293

unsecured debt from 2005 to 2009, although the challenges might
be more severe for families of color who have lower incomes and
significantly lower assets; that even as the level of unsecured
debt was decreasing, net worth greatly diminished between 2007
and 2010, with median net worth, including primary residences and
mortgage debt, falling by 39 percent and median net worth,
excluding primary residences and mortgage debt, falling by 30
percent; and that the racial wealth gap widened dramatically
between 2007 and 2010, with white families losing about 36
percent of their net worth as compared to a loss of 50 percent
for black families, with eradication of the gains made by
families of color over the past 20 years, and with the average
black family now owning five cents for every one dollar the
average white family owns. He next pointed to a study conducted
by the PEW Charitable Trusts Economic Mobility Project as support
for the hypothesis that savings is a foundation for economic
mobility and other asset building activities that occur over a
lifetime, explaining that the study lined up parents in order of
their personal saving rate in the 1980s, divided them into high
savers and low savers, and, a generation later, looked at the
children’s mobility outcomes according to whether their parents
were high savers or low savers; and that the study showed that 71
percent of children with high saving parents experienced upward
mobility over the course of a generation, compared to only 50
percent of children of low saving parents. He further explained
that over the years, that hypothesis has been tested in a series
of pilots and demonstration projects that offered matches to
savings, the individual development account experience, tax-time
interventions, and automatic enrollments, all of which were
designed to assess whether even people with low incomes could
save and that, as a result of the projects, a lot more is known
about the incentives, support, and protections that enhance the
savings process for the target population. He then addressed
what is currently known about whether and why people save, citing
a 2010 FRB Survey of Consumer Finances that asked people whether
they had saved during the past year, in response to which only 52
percent indicated that they had, the lowest level since the FRB
began taking the survey in the early 1990s; and that asked why
people save, in response to which the two most often cited
reasons were for retirement and liquidity.

Next taking a broader look at the household balance sheet of
a typical family with an annual income of approximately $50,000
in 2010, derived from the Survey of Consumer Finance, Mr. Cramer
indicated that on the asset side of the balance sheet, the
largest category of assets were physical assets, mostly housing,
with liquid asset holdings of about $3,100, including funds in

December 13, 2012


287

technology vendors. He explained that, as an initial step to
understanding the mobile apps landscape, staff was reviewing the
most popular mobile financial apps currently available through
Apple iTunes, and Google Play, having selected the iPhone and
Android platforms because together they represent the lion’s
share of the smartphone market; reviewing the app descriptions
and categorizing them as previously mentioned by Mr. Miller; and
noting key features for each app, including remote deposit
capture, account transfers, P2P transfers, alerts and
notifications, balance inquiry, bill pay, location finder, deals
and rewards, prepaid card loading, budgeting, and point-of-sale
payments. He then advised that, to date, staff had reviewed
approximately 150 apps; that, although none of the apps were
downloaded or tested, the review was helpful in enhancing staff's
understanding of report findings and what they learn at
conferences; and that the effort was helpful in identifying
mobile apps features that may benefit the unbanked and
underbanked.

Next turning to a discussion of each of the categories of
mobile financial apps and their common features, Mr. Homer
indicated that the most common category of app was personal
financial management, followed by mobile banking, financial
education, and mobile payments. He stated that the most common
feature of financial management apps was budgeting, but that they
frequently also offered alert and notification and balance
inquiry features, with examples of such apps including finance
calculators, account aggregators, budget and bill pay tools, and
financial education components; that the most common features of
mobile banking apps were balance inquiry, account transfer, bill
pay, location finder, and alerts and notifications, but that they
sometimes also include remote deposit capture, P2P transfers, and
deals and rewards, with examples of such apps including those
developed by the spectrum of financial institutions; that the
most common features of financial education apps, which have
considerable overlap with financial education apps, were
budgeting and alerts and notifications, with the difference
between the two types of apps being that financial management
apps may provide a snapshot of an individual’s current financial
condition, financial education apps provide additional features
to help consumers understand their financial condition and
develop a plan for improving it; and that the most common
features of mobile payment apps, which are still emerging and
represent only a small sliver of the apps marketplace, are P2P
payments, followed by account transfers, balance inquiry, and
bill pay, with some of the mobile payment apps comprising a

December 13, 2012


297

negative impact on savings, and savers aged 55 to 64 saved the
most successfully, having saved an average of $2,000 since
joining the campaign. Moving to information gleaned from saver
tips and stories, she stated that the major take-away was that
before they actually start saving, people are very pessimistic
about their ability to save and that virtually every successful
savings story involves a plan and/or an automatic component.

