 

persons obtaining graduate or undergraduate degrees between 

2011 and 2015 were racially or ethnically diverse. However, this 

level of diversity is not at all reflected in the financial services industry. 

Many of them tell us they go to the colleges and universities and 

they are all telling us they go to Georgia and they are recruiting, 

but it is not reflected in their pool of workers. So what is happening between the time that they recruit, so-called, and the fact 

that they are not hired and they don’t show up in their workplace? 

What do you think happens? 

Mr. GARCIA-DIAZ. Well, there is the other problem. Even if you 

are doing the recruitment in the right area, if the candidates are 

looking at the firm and they are finding that the firm is not as diverse as it could be, that itself can act as a barrier. 

And so whenever we look at any of these approaches, it is not 

just one thing. It is not just go to one school and try to recruit 

there. It has to be a combination approach which includes more extensive outreach and education about what they do for those stuVerDate Nov 24 2008 16:07 Jul 12, 2019 Jkt 095071 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\HBA058.130 TERRI
14 

dents, because the academic programs that we have nationwide are 

extremely diverse. 

Minority candidates and women are not hiding. They are out 

there. They are available. But a lot of times it is making the case, 

and making it convincing, that this is a possibility for them. 

Chairwoman WATERS. Can you think of any incentives? 

Mr. GARCIA-DIAZ. I’m sorry? 

Chairwoman WATERS. Can you think of any incentives? 

Mr. GARCIA-DIAZ. For? 

Chairwoman WATERS. Incentives that could be offered to the 

firms, the financial firms on Wall Street, that would be interesting? 

Mr. GARCIA-DIAZ. The leadership of the firms have to put pressure and incentives for managers to really take this responsibility 

seriously and to heart. It is not a check-the-box activity. It is a 

more substantial commitment that is required. 

And so that goes back to what I think is kind of the fundamental 

part, which is making sure that middle managers in the organization who are doing the interviews and the recruitment are held accountable, that they are, in fact, doing the best job they can to 

share information with potential candidates and recruit them. 

Chairwoman WATERS. That is an interesting idea, incentives to 

management who have the responsibility for hiring, and that could 

be done in any number of ways and perhaps in their annual reviews and some other kinds of things. 

Mr. GARCIA-DIAZ. Yes. That is the kind of accountability mechanisms that you can have, that it is part of their performance review. Potentially, it is a consideration in pay and bonus. And even 

just reporting requirements and being subjected to scrutiny is another powerful tool. 

Chairwoman WATERS. Well, thank you so much. 

And I yield back the balance of my time. 

Chairwoman BEATTY. Thank you. 

The gentleman from Wisconsin, Mr. Steil, is recognized for 5 

minutes. 

Mr. STEIL. Thank you. 

Mr. Garcia-Diaz, thanks for coming today. 

I want to follow up on the question that my colleague, Mr. Gonzalez, had. As I looked at your report, I noticed that diversity 

trends in the financial services industries are not uniform across 

some of the subgroups. So, for instance, banks and credit unions 

tended to be more diverse than, say, insurance companies. 

Do we observe any common features in more diverse industries 

and companies? Or what leads one industry to have a more diverse 

workforce than another, based on your research? 

Mr. GARCIA-DIAZ. Yes. To speak to those specific trends, I think 

is a little bit challenging, given the data that we have. However, 

in doing the research, we did identify studies where there are certain types of jobs in the financial industry that may be perceived 

as being less welcoming of women, let’s say. So certain areas would 

be like trading in the securities business and, in fact, you see that 

the securities representation line is relatively low compared to 

other sectors. 

Mr. STEIL. Less welcoming on the entry-level side, is that what 

you mean by less welcoming, or less welcoming across-the-board? 

15 

Mr. GARCIA-DIAZ. No, I am talking about at the managementlevel side. 

Mr. STEIL. Management. Okay. 

Mr. GARCIA-DIAZ. We heard from experts that there are certain 

types of responsibilities and occupations that may be perceived as 

being more male-dominated and less welcoming in that sense. 

And we also heard at least, and we can’t tell this from the data, 

but we heard that sometimes in the management figures that we 

are looking at, it is unclear whether the minority employee or the 

woman employee is working kind of in the business-forward side of 

the business as opposed to, say, accounting, human resources, and 

things like that. 

So that is an interesting area, again, that if there were data to 

explore that just because they are in the financial services industry, just because they are in banking or insurance, we don’t really 

know what their occupation, the specific occupation is that they are 

doing under that rubric. 

Mr. STEIL. Got it. Thank you. 

I want to shift gears slightly over to the education side. Education is a powerful tool that allows people to get that first step up 

as they head towards a higher-level management position in some 

of these industries. 

I served on the University of Wisconsin Board of Regents prior 

to coming to Congress and was proud of the fact that we put in 

place policies to control the cost of education. So if a student was 

going to UW-Madison and was from a family that made less than 

$56,000 a year median income in the State of Wisconsin, the tuition and fees of the University of Wisconsin-Madison is free, it is 

covered. And so that gives individuals an opportunity to get a step 

up. 

You mentioned in your testimony that some of the financial services firms surveyed told research they had broadened the list of 

schools that they had gone to recruit from, from beyond just a 

handful of maybe elite schools on the East Coast. Can you share 

any information as to how successful those efforts may have been? 

Mr. GARCIA-DIAZ. Yes. Only sort of in terms of what we heard 

from the folks that we interviewed. 

Mr. STEIL. Please. 

Mr. GARCIA-DIAZ. And generally, they were positive about those 

efforts in expanding beyond the normal circle of schools that they 

recruit from. And in particular, it is stated as a challenge when 

managers kind of focus on a few schools and trying to get them to 

actually think more broadly and expand beyond what they are accustomed to is one of the challenges that some of the folks we 

interviewed cited. 

And so while I can’t speak to what is happening nationally, but 

at least anecdotally, folks are reporting back that it is a promising 

practice. 

Mr. STEIL. Thank you. That is helpful. 

I yield back the balance of my time. 

Chairwoman BEATTY. Thank you. 

The gentlewoman from Texas, Ms. Garcia, is now recognized for 

5 minutes. 

16 

Ms. GARCIA OF TEXAS. Thank you, Madam Chairwoman. And it 

is, indeed, an honor for me to serve with you and try to tackle some 

of the issues that are in front of us today. 

Before I begin, I just wanted to say that I served as the elected 

city controller in Houston from, oh, 1998 plus 5 years, till 2003. 

And probably one of the most disheartening things for me was 

dealing with the financial world, not because I couldn’t handle the 

work, but because of who I faced sometimes. 

It seems like any meeting that I went to, whether it was to negotiate a depository contract or a banking contract or select investment bankers for a bond deal or anything that I did, it really was 

still a man’s world and it was also very White. I still remember 

when they took me up to the floor when they were trading with our 

first pricing. I didn’t see anything but, quite frankly, blond, blueeyed men in white shirts and ties. 

I am happy now that the last time I spoke to a public finance 

group, it has changed a little bit. But we haven’t really quite done 

enough, it seems. 

So what you said earlier today caught my ear, when you said 

that diversity is interpreted differently in different areas. 

Is there a way to get a better handle on what diversity really is 

and set real goals and timetables for some of the people in the financial services industry? Because it seems to me that we are not 

even quite there yet. And it is more than diversity, it is also inclusion and really a commitment to it. 

So what else can we be doing in this arena? 

Mr. GARCIA-DIAZ. I think that is the significant challenge ahead 

of us, is what does it look like and then what do we need to do to 

get there. And, as I mentioned before, there is really no easy answer to that question. 

But I think there are steps that firms can take to really enhance 

their diversity management in their organization, but first you 

have to commit to it, you have to see this as a priority, and then 

do other things that we highlight in our prior work, practices that 

help organizations achieve the kind of diversity that they are hoping to achieve. 

And what informs that, in terms of what does that diversity look 

like, is really looking at who your customer base is, where are you 

located, what does your community look like. 

Ms. GARCIA OF TEXAS. Right. Because I have always thought that 

the easy answer is that your workforce should look like the people 

that you are serving. 

Mr. GARCIA-DIAZ. That you are serving, yes. 

Ms. GARCIA OF TEXAS. So that is easy enough. I just sometimes 

get really baffled that they make it so hard. 

I will move on to another question related to that. We have focused on the services. Have you seen any studies or have you all 

done any studies on them looking at the access to those institutions? 

Mr. GARCIA-DIAZ. Access by? 

Ms. GARCIA OF TEXAS. By the customer, the consumer? 

Mr. GARCIA-DIAZ. I don’t have any information on that. I’m sorry. 

17 

Ms. GARCIA OF TEXAS. You don’t at all? It is just the diversity 

and inclusion of the workforce in terms of the studies you have 

done so far? 

Mr. GARCIA-DIAZ. Yes, part of it. We have done—the agency has 

done work in terms of looking at, in a very specific area, looking 

at business activities and contracting with and conducting business 

with minority organizations to support minority- or women-owned 

businesses, if that is what you are referring to. 

Ms. GARCIA OF TEXAS. Right. So what service have you actually 

done just on inclusion? You had diversity—you know, coincidentally, I also was an EEOC hearings examiner, and they tend to just 

look at the numbers, look at the percentages, and look at the EEO 

profiles of the companies. But you can have someone—again, I will 

use my experience when I was controller. 

If a minority or a woman came in with the investment banking 

team, it was usually the one who was carrying the presentation 

books and was never really included on being part of the presenters. They just carried the books. 

And I used to sometimes just have to look at the person and say, 

‘‘Well, you know, Mary Sue, you haven’t said anything. What do 

you think?’’ I would have to ask to get them included. 

So how do we really look at inclusion, making sure that they are 

really part of the company, given training, given opportunities to 

grow within that particular company? 

Mr. GARCIA-DIAZ. That is the cultural shift that has to happen. 

And one of the things we identify is the education and training 

component to make people aware of the consequences of the kind 

of behavior you described just now. 

Ms. GARCIA OF TEXAS. Thank you. 

Thank you, Madam Chairwoman. 

Chairwoman BEATTY. Thank you. 

The gentleman from West Virginia, Mr. Mooney, is now recognized for 5 minutes. 

Mr. MOONEY. Thank you, Madam Chairwoman. 

So, Mr. Garcia-Diaz, thank you for coming and for providing your 

expertise. I really appreciate it. 

We can all agree that efforts to increase diversity can always be 

improved, but it is important to point out that diversity and inclusion are two different factors. That is why this committee has two 

different names for that. 

So in the Harvard Business Review study researchers have found 

that diversity in the workforce will not succeed without the inclusion factor. The study cited Verna Meyers, a noted diversity advocate, who stated, ‘‘Diversity is being invited to the party; inclusion 

is being asked to dance.’’ 

So, Mr. Garcia, inclusion is the driving force to make lasting impacts on the diversity of a workforce. So if that is the goal, what 

has the data shown are the most crucial factors affecting inclusion? 

Mr. GARCIA-DIAZ. Yes. And you are absolutely right, I think a lot 

of the research does point to the importance of inclusion as—diversity is not enough in a lot of ways, and that you do need that inclusiveness to make sure that people are making meaningful contributions in the firms that they work for. 

18 

In terms of the data, our data doesn’t necessarily speak to that, 

at least the data analysis that we did of EEOC information that 

is reported by financial firms. And so it is hard to kind of take the 

temperature, in a sense, of the firms and to see to what degree 

they are embracing and incorporating inclusion. 

But in our conversations with experts, again, they highlight that 

is a necessary condition to have a longstanding and effective management of your diverse workforce, is the inclusion part. And that 

can actually help with even the notion of addressing kind of retention issues and making people feel that they are part of the organization and they are willing to stay there long enough so that they 

can rise in the organization. 

Mr. MOONEY. Fair enough. 

My next question has to do with the issue of government regulation, rules, mandates, laws versus an industry or a business on 

their own taking initiative for their corporation, taking into account their unique circumstances to promote diversity and inclusion. 

Because sometimes I feel that the one-size-fits-all government 

regulations may actually have an adverse effect. When you try to 

apply it to every business the same way it may actually have a 

counter-balancing effort as people worry about the regulations and 

start making laws to that. 

So apart from government efforts, what are some of the organic 

solutions that the firms have come up with on their own to address 

the diversity and inclusion challenges? 

Mr. GARCIA-DIAZ. Again, when talking to experts in the area, 

they repeatedly say there is no single solution that works for everyone. And so there has to be flexibility, there has to be innovation 

occurring. But in order to make that effective, there has to be sufficient information-sharing. Venues like this, the kind of work the 

subcommittee will do, will contribute to that. 

But whether it is Federal agencies, through their OMWI offices, 

or the private sector and what they are doing, sharing information 

about practices that have been effective in their case and also reporting on any assessments that they have done is critical to getting information out about the range of options that are available 

to promote diversity and inclusion. 

Mr. MOONEY. And so the promoting diversity and inclusion 

across multiple businesses, or is this more of a financial services 

sector issue? 

Mr. GARCIA-DIAZ. Well, it really does apply to everything. It applies to us as Federal agencies. It applies to the financial sector 

and other professional services organization. 

Mr. MOONEY. All right. I have a minute left here, but I will try 

one more question. 

The GAO report that you authored describes the need to improve 

recruitment and retention. Those two factors will lead to the most 

lasting solutions to the diversity and inclusion problems. What did 

the data show to be the most effective and proven solutions in 

those two categories? 