Ms. Register then addressed information gathered from the
CFA’s communications with organizations, noting that the CFA
works closely with national partners such as federal agencies,
associations, large employers, and regional banks to build up
their participation and embed it in the culture of the
organization so that it will survive staff and leadership
changes; and that ongoing communication with organizations is via
emails, conversations, and a reporting survey asking America
Saves participants to describe their campaign plans and actual
activities. Focusing on financial institution participants, she
indicated that financial institutions have clearly communicated
that they want to help people save and they are increasingly
willing to participate in America Saves Week, with their
participation in America Saves Week having increased
significantly to almost 350 institutions. Providing examples of
America Saves campaigns sponsored by financial institutions, she
reported that Prudential Retirement Insurance and Annuity
Company, in 2010, offered a promotional certificate of deposit
during America Saves Week and conducted a satellite media tour,
resulting in the sending of 580,000 mailers, 11,188 increases to
retirement savings accounts, and $16 million in new annualized
savings; and the Navy Federal Credit Union promoted the goal-
oriented custom club account, with no direct deposit or checking
account requirement and set-up of automatic, recurring deposits
at any time, resulting in the opening of 11,532 custom club
accounts, totaling $22.5 million, a 73 percent increase from
prior months.

Ms. Register stated, in closing, that the FDIC has been a
partner in America Saves and America Saves Week from the
beginning, with past support including a speech by then Chairman
Sheila Bair to nationally launch the 2008 America Saves Week
campaign; issuance of press releases and memorandums to FDIC
field staff in 2009 and 2010, encouraging support of local
America Saves activities; a 2010 video by then Chairman Bair in
support of America Saves Week posted on the home page of the
FDIC’s web site; and a 2012 FDIC-hosted webinar for financial
institutions and individuals. Regarding support for the 2013
America Saves Week, she advised that the FDIC had committed to

December 13, 2012


278

With respect to minimum account balance required to avoid a fee,
availability of overdraft programs, and fees associated with
overdraft payments and items rejected because of non-sufficient
funds, he reported that for the roughly 30 percent of banks
requiring a minimum balance to avoid a fee, the median minimum
balance to avoid a fee was $300 with direct deposit and $350
without direct deposit; that approximately 90 percent of banks
offered automated or non-automated overdraft programs and 85
percent offered an alternative to an overdraft program; and that
the median charge for both overdrafts and items rejected for non-
sufficient funds was $28.

Next focusing on transaction and savings account offerings
for applicants who do not qualify for a conventional account,
specialty savings product offerings, and types of identification
(“ID”) accepted from prospective customers wishing to open such
accounts, Mr. Robbins began by advising that 21 percent of banks
offered “second chance” transaction accounts to those not
qualifying for a conventional account; that 21 percent of banks
offered electronic accounts as their most basic transaction
account, with less than one percent of banks offering a strictly
card-based electronic account; and that the average minimum
amount to open, and the average monthly maintenance fees for,
such accounts are lower than for traditional checking accounts
with a check-writing feature. With respect to basic savings
accounts, he advised that the median minimum opening balance for
such accounts was $100; that the median minimum average balance
requirement was also $100; that many banks did not charge a
monthly maintenance fee if the minimum average balance
requirement was met, with a median fee of $2.50 for accounts not
meeting the minimum average balance requirement; and that three
out of four banks offered an automatic savings option without a
fee. Moving on to specialty savings products, he indicated that
82 percent of banks offered youth savings accounts, 41 percent
offered specialized savings clubs, nine percent offered
workplace-based savings, and nearly 4 percent offered individual
development accounts. Regarding ID needed to open a consumer
deposit account, he stated that 83 percent of banks accepted non-
traditional forms of ID, with 58 percent accepting a non-U.S.
passport, 40 percent accepting foreign ID from a foreign
consulate, and 73 percent accepting an individual taxpayer number
as alternatives to a social security number at account opening.

Mr. Robbins then addressed auxiliary products offered by
banks to their entry-level accountholders and noncustomers in
their market area, noting that more than 75 percent of banks
offered check-cashing to accountholders, whereas less than half

December 13, 2012


294

both checking and savings accounts; and that, even when there are
holdings on the debt side of the balance sheet, there is a great
deal of value in liquid asset holdings for families since those
are the funds that can be accessed quickly in the event of an
emergency. He then briefly discussed liquid assets across income
levels and by race, noting that people do save more as they move
up the economic ladder, with those living at or below poverty
having on average a modest $520 in liquid assets, those between
poverty and median income having liquid assets on average of
almost $2,000, and those with median income to the sot
percentile having liquid assets on average of more than $5,000;
and that families of color have much lower levels of liquid
assets than their white counterparts. With respect to household
trends in liquid asset holdings and net worth from the 2007 to
2010, he reported that even as liquid asset holdings increased,
net worth decreased for the typical household; but that for the
average household with income in the poverty to median range,
liquid assets and net worth decreased at roughly the same rate.