Mr. GARCIA-DIAZ. As far as we can tell, it is hard to pinpoint just 

one. Everything we have heard has emphasized the multiplicity of 

action to address both the recruitment and the retention question. 

19 

Mr. MOONEY. Okay. Well, thank you for your time and testimony. 

And thank you, Madam Chairwoman, for having this hearing 

today. I yield back the balance of my time. 

Chairwoman BEATTY. Thank you very much. 

The gentleman from Missouri, Mr. Clay, the Chair of our Housing, Community Development and Insurance Subcommittee, is now 

recognized for 5 minutes. 

Mr. CLAY. Thank you, Chairwoman Beatty. 

Let me say that, Madam Chairwoman and Ranking Member 

Wagner, I appreciate you embarking on a new course by leading 

this new Subcommittee on Diversity so that diversifying America’s 

workforce will no longer be mere lip service. 

And as the Chairman of the Federal Reserve indicated in this 

morning’s Humphrey-Hawkins hearing, it is time to move past the 

Rooney rule so that not just one minority candidate is interviewed 

for the purpose of window dressing, and we will now refer to that 

new rule as the ‘‘Beatty-Wagner rule.’’ 

America is made better by its rich diversity. Our institutions of 

higher learning are enhanced when more voices are included on 

campuses. Our religious institutions grow and prosper when the 

congregations are not segregated. Our athletic fields are more interesting when people from all walks of life are able to participate 

together. And our apartment buildings, neighborhoods, and co-ops 

are more comfortable to inhabit when not everyone looks the same, 

speaks similarly, or has identical neighbors on every floor. 

Mr. Garcia-Diaz, let me ask you, during your research for this report were you able to determine what percentages of financial firms 

provided training on unconscious bias? And did any firms note that 

some forms of training were found to be more successful than others, such as in-person training versus online training? 

Mr. GARCIA-DIAZ. Yes, sir. We don’t have any figures on the frequency of the use of that kind of training to address unconscious 

bias. In our interviews with industry representatives and advocacy 

groups that was definitely one of the tools to use and to address 

the issue of unconscious bias. Training can’t do it by itself, though, 

and it has to be in culmination with other efforts. But, yes, that 

is— 

Mr. CLAY. But you and I will agree that that is one of the major 

impediments, major barriers to diversifying workforces in financial 

services, or in any other industry in this country. 

Mr. GARCIA-DIAZ. Yes. That would be a significant concern, and 

not just in the financial services industry but broadly speaking. 

Mr. CLAY. But broadly, sure. 

Mr. GARCIA-DIAZ. Yes. 

Mr. CLAY. And so can you offer any suggestions on how we attack that? 

Mr. GARCIA-DIAZ. I think just the question that you asked of how 

frequently, how prevalent is this type of training, how is this being 

used. And also the different varieties. As you just pointed out, you 

can do it online, you can do it in person, you can do it in different 

formats. And so having more information, obtaining more information on the variety of options for training and what seems to work 

more would be something that is needed to really advance the ball. 

20 

Mr. CLAY. And regarding retention, could you comment on what 

workplace inclusion practices can improve companies’ minority and 

women retention rates? 

Mr. GARCIA-DIAZ. Yes. And I will start off with one that I think 

is very important. It is holding management accountable for the organization’s diversity goals, ensuring that their work, their performance, and their ability to take these matters seriously aligns 

with their leadership’s own commitment to diversity and inclusion. 

Other kind of steps, practices that would be helpful for retention 

includes employee engagement, obtaining a lot of qualitative information about what their experiences are in the firm that may not 

be reflected necessarily in just straight numbers. 

Mr. CLAY. All right. And my time is up. Thank you, Madam 

Chairwoman. I yield back. 

Chairwoman BEATTY. Thank you. 

The gentleman from Texas, Mr. Gonzalez, is now recognized for 

5 minutes. 

Mr. GONZALEZ OF TEXAS. Thank you. 

And, thank you, Mr. Garcia-Diaz, for being here today. 

I have a question. Has the GAO looked at promotions separately 

from new hires? In other words, are we promoting more minorities 

from within? And is the rate at which minorities are promoted to 

management positions different from the rate that minorities are 

hired into management? 

Mr. GARCIA-DIAZ. Yes. And, unfortunately, one of the limitations 

of the EEOC data is that it doesn’t allow us to see people’s movement within the organization, like in the case of promotion. We 

just see these balances, how many people in its account. 

But in the report, in our 2017 report, and in testimony, we look 

at the potential pipelines that feed into these promotions outside 

of the management level. And so we have statistics that there is 

quite a bit of diversity in sort of professional jobs that are nonmanagement, sales jobs that potentially the firm can draw from to 

promote into the higher management levels. 

Mr. GONZALEZ OF TEXAS. So the answer is, we don’t know. 

Mr. GARCIA-DIAZ. We don’t know. 

Mr. GONZALEZ OF TEXAS. And finally, in my district, we have 

about an 80 or 90 percent Hispanic population, but we still struggle 

with inclusion in upper management for non-minority-owned businesses. Can you advise if the GAO could get a better handle on 

challenges faced in the hiring of a diverse workforce if, for example, 

the data was looked at on a State-specific scale or on a regional 

scale? 

Mr. GARCIA-DIAZ. Yes. In our 2017 report we include some statistics on the State level based on the EEOC data. But the emphasis 

still falls on effective recruitment strategies that firms should be 

adopting, again, looking broadly and doing intentional recruiting of 

minorities, identifying the pool, draw them in, so that they have 

the opportunity to be interviewed, to be considered for the job. 

At the end of the day, it is the talents and what you bring to the 

table that will hopefully lead to a job. But they need to first show 

up at the interview. And firms have to do an effective job to draw 

those candidates in for consideration. 

21 

Mr. GONZALEZ OF TEXAS. Very well. I yield back the balance of 

my time. 

Chairwoman BEATTY. Thank you. 

The gentleman from Florida, Mr. Lawson, is now recognized for 

5 minutes. 

Mr. LAWSON. Thank you, Madam Chairwoman. 

And, Mr. Garcia-Diaz, welcome to the committee. 

I worked in the financial services area for 36 years, and during 

my tenure there what I have found out is that in most cases in the 

financial services industry when they do recruit minorities into the 

area, oftentimes, which is not discussed, is they don’t really last, 

because they don’t have the support that is needed in the area because sometimes it is the new entrances, whereas in the majority 

population, where some of these individuals or students are exposed because of family connection and the jobs that they have in 

college and so forth, they have more of an appreciation on how it 

works and how they can move through the system. 

And my question would be, for example, I have Florida A&M 

University, one of the Historically Black Colleges and Universities 

(HBCUs), in my district that has a great school of business and engineering. And do many of the companies, are they still, from your 

knowledge, are they going around to recruit at the universities a 

couple of times a year to make sure that they can attract some of 

the students into the financial industry to improve our diversity? 

Mr. GARCIA-DIAZ. Yes. And I think one of the important points 

is when you are drawing folks of different backgrounds, different 

experiences, everyone relies to some extent on some sort of mentoring. It may be family because they have been in the business, 

so they know it. Others don’t have that. 

And so a forward-looking organization will be setting up either 

mentorship programs or some sort of sponsorship program for employees coming in to ensure that they understand how to navigate 

through the organization, how to progress in your career, and those 

are critical parts to addressing actually the retention issue. 

Sometimes it might be easy to get someone in the door, but then 

to keep them is a whole different matter. And, particularly, you 

want to set up folks for success. And so programs, and they are out 

there and they exist, and we have been told that they have been 

quite effective in assisting folks in their career. 

Mr. LAWSON. Sometimes, when I am back in the district, I do 

banking on Saturdays because it is open from 9 until 12. And in 

the banking area, and this is, I am just going to say, this is with 

Bank of America, what I have noticed is the trend has been, because a lot of the Hispanic members, individuals go into banking 

now, I have seen where they have increased the number of Hispanic-speaking individuals in the banking industry so they can 

deal with all of the customers who come in. 

But over the last couple of years, when I have gone into those 

institutions, I haven’t been able to see whether there has been an 

increase in minority, African-American representatives like they 

have done on the Hispanic areas in that financial institution. But 

I thought it was great what they did for Hispanic because sometimes there is a language barrier that some of the people can help 

with a little bit more. 

22 

I have always viewed diversity as something that should be a 

part of the American way of life, because the whole population in 

America has been changing. In your dealings and in the research 

that you have, how do you all approach these institutions about 

trying to create more diversity in the workforce? 

Mr. GARCIA-DIAZ. I think one of the important components is for, 

whether they are banks or securities or insurance companies, whatever they are, is that they have institutionalized kind of the thinking behind diversity and inclusion in their operations and to do it 

consistently across all levels, whether it is the entry level teller 

kind of jobs in the bank, but thinking about how people can 

progress through the organization all the way to the top. 

And so we have identified some key practices that are essential. 

I mentioned a few before, like leadership commitment and accountability. But other things include data analysis, knowing what the 

shape of your workforce looks like, where are you losing candidates 

for potential promotion, what is their composition and makeup. 

Those are critical parts for an organization to become self-aware 

about how they stand, how they are doing in terms of diversity and 

inclusion. 

Mr. LAWSON. Okay. Thank you. I yield back. 

Chairwoman BEATTY. Thank you. 

The gentlewoman from Pennsylvania, Ms. Dean, is now recognized for 5 minutes. 

Ms. DEAN. Thank you, Madam Chairwoman. And I thank you for 

this hearing and the focus of the hearing. 

And thank you, Mr. Garcia-Diaz, for being here and for offering 

us your expertise and your guidance. 

I, too, echo my colleagues’ sentiments about diversity being our 

strength. And it is not just a pretty sentiment. We actually know 

that it works in industry, in the financial services industry, and in 

all industries. 

As we diversify, as the research shows that as we have people 

of different ethnicities, gender, backgrounds, experiences, geography, ethnicity, the enterprise does better because they get better 

ideas. 

I represent Montgomery County and Berks County in Pennsylvania. I am a newly elected Member. I have to admit that I have 

been so proud of the mentorship that senior Members have offered 

us incoming freshmen, regardless of our age. And so I want to talk 

to you about the idea of mentorship. 

As I visit my area high schools, I want to talk about the talent 

pool and making sure that that talent pool knows of the opportunities, whether it is in financial services or other industries. So I noticed, for example, in the GAO 2017 report, one suggestion for overcoming recruiting challenges was to offer programs to increase 

awareness of financial services. 

So to follow along on the line of questioning you were just having, could you describe in detail—and I am going to give you specifics on the ground. Montgomery County is considered the third 

most affluent county in Pennsylvania, but there are pockets of 

great need, terrific resources and opportunity, but educational unevenness, economic unevenness. 

23 

So I visit my Norristown area high school students. They don’t 

know all the opportunities in front of them. And this is literally 

what we talked about. We need mentors in these schools at the 

high-school level, if not even earlier. 

Can you describe some of these relationship-building, 

mentorship-building programs, how can I get them, tap into them 

in the financial services industry in my Fourth Congressional District? What does the curriculum look like? How are they implemented? 

And are there certain literally training programs for students so 

they can come visit financial services institutions? Can you give us 

some sense on how I can access it for my students? 

Mr. GARCIA-DIAZ. While we didn’t look at specific types of programs that are out there, there are a lot of groups that are trying 

to generate these kinds of partnerships between, say, a bank and 

a school or the large local employer with the schools to reach out 

to students. And it is something just in our conversations that we 

have had when we were doing the 2017 report. 

We can certainly share names of certain organizations that can 

kind of facilitate that and help thinking. They tend to specialize 

more on those type of efforts than we do. 

But that holds a lot of potential. And it is not only important for 

firms to engage their own employees; it is also important that they 

engage their community because that is going to be their future 

workforce. And how do they bring them in through the door, how 

do they make sure they are aware. 

Because sometimes it is just: Is this a possibility for me? Is this 

something that I could do? Conveying that clearly to certainly 

young folks and going in school right now would be very helpful. 

But we can get you some information on the types of organizations 

that can help with those kind of partnerships. 

Ms. DEAN. And if you could provide that to the committee. 

Mr. GARCIA-DIAZ. Oh, yes. 

Ms. DEAN. I think it would help across the country to know 

about things like that. 

Are there any best practices you can share, and/or are there any, 

among those programs, are there any scholarship opportunities? 

What can you say about those two ideas? 

Mr. GARCIA-DIAZ. We can look into it and get back to you on 

that. There are, I know, a lot of efforts, for instance, like in the financial literacy area where financial institutions are engaging 

schools and trying to incorporate financial literacy in the curriculums and things like that, which, even though it is not directly related to this, but it does get at the partnerships that exist out there 

that can be leveraged to have school-age children sort of recognize 

this as a possible career path. 

Ms. DEAN. And I am going to ask a very broad question really 

late in my time here and probably it has been discussed. But what 

is the secret to, not out to maybe the talent pool, but at the retention and hiring time and promotion, what is the secret to changing 

the trends that we see? 

Mr. GARCIA-DIAZ. I think the secret, if there is one, but I am 

going to venture a guess here— 

Ms. DEAN. Unleash the secret, yes. 

24 

Mr. GARCIA-DIAZ. —is really that it has to be intentional, it has 

to be strategic, and it has to be sustained. If you don’t have it, if 

you don’t do that, it will fall apart. 

Ms. DEAN. Thank you. 

Thank you, Madam Chairwoman. 

Chairwoman BEATTY. Thank you. 

I would like to thank our witness, Mr. Garcia-Diaz, for your testimony today. 

The Chair notes that some Members may have additional questions for this witness, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to this witness 

and to place his responses in the record. Also, without objection, 

Members will have 5 legislative days to submit extraneous materials to the Chair for inclusion in the record. 

This hearing is adjourned. 

[Whereupon, at 4:42 p.m., the hearing was adjourned.] 

(25) 

A P P E N D I X 

February 27, 2019 

26 


Insert offset folio 1 here 35693.001

GA0-19-398T 

Subcommittee on Diversity 

and Inclusion, Committee on Financial 

Services, Representatives 

Represe n of 

Minorities and Women in 

M nagement nd 

Practices to mote 

Diversity, 2007-201 

Statement of Daniel Garcia-Diaz, Director, Financial 

Markets and Community Investment 
27 


Insert offset folio 2 here 35693.002

FINANCIAL SERVICES INDUSTRY 

Representation of Minorities and Women in 

Management and Practices to Promote Diversity, 

2007-2015 

What GAO Found 

In November 2017, GAO reported that overall management representation in the 

financial services industry increased marginally for minorities and remained 

unchanged for women from 2007 to 2015. Similar trends also occurred at the 

senior-level management of these firms. For example, women represented about 

29 percent of senior-level managers throughout this time period. As shown 

below, representation of minorities in senior management increased slightly, but 

each racial/ethnic group changed by less than 1 percentage point. The diversity 

of overall management also varied across the different sectors of the financial 

services industry. For example, the banking sector consistently had the greatest 

representation of minorities in overall management, whereas the insurance 

sector consistently had the highest proportion of women in overall management. 

Senior-level Management Representation of Minorities in the Financial Services Industry, 

2007 and 2015 

:::ree:: Percentage of senior-level management 

~ Afncan-Amencan 

RIH!spamc 

[~] M.ao 

L]oth~ 

12% 

12 15 

Native American or Alaska 

As GAO reported in November 2017, potential employees for the financial 

services industry, including those that could become managers, come from 

external and internal pools that are diverse. For example, the external pool 

included those with undergraduate or graduate degrees, such as a Master of 

Business Administration. In 2015, one-third of the external pool were minorities 

and around 60 percent were women. The internal talent pool for potential 

managers included those already in professional positions. In 2015, about 28 

percent of professional positions in financial services were held by minorities and 

just over half were held by women. 

Representatives of financial services firms and other stakeholders GAO spoke to 

for its November 2017 report described challenges to recruiting and retaining 

members of racia!/ethnic minority groups and women. They also identified 

practices that could help address those challenges. For example, representatives 

from several firms noted that an effective practice is to recruit and hire students 

from a broad group of schools and academic disciplines. Some firms also 

described establishing management-level accountability to achieve workforce 

diversity goals. Firm representatives and other stakeholders agreed that it is 

important for firms to assess data on the diversity of their employees but varied in 

their views on whether such information should be shared publicly. 

_____________ United States Government Accountability Office 
28 


Insert offset folio 3 here 35693.003

Chairwoman Beatty, Ranking Member Wagner, and Members of the 

Subcommittee: 

to discuss diversity trends in the financial 

of the newly established 

The financial services industry 

is a major source that affects the economic well-being of 

its customers and the as a whole_ 1 As the makeup of the U_S_ 

workforce force continues to become more diverse, many private sector 

orcrarliZfltic,ns have recognized the importance of recruiting and retaining 

and women for key to improve their business or 

organizational performance better meet the needs of a diverse 

customer base_ 

I will discuss trends in management representation of minorities and 

women and diversity practices in financial services firms from 2007 

through 2015_ Specifically, I will discuss (1) trends in management-level 

in the financial services industry, (2) trends in diversity among 

talent pools, and (3) challenges financial services firms identified 

to increase workforce diversity and the practices they have used 

those statement is based on the findings from 

our most recent report on from November 2017_ 2 For that 

2007--2015 workforce data from the Equal 

Commission's (EEOC) Employer Information 

Report for 2015 were the most current available at the time 

of our review_ We also summarized !hat the financial services 

faced in 

by reviewing 

interviewing representatives financial services firms and advocacy 

organizations_ More detailed information on our scope and methodology 

can be found in that report_ 

Page 1 
29 


Insert offset folio 4 here 35693.004

Background 

The work on which this statement is based was performed in accordance 

with accepted government auditing standards. Those standards 

that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe tl1at the evidence obtained 

provides a reasonable basis for our findings and conclusions based on 

our audit objectives. 

or more employees, and all federal contractors who have 50 or 

errlpi<)YE'es and meet certain other requirements, must submit data 

to the on the racial/ethnic and gender characteristics of employees 

by occupations for a range of industries, including financial services. 3 

Fn•nl.mu•r< are required to submit these data to EEOC every year using 

report. 

employers to use the North American Industry 

rr:"<:ifir:Rtinn System to classify their Under this system, the 

financial services industry includes the five sectors: 

Credit intermediation and related activities (banks and other credit 

institutions), which include commercial banks, thrifts, and credit 

unions; 

Securities and other activities, which includes firms that bring together 

and sellers of securities and commodities and offer financial 

Insurance firms and agents that provide protection against financial 

risks to policyholders: 

Funds and trusts, which include investment trusts and holding 

companies: and 

Monetary authorities, including central banks. 

Beginning in 2007, EEOC changed its requirements for reporting data on 

managers. Specifically, employers were required to report separately on 

with 50 or more employees 

Page 2 
30 


Insert offset folio 5 here 35693.005

rather than combining data on seniorand mid-level as had been 

Fn1nlnw>r~ are required to EEOC guidance 

and determine how their firm's 

In a January 2005 we identified a set of nine leading practices that 

should be when an organization is developing and 

implementing diversity management4 They are (1) commitment to 

diversity as demonstrated and communicated by an organization's top 

leadership; (2) the inclusion management in an organization's 

plan; diversity linked to the case that a 

more inclusive work environment could help 

productivity and individual and organizational performance; (4) 

measurement of the impact of various aspects of a diversity program; (5) 

management accountability for the progress of diversity initiatives; (6) 

(7) recruitment; (8) employee involvement in an 

management; and training for management 

In we reported that industry 

nine practices are still relevant 5 

a 

similarities and differences, so can reach their potent1a! and maximize 

their contnbutions to an organization's strategic goals and objectives 

5GAO··i8-64 

Page 3 GA0-19~398T 
31 


Insert offset folio 6 here 35693.006

Management-Level 

Trends in 

the Financial Services 

Industry Showed 

Little or No Increase 

from 2007 through 

2015 

Level ~c>nrp~,pn·t~tlnr 

Increased Marginally for 

Minorities and Remained 

Unchanged for Women 

As we reported in November 2017. at the overall management level, 

representation of minorities in the financial services industry increased 

from 2007 2015, though representation varied by individual 

minority groups fig. 1) 6 Specifically, minorities' representation in 

overall management positions increased by 3.7 percentage points. Asians 

had the since 2007, increasing their representation among 

managers percent to 7. 7 percent Hispanics made smaller gains; 

their representation among managers increased from 4.8 percent to 5.5 

percent In contrast, the of African-Americans in management 

positions decreased from percent to 6.3 percent. 

5

We use the term "overall management" to refer to both fwst~ and mid· !eve! managers and 

sen1or-level managers 

Page 4 GA0-19-398T 
32 


Insert offset folio 7 here 35693.007

Percentage of management 

Representation of minorities also increased between different levels of 

management from 2007 through 2015 (see fig" 2) 7 Minority 

representation among tirst-and mid-level managers increased by 3" 7 

points, !n contrast, representation of minorities among seniormanagement increased at a slower pace during this period (1 "7 

percentage points)" Minority representation senior-level managers 

remained considerably lower than among first- mid-level managers" 

Page 5 

smaller than the pool of first- and mid-level 

financial services mdustry reported over 89_ 000 

and almost 440,000 first. and mtd-level !n 2015, there 

managers and over 504,000 first- mid-level managers 

GA0·19-398T 
33 


Insert offset folio 8 here 35693.008

Percentage of management by level 

25 

20 

15 

10 

2007 2008 2009 2010 2011 2012 20i3 2014 2015 

Fisca!year 

We also reported in November 2017 that representation of women at the 

overall level had remained From 

2007 about 45 

racial and ethnic group varied by 

period. For example, among minority women, 

An·,c;m-AnlPr•c~n women consistently had the highest representation in 

mR,nRnPITIPnl (about 4 of per year). Among 

WllSi<,lP!OtiV had in 

managers). 

PageS 
34 


Insert offset folio 9 here 35693.009

of men and women within various levels of management 

unchanged from 2007 2015, though there were some 

increases in the representation of minority women and minority men. 

During this timeframe, women around 48 percent of first-and 

mid-level managers and about percent of senior-level managers. 

first- and mid-level positions, the representation of 

nPrH>nt;,nr-> points and the 

men increased 2.2 percentage points (see 

Among sPr1ior·-lpvcel management positions, representation of 

women and minority men increased by smaller amounts (0.3 

oe•rcente'a" points and 1 .5 percentage points, respectively). 

Percentage of first- and mid·l&vel management 

70 

Percentage of senlor~!eve! manageml!:nt 

70 

50 

Ill 40 

30 

20 

.. 50 

'" Ill 40 

30 

Page 7 GA0~19-398T 
35 


Insert offset folio 10 here 35693.010

Are More Diverse Than 

Others 

In November 2017. we 

across sectors within the 

representation in overall mRn~.nPrnP>nt 

financial services industry (see 

varied 

minorities in the banks and other institutions sector increased by 

3.1 percentage points and 4.3 percentage points in the funds and trusts 

sector Also, the representation of minorities in overall management was 

consistently the greatest in the banks and other credit institutions and 

lowest in the insurance sector. 

Page 8 

D1mctor Recruftnwnt Efforts and lncroase Tmnsporency 

(Washtngton, D.C. Oct 19, 2011) 

GA0-19-398T 
36 


Insert offset folio 11 here 35693.011

Percentage of manageme-nt 

25 

20 

15 

The representation of women in overall management also varied by 

financial services sector (see fig, 5), The insurance sector consistently 

had the highest of women in management followed 

by banks and credit institutions, The proportion in 

management decreased in each sector for the insurance sector 

where it increased by 1,9 percentage points 47,7 percent to 49,6 

percent 

Page 9 GA0-19-398T 
37 


Insert offset folio 12 here 35693.012

Representation of 

Minorities Increased with 

Firm Size 

Percentage of management 

50 

40 

35 

Our November 2017 report found that the representation of minorities in 

overall increased as firm size of 

employees) whereas the representation in 

management generally remained the same across firm size. 9 More 

specifically, in 2007, the of minorities in overall 

management was nearly percentage points greater in firms with 5,000 

or more employees compared to firms with 100-249 employees. By 

Page 10 GA0"19-398T 
38 


Insert offset folio 13 here 35693.013

Trends Have Similarities 

and Differences 

Compared To Professional 

Services and Overall 

Private Sectors 

External and Internal 

Potential Talent Pools 

for Financial Services 

Positions Are Diverse 

comparison, in 2015, the representation of minorities in overall 

management was about 6 percentage points in firms with 5,000 or 

more compared to firms with employees. Across 

firms sizes, the of women in management 

positions in 2015 was the same as it was in 2007. 

representation of in all levels of management in the 

financial services sector, the professional services sector, and the overall 

private sector. 10 However, among first- and mid-level managers, 

representation of minorities increased at a lower rate in the financial 

services sector during this time period (3.7 percentage points) than in the 

nrr1fPssinn."l services sector (7.5 percentage points) and slightly lower 

the overall private sector (3.8 percentage points) . 

In addition, the financial services sector generally had a greater 

proportion of women in management compared to the overall private 

sector and services sector. For example, women 

percent and 38.2 percent of first- and mid-level 

nrr1fRssinn,"l services sector and overall private sector, 

respectively, in As previously mentioned, women represented 

about 48 percent of first- and mid, level managers in the financial services 

sector from 200'1 through 2015. 

can come a 

backgrounds. firm 

to for our November 2017 report told us that 

undergraduate or degrees are an important consideration for 

enmi<Jvrnent Some firm representatives also told us that while graduates 

of Business Administration (MBA) degrees are an important 

pool of talent, firms seek students with a variety of degrees. 

We also found that from 2011 

external pool of potential talent for 

Page 11 

2015, about one-third of the 

financial services industry-that is, 

GA0-19-39BT 
39 


Insert offset folio 14 here 35693.014

Percentage of degrees by minorities 

so 

so 

those racial/ethnic 

Addrtr,onaiiiJ. rates of of bachelor's, 

by racial/ethnic minorities all increased 

during this time example, minorities' representation among 

those who attained an MBA increased from 35.6 to 39.2 percent 

Furthermore, from 2011 2015, minority women consistently 

earned a greater proportion master's and MBA degrees compared to 

minority men. 

Additionally, we found that from 2011 through 2015, a majority of those 

obtaining undergraduate or graduate degrees have been women (see fig. 