Addressing desired precautionary savings and desired account
changes to induce the unbanked to open a bank account, Mr. Cramer
advised that when people are asked, they affirm a desire to set
aside more of their income as a precaution in a place where it is
accessible in a flexible manner and that the desire cuts across
income levels; that families in the lowest quintile desire to
save $2,000 or 14 percent of their income and families in highest
quintile desire to save $10,000 or about 8 percent of their
income; and that the desired savings levels show that aspirations
are above current holdings and reflective of an opportunity to
change behavior under the right set of conditions. He stated
that the challenge is to turn desires into behavior and actions;
that the question for the banking industry is to determine what
product features make savings accounts attractive; that a 2009
study by Professor Barr, supported by the results of the FDIC’s
Model Safe Accounts Pilot, concluded that lower fees,
convenience, and less confusing fees are the features that matter
most to unbanked households; that although incentives are
helpful, they are not foundational; and that the success of the
FDIC Model Safe Accounts program presents an opportunity for the
FDIC to elevate such accounts to the level of policy, with one
option being to give Community Reinvestment Act credit for
products and services that target underserved consumers and for
innovative programs that focus on financial inclusion.

In conclusion, Mr. Cramer discussed barriers to and

opportunities for saving, acknowledging that the recession had an
impact on savings behavior and that the marketplace is changing

December 13, 2012


Minutes
of
The Meeting of the FDIC Advisory Committee on Economic Inclusion
of the
Federal Deposit Insurance Corporation
Held in the Board Room
Federal Deposit Insurance Corporation Building
Washington, D.C.
Open to Public Observation

December 13, 2012 - 1:58 P.M.

I hereby certify that, to the best of my knowledge,

the attached
minutes are accurate and complete.

Martin J. ~ p=
Chairman

Board of Directors

Federal Deposit Insurance Corporation


296

stories directly from savers; and that the program communicates
directly with organizations, including financial institutions.
With respect to the Annual Savings Survey, she reported that it
started in 2008 and is conducted by the Opinion Research
Corporation; that each year since 2008, a representative sample
of over 1,000 adults is surveyed; that from 2008 to 2012, those
who said they spend less than their income and save the
difference declined from 73 percent to 66 percent; that those who
said they had sufficient emergency savings fell from 71 percent
to 66 percent; that those who said they are saving enough for
retirement declined from 52 percent to 43 percent; and that for
those with incomes below $25,000 in 2012, the numbers were much
lower, with 44 percent saying they spent less than their income
and saved the difference, 33 percent saying they had sufficient
emergency savings, and only 17 percent saying they were saving
enough for retirement. Citing the results of the most recent
annual Holiday Spending Survey, jointly conducted by the CFA and
the Credit Union National Association, which show that only 49
percent of all respondents and 19 percent of respondents with
incomes below $25,000 reported having at least $1,000, not
including lines of credit, to pay for unexpected expenditures,
she expressed the view that the nation is not doing enough to
address savings needs and that, with research showing that most
LMI households can afford to save something, the unmet savings
needs reflect far more than inadequate incomes. Ms. Register
further reported that the results of the 2012 Annual Savings
Survey clearly revealed that having a savings plan with specific
goals can have beneficial financial effects even for low-income
families; that, when income is taken into account, those with a
savings plan are much more likely to spend less than their income
and save the difference, have adequate emergency savings, and,
among the non-retired, indicate that they are saving enough for
retirement; and that households with incomes under $25,000 that
have a savings plan save more than higher-income families that do
not have a plan.

Next discussing the America Saves Surveys of Savers, Ms.
Register stated that the primary take-away is that participants
do save and are saving more, are more hopeful about their
financial situations, and are better managing their debt; that
from 2009 through 2012, creating an emergency fund was the
primary goal for campaign participants, followed by education and
debt repayment, with the savings goals having changed over the
years to reflect the current state of the economy, people’s sense
of where they are and what they think is important, and their
sense of well-being; and that females reported saving $500 less
per household than male savers, divorce has a predictably

December 13, 2012


291

assessing mobile banking apps, including whether the app is a
convenient vehicle for payments and financial activities, whether
if offers value added, and to what extent it provides the user
with information. Mr. Ryan recommended that staff explore
America Saves Week in February as an opportunity to highlight the
sort of partnerships with third party providers referenced in the
presentations that encourage savings. Mr. Henderson recommended
that staff explore the capability of sending remittances from a
bank account as an inducement to certain segments of the
unbanked, especially the immigrant community, to establish a
banking relationship. Mr. Miller thanked Committee members for
their very helpful suggestions and, in response to Mr. Ryan noted
that staff was already in contact with America Saves
representatives.