7). For example. women consistently earned about 58 percent of 

bachelor's over 60 percent of master's degrees, and about 

45 percent during this time period. 

Page 12 GA0-19·398T 
40 


Insert offset folio 15 here 35693.015

Percentage of degrees by women 

70 

12EEOC data are denved from annual 

1n time and therefore do 

Page 13 

staff Internally However, the data do 

pipeline 

talent for 

of staff 
41 


Insert offset folio 16 here 35693.016

Financial Services 

Firms and Others 

Described Workforce 

Diversity Challenges 

and Practices to 

Address Them 

show that representation of women in professional positions in the 

financial services had been greater than women's 

rer"e'ser1tation in management example, from 2007 through 

women consistently represented about 50 of all employees 

nrr>te,;s,.onrlf positions and about 45 management 

percentage of women in sales in the financial industry had 

generally been lower, at about 40 percent 

organizations that 

advocate for women or racial/ethnic minorities who we spoke to for our 

November 2017 described a variety of challenges to recruiting a 

diverse workforce financial services sector, 13 These challenges 

included negative perceptions of the financial services industry that might 

discourage potential candidates and a lack of awareness of career paths 

in the industry, Research we reviewed and representatives we spoke with 

identified several practices believed or found to be effective for recruiting 

women and racial/ethnic minorities, which included: 

Page 14-

of schools and academic 

stated that they were 

and interested in recruiting students from a variety 

n";mlllnRs such as liberal arts or science and 

representatives from one firm said that they 

~r>lnrlirl~te>s with critical thinking skills, and that 

to new Additionally, 

noted of recruiting 

not just a small of elite 

to Increase awareness of careers ln financial 

rerlreser1tativres of financial firms told us that they 

'"'""''m'n"" with school students to expose 

field, For example, 

that pairs high 

Arl,rlitinn;llrv a 2016 

on women in financial services organizations in 

that a majority of asset managers who were 
42 


Insert offset folio 17 here 35693.017

educate 

it was important for financial services firms to 

about careers in financial services. 14 

Financial services firms and other sources also noted challenges to 

retaining women and racial/ethnic minorities."' For example, some 

representatives of financial firms noted that employee resistance. 

from middle-managers, a challenge to diversity efforts. 

addition, officials from some we interviewed noted that 

unconscious bias can negatively women and minorities. 16 As we 

noted in our November 2017 report, according to reports on diversity. 

representatives from financial services firms and other stakeholders, 

certain practices that may improve the retention of women and 

racial/ethnic minorities, 

csrarmsnlf1•n n1BrrBn•cm1crrr!-l<ewel accountability. Representatives from 

firms told us that management should be held 

accountable for workforce diversity goals. For example, two 

representatives discussed the use of a "diversity scorecard," which is 

a set and measures derived from a firm's overall 

and linked to its diversity strategy. Additionally, one 

mr>rr"'"r•t~t;v, noted that senior managers' compensation to 

goals had been an practice for retaining women and 

Hesearchers have noted that efforts to establish 

14Astrid Jackel and Tom Moymhan, Women in Financial Servtces (Marsh & Mclennan 

Companies, 20 16) 

reported on these types of retention challenges in GA0-06-617 and 

Page 15 GA0-19-398T 
43 


Insert offset folio 18 here 35693.018

Data on Workforce Diversity. Financial services firms and 

orrJarlinJtir>ns we talked to generally agreed that assessing 

rlP>mnm~mhir data to understand a firm's diversity is a useful practice. 

services firms we interviewed agreed on the 

data. Several firms stated that it is 

understand their progress on workforce 

trends indicate problems, such as retention 

issues, then can take steps to address them. Representatives of 

firms and organizations that advocate for diversity differed on the 

benefits of making data public. Representatives of one 

nrr,~r,;7,<tir.n said requiring to be transparent about their 

data creates incentives to the diversity of their 

workforce. However. representatives financial firms expressed 

disclosing firm-level employee characteristics 

to businesses. For example, one 

'"''"'"""''tRtivP noted that disclosing that firms are not diverse 

Chairwoman Beatty, 

Subcommittee, this 

pleased to respond to any 

Page 16 

make improvement of workforce 

for the opportunity to discuss trends in 

in financial services industry. I look 

subcommittee on these important issues_ 

Member Wagner, and Members of the 

prepared statement. I would be 

that you may have at this time. 

GA0-19-398T 
44 


Insert offset folio 19 here 35693.019

GAO Contact and 

Staff 

Acknowledgments 

Page 17 

Contact points for our 

Conaressional Relations may be found on 

statement GAO staff who made key contributions to 

are Lisa Moore (Assistant Director), Christine Ramos 

Kay Kut1lman, Jill Lacey, Tovah Rom, Jena Sinkfield. 

GA0-19-398T 
45 


Insert offset folio 20 here 35693.020

Related GAO 

(it13345) 

ucts 

Financial Services 

Minorities and Women 

Washington, D.C.. 

Could Provide More Options for 

Ormr>ttr,rnifiA., for Minority- and Women-Owned Asset 

Managers. DC.: September 13, 2017. 

Corporate Boards: Strategies to Address RErpn9s<mtatii)n of Women 

Include Federal Disclosure Requirements. Washington, D.C .. 

December 3, 2015. 

Federal Home Loan Banks: Information on Governance Changes, Board 

and Community Lending. GA0-15-435. Washington, D.C.: May 

Mim£rge·mrmt: Trends and Practices in the Financial Services 

after the Recent Financial Crisis_ GA0-13-238. 

·April 16, 2013. 

Federal Reserve Bank Governance: Oppertunities Exist to Broaden 

Director Recruitment Efforts and Increase Transparency GA0-12-18. 

Washington, D.C .. October 19, 2011. 

Financial Services 

Diversity and Diversity 

Washington, D.C .. May 12, 2010. 

Financial Services 

Diversity and 

D.C .. June 1, 2006. 

Page 18 GA0-19-398T 
46 


Insert offset folio 21 here 35693.021

GAO's Mission 

Obtaining Copies of 

GAO Reports and 

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Order by Phone 

Connect with GAO 

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Subscrfbe to our RSS Feeds Updates. Listen to our Podcasts 

Visit GAO on the web at h!tps:llwww.gao.gov 

Website: https·//www.g.ao govifraudnet/fraudnet.htm 

Automated answering system: (800) 424-5454 or (202) 512-7700 

Washington, DC 20548 

Please Print on Recyded Paper. 
47 


Insert offset folio 22 here 35693.022
48 


Insert offset folio 23 here 35693.023

'White Paper 

H<n,· Fin Tech is Addressing the Financial Nee-ds of the {Jnderscn:ed 

Table of Contt-.·nts 

Executive Summat'Y ... , 

ETA 1\'lessagc to Policymakcrs . ., 

Cndcrstanding the Financial Services Nct•d.s of the Vudcrserved ... 

Deploying Tt.·chnology to Benefit the l!nderserved .. 

a) Prceaid Products .. . 

b) Cashless ( 'ha!!cngr:s. 

c) Financial Litera(r & Rcadincs.\' Programs .. 

d) .\fohile Banking S~C!Ticcs and !nnontlions in -1LU Compliance. 

e) r\!ohile J)aymen!s .. 

f) Peer-2-Fccr Payments .. 

g) Erpanded 

h) Online Small Business LcntHng .. 

i) lnferocfh·r:. "Jufomated Tellers .. 

Conclusion. 

....... 4 

. ..... 5 

. .......................... 6 

. ... .,. 6 

. ........ 7 

... 8 

. ..... 13 

. .................... 14 

.. ................. 15 

16 

. ...........•.. I R 

. ....... 2·1 
49 


Insert offset folio 24 here 35693.024

Executive Summary 

One of the goals or our financial system is to prmddc high quality, affordable 11nancia! scr\'iccs 

for the broadest pnssihk of consumers. Over the past decade, Jinancial institutions ("Fls") and 

financial tcl..'hnolog:v companies have transformed the financial hmdscapc through the introduction 

ofncv\ technologies that expand financial offerings for consumers, !ower costs, improve financial 

management, and increase tnmsaction security. These prnduets and scrv ices -·often referred to as 

"FiuT('ch" - have also expanded, and arc· continuing to expand. financial opportunities for 

undcrservcd consumers. 

In this White Paper, the Electronic Transactions Associ3tion ("ETA'') highlights the many ways 

in \vhich its members arc using technology to address the financial needs of undcrservcd 

consumers. ETA published the first volume of the \Vhitc Paper in July 2016; this volume expands 

upon the last volume and includes additionJJ products and services that have come to market for 

consumers. These efforts, Jiscussed in detail below, include-: 

• Prepaid Products - Provide cost~cffcctive, convenient. and innovalivc payment options fix 

millions of consumers. including those thal may not have access to traditional financial 

accounts. 

• Cashless Challenges - How companies arc providing inno\·atiw solutions in a changing 

CC(IllOmy, 

• Financial Literacy & Readiness Programs EmpO\\CT consumers to take control of their 

finances nnd prepare for the fUture. 

• Mobile Banking Services & lnnovntion:-; in ADA Compliance Provide financial 

independence and security for those demographic groups that bck easy access to physical F! 

branches. such as consumer;-; in rural areas. the cld~..-r!y. {)f persons \Vith disabilities. 

• Mobile Payments "-Provide an exciting alternative to cash nnd checks that allo\v rnnsumers to 

pa) for gnods and in efficient cost-cfTcctivc. <Uld secure manner. 

• Pccr··2-l\:er Payments Enable consumers to send money io each other \'ia mobile 

applicatiQns. 

• Expanded Internet Access - Expands aff()fJabk access 10 the internet in underscrved 

(~mHmmities domestically and abroad by imrroving infrastructure and reducing costs so that 

more p.:oplc can connect t\) the \Vcb-hascd world. 

• Online Small Busincss Lending -·l~xpands access to credit for small husincsses seeking capital 

to grow their businesses. 

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50 


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• lntcractivc, ;\utnmatcd Tellers- Transform traditional FI hrancbt~S by making them 

economically sustainable in prcYious!y undcrscrvcd communities. 

f'hc unprecedented recent advancements in technology highlighted in this White Paper continue 

to show great benefits for underscrvcd omsumtTS. as \\Cll as the broader economy. ETA and its 

members support an inclusive financial system that provide;; high quality, secure, and affordable 

flnancial services for the broadest possible set of cnnsumcrs. member companies touch. 

enrich. and impn)\'c the li\'CS of underservcd consumers vvhile mah_ing the global no\v ,,f commerce possible. A goal of ETA mem[\cr cnmpanics is to continually enhance the electwnic 

payments nnd finnncial ecosystem SP that it is accessible for all consumers. \vhi!c ensuring their 

transactions can be completed c!Ticien!!y. and ubiquitously. A driver to achieving 

sul'h a system is the development ofnC\\ tcclmnlogics that a!IO\v tht.~ undcrscrvcd to a.ccess fl and 

FinTcch company financial products and ~erviccs. 

ETA Message lo Policymakers 

ETA mcmhcr companies arc creating innovative offCrings in financial services. revolutionizing 

tbc way commen:c conducted with safe, convenient, and n?'>\<lrJing payment solutions and 

lending alternatives that arc available h) a broader set of consumers. As the leading trade 

association for the payments industry, ETA and its members encourage policymakcrs to support 

these cfTorts through poli~.:ies that encourage innovation and the usc of technology to improve 

financial inclusion for a!! consumers. 

ET ;\ urges polieymakcrs to remain thoughtfUl and forward-thinking in how tn best suppot1 the 

industry's on-going efforts to provide npporiunitics fOr <ill consumers and small businesses to 

access and benefit from innonnivc financial pl\)ducrs and services. Effi)fts by pnlicymakcrs to 

regulate financial products and scniccs should he d(1ne collahoratively and with careful 

consideration. Vv'c encourage the government to be sensitive 1o the risk that applying a uniform 

regulatory framework to <~H prnducls and \Vithout ::my appreciation of differences in 

pn•ducts and services and consumer needs. will likely stifle creativity and innovation in the market. 

Such an outcome \\Otdd harm consumers. particu!ar!~y at a time when new technologies, products. 

and services arc pmviding the undcr;.,ervcd \:v·ith unprecedented access to FI and FinTccb company 

llnancial products and sen· ices. 
51 


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llnderstanding the Financial Services Needs of the IJndcrscrved 

One of the goals of our financial system is to provide high quality. a!Tordablc financial services 

for the broadest possible set of consumers. An inclusive financial system is one that provides 

consumers and businesses vvith access to a variety offlnam:ial proJucts and services./\ key driver 

of financial inclusion the Jevdopment of nc\v technologies thai allow the undcrscrvcd to access 

F! and FinTcch company financial products and services. Technology not on!y creates ne\v 

products and services, but also broadens the avaiiabi!it;.- of existing ones by making them more 

accessibk and IO\\'cring costs. 

As addn:sscd in this White Paper. FTA 's 1 members arc at th': f(lrcfront of technology to 

bn~adcn financial inclusion for underscrvl"d consumers. Fin Tech is building an inclusive financial 

systt~m that addresses the needs nf "tmdcrserved" consum~rs hy providing increased access to 

ATMs for persons \vhh disabilities. helping the clderty or rural population deposit checks 

remotely, assisting parents in sending funds instantly to their children in cPllcgc, or helping srnall 

businesses loans. Products and !ike prepaid cards. mobile banking. pcer-2-pccr 

payments. electronic payment systems. expanded to the intcrncL and alternative lending 

snurccs for small businesses 

following benefits: 

the needs of undcrscrvcd consumers by providing the 

• Access Allowing cnnsumcrs to funds and flnancia! services wherever and 

whenever needed. 

Affi:miabilit; Ensuring consumers have th8 ahiliry to select from various affordable 

products and services. Tcchn<.1!ogy is increasing compctitiPn nnd driving dovm the cost of 

gooJs and 

constlmcrs. 

·which makes products more aft(m.iab!c. and thus a.::cessihlc to more 

• (\~nvcnicncc Providinf! consumers ·with multiple payment options that time and 

money< 

• Security·"· Protecting consumer funds from physical and electronic fraud or thcfl. 

• ( 'on!nJl and Financial Management -~ llclping consumers gain hctter control over their 

finam:cs through financiallitcmcy and various financial managcm~.:nt tOl)ls. 
52 


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The followlng section ~)utlines in gr~?utcr detail the many ways in w-hich ETA member companies 

arc using technolog) to address the financial needs of undcrservcd consumers and small 

businesses. 

Deploying Technology to Benefit !he llnderserved 

i\'lajor advancements in technology in 1he last decade. particularly the explosion of high-speed, 

\\irc!ess internet. have a!hYvvcd Fis and technology companies to expand new pn)ducts and services 

to more consurners than ever before and they able to do so efficiently, securely. and at !o\V 

cost This section discusses a nun1bcr of pn)ducts and that member companies arc 

deploying to benefit the underservt~d. 

Prepaid Prodm:Jli 

Many ETA members offCr prepaid products. which provide cost-c!Tcctiv\':. convenient. and 

innovative payment options for miHions of consumers, particularly for thc approximately 68 

million consumers ,.,·ith limited or no to other tinam:ial scrvic.:s. 

I'hcre an~ two main categories or prepaid products: ! ) closed-loop. and 2) open-loop. 

• Closed-loop products are limited to purchases from a single company or at a designated 

location, such as gift card to a spcciric retail store that can he pun.:hascd in-store or from 

kiosk at another retail !<)cation. 

• Open-loop products arc those that can be used a1 vitiu::dly any retail location or business. 

Examples include a general rdoadablc gift card or a general-purpose rc!oaJab!e card that 

is network branded and can be used to make purchases and obtain ca;;.h from ATivl 

machines. 

According to the Fcdcra! Deposit Insurance Corporation r·FDIC't percent of households. 

either do not hav~ an at~oHmt throu[<.h nn Fl or usc altcrnalivc financial sources in addition to their 

bank accmmts.2 In particular_ open-loop prepaid cards arc popular vvith many types of consumers 

seeking to manage or protect their financt.~s. including college ~tudents. !ow-income individuals 

\\ ho may not have access to a traditional checking account and con-;umers traveling 

internationally. In !~1ct, the ICdcra! government uti!i?cs open-!1)0p prL:paid cards as an alternative 

to paper clu.·cb fm benefit programs. J\ recent partnership between MasterCard. the U.S. Treasury 

and Cornerica Bank, provides several mil! inn Americans \Vith a safe and reliable \\ay to receive 

r~.~Jeral bcnd1t payments ckctrnnically· on a Mastercard prepaid card:' Many of the consumers 

who usc this product do nm use mainstream financial services. One of the goals of this product is 

' Federal Depo\itln\urance ('orp(\r:Jtion. !~01 :n, Fl)](' .\'otional.\'utNy '!I ( ·'nlhmkcd and I 'nderb(mkc•d 

!!uuscho!ds 

1-'inancw! Indus! On 111/h 

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Insert offset folio 28 here 35693.028

to increase the usc of th~ card as a payment tooL rather than simply a \vay to access cash. so that 

consumers have a more secure way to manage money. 

Prepaid cards l1avc shown demonstrable benefits fix the underscrvcd, particularly those vvho use 

open-loop products. Providing America's undcrscrvcd consurncrs with accc:-;s to prepaid cards 

makes their money safer and also helps move tht.'m intn the increasingly important world of online 

transactions. For example, 'Nctspcnd prepaid debit cards offh direct deposit and online bill-pay,4 

features that used to be reserved for customers of Fis, Nt)\V, debit cardholders open savings 

accounts and budget their money in ways that open the door to financinl security and stability. 

Netspcnd cardholders abo have to optional overdraft protection \Vi1h built-in safeguards 

that prevent abuse and help consumers meet their emergency needs. This optionaL opt-in feature. 

provides a great service to Netspcnd customers by helping consumers bridge their financial gaps 

and achieve stabilit)-' when they cxp..::ricncc an uncxpccJcd expense. 

·rhrougb its reloadab!c. prepaid card. JP i'v'lorgan Chase has helped rnor~ than .n million people gain 

access to mainstream banking. Tht: Chase Liquid Card carries no overdraft has robust 

tmnsaction capabilities. and n!lo\lo'S consumers to pay their hills online. As of December 2016, 

nearly 80 percent \)f Chase Liquid (U~tl,mcrs were to Chase. :1nd JP Morgan Chase estimates 

that lulf of those had never used traditional han king services. did not have a current bank account 

or \\ere othcrv.-isc undcrhnnkcd prior to opening their Chase Liquid Can!.5 

There arc billions of pcopk: globally who are faced with inconvenient. tim1.>consuming and 

prohibitivdy expensive S)':-.:icms to complcic simple actiuns like cashing a paycheck or sending 

money to a loved one. [n the United States alone, 85 percent or today's transactions an~ still 

happening in cash and checks.6 In this era of mobile technology and advanced soft\-\an; p!atfom1s. 

the Fin !'cch sector can serve this undcrscrvcd group v., ho arc using financial services to help people 

around tht~ wPr!d man;1g:e. move and spend their money thwugh consumer choice. 

According to the FDIC only 7.2 percent ofunhankcd households have a credit card. 

with 60 percent of undcrhankcJ households and 76.3 percent of fully banked 

FinTcch sector is vvell positioned to provide non-traditional financial services to those \Vhosc 

being underscrvcd and undcrbankcd. ETA member companies, such as Amazon and PayPuL 

provide a safe. secure, and convt::ni~:nt \\·HY f~w consumers to add rash directly to their accounts. 

1 About Nctspend : :\ictspenJ l'repaid D~bit Cards. (2017) ffom 

Rdr[c\Td from WIA<\\.jprnorgan.::hnsc.eom/finmJcialhca!th. 

Retricvt·d from 

Page i 
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In 20!7. 1\mazon launched Amazon Cash. a service that allovvs consumers to add cash to their 

Am::l.?on.com balance by showing a harcodc at a participating retailer. then having the cash applied 

to their online Amazon account Amazon Cash is available at brick-and-mortar retailers across the 

U.S .. including CVS Pharmacy·. Specd\Yay. Sheetz. Kum & Go. D&.W Fresh Market Family Fare 

Supermarkets. and VG's Grocery. 

Similarly, PayPal has fcuturcd new ways to ;:.H.l.d money to individual PayPal accounts. PayPa! has 

introduced the Pay Pal Cash Mastercard and Pay Pal Cash. The PayPa! Cash Mastercard is free to 

sign-up for. with no monthly fees. and no minimum balance requirement. The carJ will Jet users 

access tht:: money in their PayPa! account to shop online or in stores anyv., hac Mastercard is 

accepted or users c<-Hl withdruvv cash from ATMs worldwide. including OYer 25,000 free 

~v1oncyPnssm) A'l'Ms natiun-vvide. 

PayPa! Cash is feature that allows consumers to !oad money into their PayPat account at more 

than 20,000 retail and ..::onvenient shwe locaticms, including 7-Eievcn. CVS, and Rite Aid to do 

activities like shop or pay their hills on !inc. PayPal also a !lows individuals to dircctl:y deposit their 

paycheck into their Pay Pal uccount for free. so consumers can enjoy the benefits of spending their 

PayPal balance ::mywherc. These funds arc protected \Vith FDJC lnsuranec. and there is no 

minimun1 balmKe required. 

These services provided by PayPa! and Amazon path'>vay to the undcrserved ant! unbankcd 

community and nllovvs themtn participate in the digital economy. 

Eil!!.mi:JgLJ.il'{NQ~ . .-,.k_ Rc(ulillf~~Lf):JJJ.!I__!!_!]J_5_ 

Financial literacy empowers consumers to tak~~ control of their tlnanccs and prepare for the future. 

l'hcrc arc number nC proJuct and (•ffcrings made by L !'!\ comp;:wies to help expand 

financial literacy to constm1crs. 

Combining innovative technology. unalytica! duta. and responsive design, these companies 

organize historical tlnancia! data to helping financial institution and FinTcch developers provide 

financial guidance that constmlers ean act on across a spectrum of devices. user interfaces and 

platforms. 

First Dala. a global leader in commerce-enabling technology. launched a multkhannc! content 

marketing campaign lo help Money Nct\\ork carJhokkrs "Up Their Financial Literacy Game·· in 

2018. First Data's initiati\·c {i:xuscd on financial litcwcy. which is of major concern since 40 

percent of Americans \Vould m)t he able to come up with $400 in an emergency and on average. 

people answer fewer than three out of five hasic !!nancial literacy questions correctly, \\ith lower 
55 


Insert offset folio 30 here 35693.030

scores among those nrc less comfortable managing their retirement savings. 8 First Data is 

working to ensure retailers arc considering different payroll options as a \•vay to cater to Millennia Is 

and Gcn Z employees as 1hcy enter the workforce and are fon:ed to face financial literacy deficits. 

First Data created an online quiz to help Mnncy Nct\\·ork cardholders idcntif)' what their financial 

profiles arc, so they could up custt1mizcd educational content tn thcrn. Five personas were 

created. including "Check to Check Cycler" (just getting by). Investor" (investing \Vith an 

eye on retirement). "Lives for the l\1omcnC {propensity to impulse buy) and '"Autopilot Saver" 

(saving automatically), Ouce employees completed the surv~y, they were driven to a mkrositc 

\vith written and video content tailored to their persona. Employees could also sign up for cn..::ws!cttcrs, io keep the education process ongoing. Money Network partnered \Vith Jean Chatsky, 

an mvard-\\ inning financial journalist and the financial editor oJ'NBCs Today Shmv. to provide 

finanein1 tips that take the complicated world of money and explain it in ways people could easily 

understand. Newsletters included tips flJr \Vhai users can do in the !v1oney Network app. such as 

create ··piggyhanks" where the employee· s money could be mm·cd into to saYe for needs later in 

the year, like hack-to-schno! time or the holidays. 

Money Network's Jarg..::st client reported strong. results fl·om the campaign. Almos1 40.000 ncv. 

piggybanks were created in the initial phase, signa!ing that employees were taking advantage of 

the app. 1\llorc than 160.000 hits logged into the campaign's landing page as \vdl. 

By focusing on democratizing financial services through technology. Plaid Ci)l1SU1llCrS 

cnntrol over their flnanciu! data. sP they can usc it to po\vcr the arps and services they prefer 

regardless of where or how they bank. Plaid's technology makes for a more indusivc /Jnancial 

services ecosystem, creating a for all p~oplc to us\' their financial data to access the hcs1 

financial tools and in order to better manag.c their financial lives. Many of their customers 

have de\ch)pcJ products on the Plaid data platl\mn to help the unhankcd and undcrscrvcd, 

including Dave, Earnin, Ev~n, DigiL Money Lion. Lend lip, Upstart, Stilt and Tally. These Plnidenahled services have all(n,vcJ m!!!ions of consume~:> use their \)Wn data to budget better. from 

using prediction tools to manage their account balances and avnid overdraft fees to analyzing their 

cashf1ow lo cnlcu!atc hmv much they can afford to save, then automatically setting that money 

aside every day. Plaid also allows consumers \l.·ho rn credit or han: a limited credit history 

to share their data and dcmonstrnte their credih\orth!ness \Vith lenders. Borrowers who a!rcady 

hav~ loans can share their data with lenders to ofkr lower rates \vith bd!cr <.bta. The Plaid data 

platform helps cnnsmners easily and safely leverage their data to access these innovative scrviccs. 9 
56 


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ln 2013, Discover \\aS the first major .:red it card isstwr to provide FICOC~ Credit Scores for free 

to cardht)!dcrs on-line ~md on monthly statements. Other card issuers have fo!!ov .. cd suit hy otTering 

some Conn of a credit score to their cardmt:mbers. In May of2016, Discover announced it would 

uHCr FICO(!-(: Scores for fi·ee through its Credit Scorecard program for all consumers. even those 

that arc not Discover cardholders. to help educate them about .::rcdiL the varinus ractors that go 

into creating their credit score. and hmv their credit score is uscd. 10 The ability t0 access personal 

credit scores for free a!!ow·s more consumers to be av·/arc of their financial standing. Particularly 

for undcrscrvcd consumers like cnllcgc~agcd students. or those\\ ith littk to no credit histnry, this 

valuah!c tool provides a foundntion for building financial health. 

In addition to the Credit Scorecard program. Oiscovcr launched its Discover it(!{; Secured Credit 

Card for consumers looking 10 build or rebuild rhcir crcdiL The card requires applicants to provide 

security deposit. Discm,cr holds as co!!ateral for a credit line that is equal to the deposit 

amount (mininwm of $200: maximum of $2500 hascd on creditworthiness)< After one year as a 

cmdmcmbcr, Discover vvill hcgln to revinv Disco\'i:r it\!{\ Secured Credit Card accounts each 

month to sec if cardmcmbers can transition to an account that docs not require security deposit. 

A unique fCature of the Discover iL!_f• Secured Credit Card, that it reports to all three major credit 

bureaus, enabling cardmcmbcrs to build a personal credit history with usc of the card. 

JP fviorgan Chase provides a number of solutions for customc:rs to manage their daily finances and 

long-term f!_oa!s. Developing and bringing aft~)rdablc. innovative financial products and scTvice.s 

d~signcd to meet cnnsurncrs' needs and suprh)rt their finanda! health: One of those proDucts 

of1Crcd by JP MPrgan the Chase S!atc'Jt: credit card. Customers can enroll in the Sbtl: Credit 

Dashboard. which pnn-idcs a monthl:y credit score. information on J~Ktors impacting the score. a 

summary of their Fxpcrian credit report and tips f(tr managing credit health. Following the success 

of Credit Dashhonrd ---more than mil! ion customers have cmollcd lo datt·. 11 

One nf the most significant challenges for the undcrbunh·d nnd undcrscrvcd population is that 

many ha\C income sources and/flr are being paid infrequently, \:..'hich c-an make budgeting 

a challenge. In 20! 7, Wells fargo :mnonnced the Ureenhousc~M experience, a standalone mobile 

banking app thctt helps consumers manage day-to-day spending, pay bills on time, spend 

conl!dcntly. and -;tart to build savings. (irccnhouse cu:>tomers won't bank overdraft fCcs \vhcn 

using the new app. Their goa! for (ircenhnusc customers is to never authorize a purchase or 

: !0 
57 


Insert offset folio 32 here 35693.032

payment if the account doesn't have enough funds, The <Jrccnhousc app nmv available in a 7~ 

state customer pilot for iPhonc 

Another public service otTen~d by \Vclls Fargo is I lands on Banking. Hands on Banking. is a free. 

engaging, non-commercial program that rrovidcs pcopk with the knm:vledge and skills to hl'lp 

them take control ol'thcir financial future. ln 2017. tht.: program was enhanced to include a greater 

focus on financial capubili1y. For cxampk the \Vebsitc features ne-w CN\tent addressing financial 

needs \arious stages of life. including interactive tnols that cnahlc users to practice their skills 

and gain confidence in their knO\vlcdgc (•f topic. The llands on Banking program also aligns 

\vith Common Core State Standards 1~)r English bnguage arts and math that many K-12 :.;ch0ol 

districts follow. \Vell Fargo partner's \\ it-h ;.,clnnl cli~tricts. gcm:rnm~nt and nonprofits 

lo drive a\"\arcncss of the !lands on Banking program, with a focm:. 0n reaching undcrscrvcd 

communities. Also, in 2017, they expanded I heir cnllahoration with the National Council for Negro 

\\'l\l11t:n. National Disability Institute. lOO B!ack !vkn of .-\mcrica, Thurgood Marsha!! Col!cgc 

Fund. and other organimtlons to pro\'idc workshnps and \\ cbinars to individuals and 

entrepreneurs. As a result participants increased their kno\\ ledge of managing expenses hy 21.7 

percent 48.7 percent indicated they \\ou!d begin to save f(x emergencies: and 40.3 percent 

reported increased confidence in their ability to gain control of their financial situation. i' 

Harriers to financial ser\ ices arc complex and expanding access to the unhanked and undcrscrvcd 

requires a multi~!aycrcd approach. By collaborating ,.vith companies, gzn-crnments and nongovernmental orgrmi;:at!on:-.. Visa is helping clients provide rc!c\ant ;:md co5t-c!Tcctivc solutions 

for the unhanlcd and undcrscrvcd, partner \\'ith organi/.ations that have relationships \\ ith the 

undcrst'rvcd. and advocate !\)!'an enabling that enc(•urages investment und innovation. 

Visa partnered with Filcnc Rt'c,can.:h Institute. ln initiate the Rc<Khing ivlinority I fouscholds 

Incubator. a pro12ram thn1 \\orkcd v, ith .'l() credit unions across the L.S. and Canada to identify and 

lest financial prodtH:t;; nncl services tksigncd h1 addrc.'>S the needs of minority communities ..,,[w 

arc nJkn ll11IH.'ccssari!y !ahckd as too risky Wilh Visa ·s suppo!i, Fiknc Research Institute 

bunched this ··think <md dtJ .. pwjcct ln dt'VCh'P scahbk snlutions that meet the need:, ofminorit) 

popubtinns. 

As a result pf thfs partnership. from June 2016 to December 2017. the Incubator \Vorkcd with 

financial in-;titutions across North America to issue loans to mon: than :'i8.000 households. tolaling 

c!o~e to $1-\5 mill inn. To htcilitatc 1hc scaling of Pne nr th~: most successful programs rested, the 

'!d 
58 


Insert offset folio 33 here 35693.033

JTLV Lending Jmplementalion Guide v.,.as rckascd in October 2018 and regional \\Orkshops \Vil! 

he conducted in 20!9 to train financial institutions on the !TIN mdhodology. 

PrO\ iding underhankcd minorities with formal financial pmducts uuJ services designed for their 

unique needs (;Ontrihutes to greater flnancird inclusion and financial health. In turn. banks and 

credit uni1)HS inv\?sting in these program::> can tap into markets. Ullimatcly. this work aims to 

refine and replicate these nc\\ modds ·with hundrt~ds of credit unions and community banks in the 

U.S. and Canad<L 

AddilionaHy. Visa pmincrcd v, ith the Center for Financial Services Innovation (CFSI). a leading 

advocate fOr financial health to Cl)!1\Juct consw11er and industry research t\1 understand 

bnw secured cards can bcih:r sen c ··credit invisibks:· especial!:;:,; anwng inunigranL minority. rurul 

and military populations. '!.hrough e:\tcnsivc cpnsunwr surveys. focus groups and market research. 

CFSl and Visa tested innovative approaches to meeting consumer saving. spending and borrO\\ing 

needs through secured cards. Oukomcs of the project highlight hovv secured credit cards haYc the 

potential to b(' an effective \\ay to help consumers build their credit score, \Vhik a1 the snme time 

helping providers a urad nr retain cus\i.1111Crs. 

As a resu!t of extensive research. Visa and CFSl have iJcntif'icd key strategies to support the credit 

invisihles \\hich include tailoring outreach ~md offerings specific to the needs oftargeted segments: 

developing a clear strategy {\)r cardholders to graduate in unsecured credit; and effectivcJ:y 

communicating that plan and leveraging the collateral deposit to jmnpslart the sa'ring:: hahit. This 

research has been shared throughout the industry to increase access to credit-building products 

such as secured cr..::Jit cards and Visa continues tn \York with select is5uers on improving their 

program offering<>. 

Another ETA member cornpany, NCR. has launched a robust Jinancial management too! fix its 

customers. \Vith the long-hc!d hdic!' that that financial literacy is a critien! stepping stone to 

expanding access to financial Expanded hrnadhand availability and high rates of 

adoption ofmohile phones at all income kvds h<n'c created the oppmtunity to create user-friendly, 

casy-hHmdcrstand financial managcm<.:nt tools and put ihcm directly in the hands of customers. 

J\Cf.Cs FinanceWorks puts powerful bunily financial management wo!s right at a pcrson"s 

fingertip;,. It a!lmvs a fbmi!y to track lis spending and hudgct, view a graphical display that breaks 

down spending by category. and gain valuable insights into spending behaviors. ll also al!O\vs 

individuals to establish a huJget. create savings goals Jnd set up automa1ic deposits t0 sm,ings 

accounts. For the financially undcrscrvcd. fees associated with financial accounts have long been 

serious impediment to financial health. Highly intuitive solutions like FinanccWorks a!lo\Y 

t:unilit·s to stay on top of their finances and avoid unnecessary fc~:s. Research has shown that 

individuals who usc hnanccWorKs ucccss their financial infomwl.ion 5! percent more frequcnlly 

than those v,:ho don't. helping 1hem gain nwre control over their budget and finances. 

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ETA member compnnies vicv .. : financial literacy as a priority across a!! participants in the 

payment's ecosystem. In toda:y's vvorld, with threats ofcyhen.:rim~;". companies and customers must 

bl" vigilant in understanding and properly protecting the personal financial infonnation that they 

share. An impmiant tool in !~Kilitating trus1 in electronic transactions i~ ensuring that transactions 

can be made securely. lJL is a cQmpany that specializes in identification. authentication. and 

authorization ()f digital payment:-; and transactions. Establishing trusted identities is crucial in an 

intcrconnedcJ and cashless world from us!ng ynur identity to traveL pay or seek medical care to 

building the digital trust cs:-.entiai fbr auth.:nticating and aulhori;,ing th\::sc electronic exchanges. 

Ul.'s identity managcmt:nt solutions support a mtwc secure and streamlined identification process 

vvhilc safeguarding convenience and user~fricndlincss. Building on their security and identity 

management expertise. they support financial technology companies by t:nsuring that with every 

t...:dmological disruption they arc able to meet the security demands of today and tomorrow. llL is 

driven by its global safety mission.\\ hich promotes safe living and working conditions for people 

everywhere through the npp!ication of sciem'e to solve saCcty and security challenges. 

l'd_!]_bife BqnkitJZ./:is:_~_Tices tl!JJ.UJJ!JQE!lJ.U!lS in Af1£LC!J.mf!l.i~.?!Jff.. 

The inkrncl has allowed for the creation, deployment. and adnption of mobile banking services 

among many diffCrcnt demographic groups. These services have given the underscrvcd more 

finJncial independence and security. 

The most recent study conducted by the Pc\v Research Center round that 95 percent of the LLS, 

adult population has a mobile phone. and that 77 percent of mobile phones are smarlphoncs. 

steady increase from previous years. 1

'

1 Twcnty-tvvo percent of consumers in the study were 

undcrhankcd. meaning they had an account through an 1-'I and haJ used om~ or more alternative 

financial services (typically from n FinTcch company) within the past Seventy percent of the 

undcrbanked \Vcrc smarlphone 0\Hl.crs, and 17 percent O\vncd a feature phone. Among the 

undcrbankcd \Vith mobile phnnes. JX'rccnt used mobik b::mking. b 

One cxmnp!c of a demor:raphic thai has benefited immensely from the emergence of rnohilc 

banking is persons with Jisahilitics. For 1.'xampk. touch scrccn-nnly accessibility features on 

phones and other devices a!!mv a visually-impaired individual to single tap on any portion of the 

screen to hear an audible description uf the button 

activate that button. 

are touching, and then tn double tap to 

The latest generation nfacccssibility solutions arc designed t() work across multiple pla!l'onns so 

that persons with disabilities have access to a single accessibility system when accessing financial 
60 


Insert offset folio 35 here 35693.035

services through an !\Ttvt tahlei, or ~martpbone. The ability to learn nne acccssihi!ity system and 

usc it across multiple devices is an important advancement that helps people \Vith sight. hearing. 

or other disabilities f!·om having to learn multiple formats. As a result of these features. people 

with disabilities are nO\\ ab!c to usc lhc same simple and dTcclivc system whether they arc 

performing a remote digital check deposit with their phone. transCcrring money on a tablet, or 

withdrawing cash an ATM. Thi;; broader range of devices v,:ith highly cftCctive accessibility 

features is making a range of financial services more available to people with disabilities. 

Improvements and innovations fm:uscJ tmvarJ under;;crv~J populations have occurred \\·ith in~ 

store transactions as well. Fin Tech organizations arc at the forefront of innovation and deployment 

of nc\v technologies to help ensure compliance \Vith the Americans vvith Disahiliiy Act (ADA). 

!'here has hcen special equipm~.!nt developed for payment terminals so that merchants can better 

customers \vith impairments. Roughly fifty~sevcn million U.S. citizens v,:ith varied forms or disabilities engage in commcrc~, and it is important f~•r merchants to have the too!s they need to 

rncet the needs of their customers-- including the case nfpaying vvith secure and expeditious forms 

of payment. 

I'hesc technologies that have been developed and deployed include: ADA TITLE Hi compliant 

POS tcm1inal dismount and n:kasc mounting stands, tactile PED. auditory. and visual aids at the 

payment point of sale. 

,\fobijgJ!..m~!l.l!:q{s 

Mobile payments arc an exciting and alternative to cash and checks that allo\v consumers 

tn pay for goods and scr\ ices in a convenient, cosh:ITcctive manner. FTA member companies 

including Apple. Google. Samsung. PayPal. Stripe. and Chase are !cadt;rs in mohi!c payments, 

offering the secure tool to consumers. as well as encouraging merchants to ac..:cpt mobile payments 

at checb.luL 

J'he adoption rate of mohilc payments hy con.,umers and merchants is on the rise. Seventeen 

percent of U.S. t'nnsumer.;;, now regularly use their smartphnnc to pay, up from 6 pcrcenl in 2014. ~> 

,\ recent survey of over ROO merchants rcvcakd \hat 20 l ~t merchants who earn half of their 

total revenue through mobik' payments has incrcas~:d from percent to 10 percent of all global 

merchants. Another 26 percent of a !I merchants believe that mobile payments will represent more 

than bcdf ,~r thcir revenue within the next two years. It is projected that U.S. in~storc mobile 

payments ·will reach billion in 20! 7 and$){)} billion by 2020. 17 

2017 

Page: 14 
61 


Insert offset folio 36 here 35693.036

Most recently. on Cyher Monday in 2018, n1orc than third of all online sales were made on 

mobile devices. Cyhcr Monday drove $7.9 billion in online sn!cs. including 36 percent~ or $2.83 

billion- made via mobile devices. The numbers represent 

commerce on C; bcr M(mday. with tota! sales 

Cross River. :-ttrusted financial services company that vms foundcJ in :2008. combines the expertise 

of a bank with the innovation ora FinT~.:ch cmnpany. Through its API connccth,ity infrastructure. 

Cross River provides a broad range of best-in-class payment products and services a unique 

banking-as~a-p!atf()fm solution, enabling its partn~rs to benefit from same-day ACH 

transfers. expedited \'-"ire transfers. efficient debit card disbursements and money transfers. backoflicc support and compliance framework solutions. 

By partncring with most other networks including and Ma~tercnnl, Cross River's platform 

empowers the consumer with immediate access to their money and optionality in how thc:y recciYc 

it, helping them manage their day-to-day cash needs more cfficit::ntly and dTectin:ly. The delivery 

time is the client's choice, \Vhether it he same day, next day or a1 a later time. 

Most recently. Cross River annount:cd its partnership with Stripe to help those in the marketpla..::c 

economy- such as workers in ridcsharing. food delivery and other freelance occupations- by 

providing them with quicker access to their earnings through push-to~card paymems, 19 

ETA encouraged by this favnrahlc trend and sees value for consumers in the access. 

ubiquity, and security ofmz,bi!c payments. When using mobile wallets for in-store payments. hoth 

customers and merchants an: protected by the latest and greatest in payments security. Through 

technologies like tokcni;ation and encryption, customer's payment credentials arc dcmonctiz<~d 

anJ transmitted St..'Curdy a.;; to n.:ducc or eliminate the risk of fraud. 

These payment solutions arc especially helpful for smaller businesses who have a high traffic 

volume of credit and dchi1 card transactions ~md \vant to move customers quickly. fv1obilc 

payments arc fnst and easy. and most importantly secun.;, so husinesses can rcs1 assured their 

customer's payment \vi!! be completed By cnah!ing mobile payments via smartphone or 

other connected device. merchants and their customers can access technology tC3turcs hcyond the 

capabilities of plastic cards. including loyalty progxams. location-based offers. and other 

capabilities that enhance the point-of-sale cxpcricm:c. 

Pecr-2-Pccr payments (P2P) technology, v,'hich enables users to securely send money to each other 

in minutL~s via mobile applications. is transft>rming. the millcnnia!s engage in financial 

markctplacc-cconomy-with-push-to-card-p::ry mcnts- >007752DO .htJn! 

15 
62 


Insert offset folio 37 here 35693.037

transactions. ln most <:ascs. the transfCr of paymcn1 is free for the user. and comes directly ou! of 

his or her hank account or credit card (which they have !inked to the mobile application). P2P. first 

popularized by PayPaL has since been ofTercd hy Gt•ogle. Vcnmn. and others. 

fhe primary uses J{x P2P among millennials is to easily split the cos1 of goods or services rather 

than relying on cash or check for reimbursement. Payl)ars P2P app. Vcnmo. has carved out a niche 

among younger n)nsumcrs in thL~ ll.S. !n 2017. lotal transaction volume reached billion. 

Vcnmo continues to sec explosive gru\~xth. reaching a record $! 0.4 hi !lion in transaction<> in the 

fomih quarter of 2017 alonc_..:-n 

Vcnmo can also integrate Facebook account with their bank accounts. allowing them to 

make payrncnts to other friend~ in their Facchnok social net\vork. 

Jn June of 2018. Pa.yPal mmounccd ::tdditiona! service through Vcnmo that would speed up 

money transfers bel ween V enmo and users· bank accounts f~)r those with supported Mastercard 

and Visa de hit cards. This nc\-v "'instant transfers" sen icc is available at a nne of $0.25 per 

transaction. and \vi !I deliver funds in a matt.;r of minutes, instead of the day or so it typically takes 

vvbcn Hsing Pay Pal or Venmo.21 

Square introduced its own P2P product- Cash App, The Cash J\pp allows users to get started 

\Vithout a hank account and a Cash Card. which is a free Visa card that provides them with 

rcal~timc access to the funds they store in their Cash J\pp. Cash Card also alkms people wht) aren't 

able to sign up t~1r a credit card to get "credit card rewards" style benefits for free. As December 

20 !7, S4uarc recorded 7 million active individuals using the Cash App. 7:: 

In the last decade. financial service~ have expanded into our intemct-bascd economy. 

Access to the internet, on en through multiple devices. has hccorne essential fix American families 

in many J8cds of their lives, including commerc-e. recreation. \Vork. and education. In many 

instances. lovv-incomc and rural populations access the internet primarily or sole!:' through 

smart phones. And. as prl'Vious!y Jisn1sscd. tl~t·rc has hecn a in mobile banking among these 

demographics. ETA member companies arc working to expand affordable access to the internet 

undcrservcd communities both domestically and ahnJad by imprnving inCrastructurc and reducing 

costs so that more people can wnncd to the wch-hascJ yvodd . 

._:ustonlt:rs-scvt.'n-mi!!ion-decemht~r-venlno 

16 
63 


Insert offset folio 38 here 35693.038

T~\1obilc, for cxampk ;;,crves a high number nf "smarlphonc dcpcnJcm" customers (meaning 

those who own a smartphonc hut bck home hwadband}:::- and has recognized that mobile internet 

access and unlimited data is crucial to making sure that consumers arc not !eft behind in this ne\v 

economy. That is why T-TY"Iobik introduced its. afft)rdahlc unlimilcd data plan. T-i'v1ohile ONE. 

\\hich includes unlimited talk. text. and datiL along with other such as the ·'kickback" 

benefit that provides up to a $10 bill credit for customers that usc 2GB nr data or less in a hilling 

T-Mobilc bas also partnered with The Department ()f H0uslng and Urban Development r·HUD") 

.as a natlona! ~takeholdtr of the Cnnncctf!ome \iatinn Program. Led hy llUfYs natic•na! non-profit 

par1ncr. E\cryont~On, Connectllomc Nation is a public-private collaboration to natTO\\ the digital 

divide for families \\ ith school-age children who live in l IUD-assistcd housing. Connect I lome 

initially launched in 27 cities and one trihal nation anJ has cxpandt~d inh) more than ! 00 

communities across the nation. connecting 150.000 people v.;ith the support they need to ac~::css 

the lnkrnet at home. Through the Conne-ctHomc Nation program. T-Mobile otTers devices to lo\Vincome communilie" thal increase broadband access and support kchnical training and digital 

literacy programs. 

Like\\ isc. T-J\:1obilc has demonstrated its .::omrnitment to providing a bnnH.i rangt.: of accessible 

product nlTering:-: and complementary service plans that support customers \\-ith specialized 

communications needs. including with hearing loss. Yision impairments or limited 

mobility. These offerings range fl·om data-only plans. 411 credit assistance. and alternate billing 

formats, to handsets with acccssibilit~ features. T-l\:1Philc also cx1cnds several or the benefits 

associated\\ ith its standard p!ans (unlimited data plans. no contracts. Smartphone Equality. visual 

voicemni! and others) tn customers uti!i;ing these specia!i.rcd plans and ln addi1iPn. 

\1ohi1c's trained representatives provitk accessible customt~r 

network and billing inquiries. 

and suppott for \\ irckss 

In a global economy. access to the internet is a critical driver of economic gnnvth. \:Vith more 

transactions helps pmvcr the economy. Likewise, the hencfits: of expanded allOrdablc internet 

access arc prevalent in underscrvcd conununitks wilhin the United States. Moving consumers into 

a more 

provides. 

financial system arc one of the many benefits that expanded access 10 the internet 
64 


Insert offset folio 39 here 35693.039

Qr!.llne S'nwlLBzlsi!JJZ:.'>5_Lending 

Small businesses arc the bnckbnnc of the American economy, creating more than 60 percent of net 

ne\v jobs and employing approximately half of the \Vorkforcc in the private scctor>~ 4 

Unfortunately, many small businesses .arc unable to <1ccess traditional credit for purposes of 

grmving their businesses due, in part, to high search. transaction, and underwriting costs.> 

Fortunately for small businesses, members and other new and inl1l)vative 

companies urc expanding access to credit and otTcring attractive alternatives to traditional 

smaH businesses v>ith smaller loans (typica!ly 

or short-term use cases. Using sophisticated. dat<:Hirivcn algorithms to assess the creditworthiness 

,)r pot..:ntial borrowers, lenders arc able to reach funding decisions quickly and efficiently and 

provide access to capita! to approved horrmvcrs expcditinusly.2

H in some cases within 24 hours. 

A new report on small business !ending in the United States n;:vca!s that some t)f the nat inn's 

largest Fin Tech small business lending plntf(mns funded nearly $10 billion in on! inc loans from 

20l51o 2017. generating $37.7 bi!!inn in gross output creating 358,91 l jobs and $12.6 billion in 

·wages in U.S. communitics.~ 9 

According to the study. nearly one-third of online small business borrcnvcrs arc located in 

undcrscrvcd communities and about percent of these borrmvers arc microbusinesscs with less 

than $100.000 in annual sales and tv,:o~thirJ.s have less than $500,000 in annual sales. About 42 

p~rcent of small businesses borrowed betvvcen $10.000 and $50,000 from the five online small 

business lenders \\ith the average amount being $55A-98. 

rhcse data-based prnccsscs arc creating new tlpportunitics for borro-wers and lenders. The 

platforms arc agile. nimble. scalable, and can wnrk in tandem with related t!nancia[ service 

offerings. For example. online small business lending programs can b~ synced >vith pnyment 

platf(mns to assist in undcrv·."riting decisions in nearly real-lime, and also provide convcni~nt 

Page i !8 
65 


Insert offset folio 40 here 35693.040

repayment options for sma!l businesses. FinTech platforms have also been used by Community 

Dc\'clopmen! Financial fnslitutions ("'CDfls") and other non-profit community lenders and 

development organizations tn help increase cnlcicncy in 1hc lending process and identify 

creditworthy sm<1l! businesses.'1

t 

OnDcck, for C:\amplc. announced in September 2015 an expansion of its partnership with the 

Association for Enterprise Opportunity ("AEO"). Onfkck is licensing its technology platform to 

/\EO's community lending partners >vvho participate in a program called TILT Forward that 

improves access to capitul fN small businesses O\\Tlcrs in underscrvcd communities, The expected 

impact will be an incrca~e in the number oCCDl-Ts participating the program. and a f3.ci!itation 

of$1 0 million in loans to small businesses across the country. '

1 

In addition to partnerships with CDFrs. online small business !enders are partnering with to 

service small business loans. Because online platforms and systems arc often more efficient and 

cost-effective for undcnuiting small dollar loans. companies like OnDeck arc able to provide a 

valuable service to rls in order to expand their market reach. For example . .JPMorgan Chase uses 

the OnDcck digit:.~ I plntf(wm to service its small business customers. The loans arc Chasc~brandcd, 

held on the Fl"s balance sheet, and made using JPMorgan 's underwriting criteria. J:: What \vas nncc 

u prnce:;s that could take up to one month for approval now is digital and takes on average just one 

day. This reduction in processing time a valuable benefit for Chase customers who need quick 

and an<xdab!c access to capita! to grow their small bu:-:incsscs. 

OnDeck has also partnered with the SCORE Foundation. a non-profit ~.xganization comprised of 

nwrc than 11.000 volunteer mentors who provide free and confidential small husiness mcntming 

and advice. As the sponsor of SCORE's F!nancinf! Center for Lxcc!!cncc, On Deck provides all 

small business owners \\,ho apply to On Deck with spc-t.:ial access to mcnttlring and advice from 

SCORE through a dedicated online experience. On Deck has commitment to small business credit 

edu(;ation by launching their Bu~incss L(\Hns platform, an onliw: resource dedicated to explaining 

business financing and hdping small businesses understand lhcir business financing questions. 

In late 20 !3. !\tyPaL lnc. and \\\:bBank launched a unique online small busincss lending platHmn 

called Pa)'Pal Working Capital ("PPVv'C'), which cnabks PayPal merchants 10 apply for and 

obtain closed-end loans quickly. These loans charge a fixed have no periodic interest 

or maturity Jate. no !ate payment'>. and arc repaid through a percentage of the merchants' PayPal 

sales. In 2017. PayPal announced that thL', product had reuched billion in funding to 

i 19 
66 


Insert offset folio 41 here 35693.041

entrepreneurs in the U.S., United Kingdom. and Australia. Nearly 35 percent ofPPWC loans go 

to lnvv and moderate-income businesses. compared to 21 percent ofF! loans. and more than 61 

percent go to entrepreneurs and businesses owned less than five years. What's more is that fK~arly 

percent of PP\VC loans were disbursed in the 3 pcn.:cnt of counties that have lost len or more 

hanks since the 2008 financial crisis. illustrating direct benefit that this product has on 

undcrscrved populations. 1

' 

Traditionally, !enders have been reliant primarily on business owners' personal financial history 

and credit scores to undcti\ritt' small businesses for funding. oftentimes taking weeks or months 

to reach a decision. Through the ust.: of improved technology, Kabbagt': is able to reach a decision 

for customers nearly immediately based on real-time business data. v.hich positively impacts the 

percentage of businesses approved for funding. 

Kabbagc. which launched in 2011, is an online snwll business lending platform that provides shortterm lines of credit to its customers and serves the loan needs small and mid~sizcd businesses. 

Kabbagc utiliz:es an automated data anJ technology platform to undcrv.Tite businesses in as little 

as minulcs based on real-time data and extends access to rnorc than 1 A·OO small businesses every 

day throu12h its lending platform.-'" By its mvn estimation. more than ~10 p.;rcent of its customers 

arc either woman or minority mvncd husincsst:s. Applicants securely C()nnectthird-party channels 

tn provide data such as transactional information, vendor payments, accounting information. social 

data. online r~:views and shipping records. giving Kabhagc a <.'omplctc. accurate and up-to-theminute view of the health ufthc business. 

Annthcr \vay Kabbagc cases the loan process and management t0r smnl! business owners is 

through its rnobi !c app experience. Through the app. small business owners can complete the 

app!it:ation process, receive a decision, and begin using their lines of credit immediately. Once 

approved. customers can \Vithdrm." f'unds. make payments and rnanal!c their accounts anytirnt\ 

anywhL'rc through the o.pp. The Kabbagc app addn.::sses business owners' need to securely access 

funds ljUick!y. and on-the-go. The mobile access to their loans business owners \Vhen they 

need to negotiate pricing:. cn\'cr an unexpected ~~xpcnsc or take advantage of a timely opportunity. 

"t~sman Ahmed. 1 hor"tcn Beck_ Chri<>tine McDaniel 

"1CCl'SS lo Finance for /-.,'mall-and Hediwn-Si:::cd Fnre1pri.ws. n;/. 

:2016 

!han. 10 .millkm per .day _\\ith .. kahhagc/prwch15& 
67 


Insert offset folio 42 here 35693.042

Since 2017. Kabbagc has seen a 68 percent increase in the total amount of working capital accessed 

via Kahbage on mobile devices. 35 

Jjkewisc. the Kahhage Card lets users withdrmv the exact :nnount of funding they need from their 

lines of credit at the point or purchase anyv·:hcrc Visa is accepted. Kabbage has seen a 283 percent 

grmvth in adoption of the Kabbage Card since 2017. By building solutions designed to rcrnovc 

the friction small husim:sscs face \vhen seeking f'unds. the amount of dollars accessed via Kabbage 

totals more than $5.5 hillionY1 

Beginning in 20! 5. Kabbagc made its platfonn available so other organizations can leverage the 

technology to power SMB and consumer loans. By utilizing the Kabbagc P!atf~xm, financial 

institutions can bclter serve their small Ousinc;<,s customers in a cos1-cffectivc and highly scalable 

\\ay at a fraction of the cost. 

Sma!! business mvncrs typ!ca!!y \VN:l during traditional banking hours. FinTcch companies. such 

as Kabhagc, have seen an increase in the need ftJr working capital outside of those conYcntional 

hours. The tota! number of dollars accessed through Kabbagc outside of typical banking hours 

increased more than 6.000 percent between 20 I J and 2018. The growth illustrates small business 

mvncrs arc increasing!::"' comfortah!c accessing capitHl online, and the; rely on the convenience or 

managing cash !low needs any time nf day. panicular!y outside of open business hours f<w most 

banks. Sixty'-rour percent nfaftcr-h(lurs !ending was accessed during the work \Vcck. totaling $754 

million. The remaining: 36 percent occurred on Saturdays and Sundays, totaling $429 million. n 

Square's lending Jrm. Square CnpiwL began off'ering merchant cnsh advances to its customers 

in 2014-. Since then. Square Capita! has shifted a\vay lfom ofl~ring merchant cash advances and 

no\v partners with Celtic Ban" to (1ffcr the Squurc Capital Flex Loan. Square Capital has facilitated 

$3.5 bi!!ion in comhined merchant cash advances and loans to more than 200,000 smal!-hus.incss 

ctJstomcrs. 

Capital 

!ending bct\vecn $500 $100.000 businesses of all si/cs arc eligible for a Square 

Technology and datil have allowed Square to hcHer serve the needs of undern:prcsentcJ 

populations--56 percent of loans issued throuf!h Square Capita! \vcnt to womcn-ovvncd 

businesses, compared to 18 percent of traditional lnans and 36 percent -of loans through Square 

Page 121 
68 


Insert offset folio 43 here 35693.043

Capital went to minority-owned businesses, <.:omparcd to 27 percent of' traditional loans?; Square 

has also been able to offer capital at amounts far lower than \\'hat has hecn available to smal! 

businesses from traditional lcndcrs~-Squarc's average small business loan size is approximately 

S6J)00,~° Furthermore. 80 percent of Square's small business !Pans arc made outside of m:~jor 

metropolitan areas. exactly where they arc needed most 

comrnunitics has Jedin...:d 50 percent since 2004" .. n 

small business loans in rural 

In Oct<.>ber 2018. Square launched a service called Square lnstal!ments that enables some 

customers of its small-business :-dlcrs to pny for purchases in installments. With Installments. 

Square simultaneously he!ps consumers big purchases with the option to pay overtime anJ 

helps small business mvn-::rs grov .. tlu .. 'ir sales by giving thcir.:ustpmcrs more pun.:hasing tlcxibility. 

Consumers can usc Installments 1<\ make purchases between $250 and $10.000. and they can 

choose from .3. 6. or 12-month installment plans priced betv/cen 0-24 percent APR. Square also 

lays out the exact cost of the repayment plans in absolute dollars. not just APR. to best inform the 

cpnsumer's choice. 

Another CtJmpan_y that participates in on tine sma!! business !ending is Lcndio. Since 2011. Lcndio 

has prrwidcd a free online service that connects businesses \\ith lender options from its 

marketplace (like Kayak. /\irBnB. or Yelp) based on inhmnation provided by the small business. 

Small business ov·mers fill out one application and it gives them. access to multiple loan pwducts 

fhm1 over 75 lenders including online lenders like Kabbagc and Fundbox as \Veil as large 

institutions like Bank of America and American Express. I ,cndio handles the customer experience 

from start to finish. compiling offers for the hornw.cr tn compare terms, and payment 

amounts. and providing cxpc1i advice lt) help them select the ideal loan for their business. 

LcnJio's use of technology makes small husine::;s lending simple for the business and the !end~r 

by decreasint: the amount of tim~ and cft(ni it takes to secure funding. Ixndi0 has facilitated more 

than $R50 million in small businc:-.s loans which has fueled an estimated $3 hill ion hack into the 

U.S. economy. Through their Lcndi~) (Jives program. they have funded more than 5.000 Kiva 

microloans that has provided more than $! 30.000 in loans to unJcrscrvcd business owners in 7S 
69 


Insert offset folio 44 here 35693.044

C\)Untrics. I,cnd10 Gives <IUocatcs over 90 percent of total funds donated to loans f(w females or 

female groups in the developing world and heynnd ... n 

!.-endio 's marketplace model allows sm:.Jll business borrowers to s.hop the most small business loan 

options in the \\'orld for free. There arc nearly 30 million smal! bu~incsscs in lhe U.S. and 80 

percent oC them \\·ant ~ma!!-dollar loans. The typical !nan granted thn ... ugh Lcndi0 's 

marketplace $40.000. and the industries best represented include retaiL restaurants and 

construction. Lendio's marketplace is faster_ casier way t~w these srnall business owners to get 

financing including credit cards. lines of credit, shcH1-term sreciahy !oans and long-term 

traditional ~oans. 

Lendio·s technology not only mah:s the applicati<ln process lUst and z-::asy, il puts capital in the 

hands of smaH business owners much quicker than traditional Fl. Each hnrrowcr is assigned a 

funding manager that is consultative and there to ansvvcr questions !'rom the moment an application 

submitted until the loan closes-·~and even after. Getting access to LeHdio·s marketplace and 

technology. comprehensive training. branded markets to0ls and national advertising. partnerships, 

and support team allows them to reach segment o[ borrowers \Vho arc cautious about applying 

for lending exclusive online. 

By providing a highly*sccurc. fully compliant innovative banking pla1JOrm. Cross River, 

enables its partners to deliver innovative financial solutions and offCr traditional banking products 

to customers while ensuring cnnsumt:r protection and regulatory compliance. By utilizing Cross 

River's platt0nn. con:-;umcrs have access to specific banking A Pis on \Vhich they can run their 

services, kvt:raging best in class hanhing technology coupkd \\ ith compliance cxccl!cncc in a safe 

;:md sound environment. By increasing access to a\\ ide range of banking services. Cross River. is 

helping to expand active participation ofunderscrved communities the financial ecosystem. 

Partnering \\ ith leading marketplace !ending platforms (su-ch Afnrm. Rockctl,oans. l lpstart and 

Best Fgg). Cross River pro\'ides consumers access to responsible and atTordabk capital. \vhilc 

maintaining their corn pi iancc. risk. credit, and undcnvriting critcri:J. Cross River has funded nearly 

$.?0 hi Ilion in loans and more than 7 million con~umcrs have benefited from access to atl{>rdablc 

and rcsponsihk capital. Cross River not only originates bans but 0\\-ns the cnd~to-end process and 

life cydc of each loan. a!! while ensuring consumer protcction and compliance remain a top 

priority. 

1

: Lendio. (2019). Lcndio Pn.)vidc~ More Than 5.000 Kiva L\>ans to Support Women-Owned Busincs~cs Around the 

Retrieved from 

Rl:1ricvt:d from 

httpo.:i/www.!.._tva.oq~/kamilendio givr:,iimpa.:l 

Page 
70 


Insert offset folio 45 here 35693.045

In 2013, the number of federally insured Fls fcl! to 6.891 the lowest number nf retail Hs in the 

U.S. since l934. The financial services industry is continuously looking for innovative ways for 

consumers to access financial In addition to mobik banking services, Fls arc deploying 

ncV·i generation of technology to transform traditional branches and make them more 

economically sustainable in prc\'inu:dy underserved communities. By harnessing these new 

tct.:hno!ogics. F!s arc establishing a nc\\ model where branches have smaller physical !l_)()tprints 

but offer a \Yldcr range of services at more comcnicnt times. 

For example. NCR has deployed technology rcfcmxi to as Jhe interactive teller. By 

incorporating video and networking capabilities into an advanced automated teller machine. !he 

interactive teller transf(mns a traditional AE\:1 with a lin1.itcd range of services into a full-service 

facility. Customers arc able to speak live to a teller on the video screen hours a day and receive 

facc-to-l~tcc assistance with vi1iually any sen, icc the offers. Incorporating interactive teller 

technology a!lnws an F! branch to operate with a significantly smaller physical footprint. A 

branch's 2.500 square kmt area can be reduced to as littk as 500 square feeL yielding substantial 

cost savings, Jn addition. the services nffCrcd cnn be expanded at little or no cost. An interactive 

teller enables '24-hours-a-day availability of assisted banking, often times in multipk languages. 

Technologies !ike interactive tcltcrs allovv Fis to operate hranchcs with more servi{TS and at lower 

costs. reaching more communities than was previously possib!c:H The 24~hour interactive 

makes banking accessible to consumers who muy have found difficult to access these services 

in a mnre traditional manner. Those that benefit from these innovative products and services 

include lovv·-inc0mc consumers who v.ork non-typical those living in rural communities. 

and persons\\ ith disabilities. Small businesses arc changing the ways they engage with linancial 

services. By simplifying the financial life of small business mvncrs. EIA members can make sure 

their scrvkcs remain a viable option and nnt rcquirc them to fit traditinna! hnnkin~; hours. 

Conclusion 

ETJ\ and it.s members support an inclusive financial system that provides high quality. secure, and 

aff{wdahlc financial services for the hroadcst pnssihk sd of consumers, ET/\. member companies 

touch, enrich. and impn)\'C the lives of unJcrservt:d consumers \vhi!c making the global flo\v of 

commerce possible. /\. gi.Xll of FTA mcmhcr companies to continually enhance electronic 

payments and financial ct:osystcm so that it is ncct:ssible f(w all Cl>nsumcrs. while ensuring their 

transactions can be completed securely. cfflcicntly, and ubiquitously. A key driver io achieving 

sud! a system the development ofnc\v technologies that allow the unJcrscrvcJ to access Fl and 
71 


Insert offset folio 46 here 35693.046

FinTcch company financial products and ETA encourages po!icymakcrs to suppott these 

goals through policies that support innovalion and the usc of technology in financial products and 

services. 

If you haw.~ questions regarding the 1Vftite Paper, or would like more il~f'ormation about ETA, 

ph!ase visit :JJ~.::l.s:fcclmn.o.r.g, or contact Scott Talbott, SVP of Government Affairs. at 

or Jeff Patchen, 1Hanager r~f Gm·emmenf Affairs, at 

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