In terms of Committee member observations, Mr. Orozco,
addressing the fact that consumers are inundated with
advertisements inducing them to spend money, stated that, in his
opinion, consumers have become far more rational decision makers,
thinking more seriously about how to better inform their behavior
on personal finances, especially after the most recent financial
crisis, and economic inclusion proponents need to give more
thought to how mobile banking apps can tap into that. Chairman
Gruenberg, noting that it appears that many of the mobile banking
services are offered through vendors, observed that there is a
need to get a handle on the structure of the mobile financial
services industry and its relationship to the banking industry,
and then identify ways to use the technology to provide access to
insured financial institutions.

Next, Ellen Lazar, Senior Advisor to the Chairman, moderator
of the panel on “Current Household Savings Trends and
Initiatives,” laying the framework for the presentations, noted
that approximately 30 percent of households concentrated among
lower income households lack access to savings and that the FDIC
has spearheaded a number of economic inclusion initiatives to
remedy that lack of savings, including the safe accounts
template, and the safe accounts pilot, work to develop the
Alliances for Economic Inclusion, and work with Bank On programs.
She also noted that the benefits of savings for households are
clear and well-known, that both the non-profit and philanthropic
sectors have demonstrated considerable interest in promoting
household savings, and that the public sector, including the
FDIC, has an appropriate role to play in promoting household
savings going forward. She advised, however, that there exist a
number of constraints, including the ability to raise awareness
of the benefits of savings, validating the statistics and facts

December 13, 2012


283

representativeness of the data, recommended that some sort of
evaluative index be developed to provide a clearer picture of
whether the level of activity targeting underserved consumers is
positive or unacceptable; Professor Fuchs, underscoring the goal
of economic inclusion, recommended gathering information on the
underlying motives, whether altruism or profits, for banks
already offering products targeted to unbanked and underbanked
consumers in order to better identify appropriate incentives and
disincentives to encourage more banks to offer the services; and
Mr. Shepherd, looking at the challenges identified by banks in
their efforts to serve the unbanked and underbanked, recommended
that some attempt be made to aggregate the major and minor
obstacles to determine whether a series of minor impediments was
sufficient to cause a business decision not to pursue a
particular product. In addition, Mr. Fish, pointing to the
potential bias of over-reporting and under-delivering,
recommended that future survey efforts include questions on the
scale of activity, such as the number of loans funded; and Mr.
Cisneros, agreeing that information on scale is important,
recommended asking questions to determine what percentage of all
accounts is represented by basic accounts and how that percentage
differs from the prior year, cross-tabulated with information on
what percentage of a bank’s branches are located in low-income
communities, and further recommended that additional information
be gathered on the specific characteristics of what banks offer
as a “second chance account” as well as the extent to which such
accounts are utilized, cross-analyzed with data from the
Household Survey.

Finally, with respect to suggestions for possible regulatory
action, Professor Barr suggested that perhaps the FDIC and other
regulators could explore smarter approaches to Bank Secrecy Act
compliance that would lighten the paperwork burden, particularly
for community banks; and on the issue of funds availability,
noting that despite some progress, there was less progress than
he would have expected, further suggested that perhaps there were
regulatory incentives that could be used to foster additional
progress. In response to the latter suggestion, Ms. Rhine
advised that the majority of banks did indicate that funds were
made available the same day as deposited or the next day and Mr.
Ernst observed that the amounts covered by regulations governing
funds availability have changed in recent years; that, therefore,
the survey had asked primarily about the timing of funds
availability; but that staff could do some field work to
determine the extent to which funds availability continues to be
problematic. Mr. Annibale, expressing surprise that so few small
and midsize banks were accepting foreign passports and other

December 13, 2012


280

obstacle; and 16 percent of banks indicated that nonbank
competition was a major obstacle, with large banks citing nonbank
competition as a major or minor obstacle and identifying retail
businesses offering general purpose reloadable cards as the
primary source of competition, mid-size banks citing nonbank
competition as a major or minor obstacle and identifying check
cashers as the primary source of competition, and small banks
citing nonbank competition as a major or minor obstacle and
identifying payday lenders as the primary source of competition.

With respect to product-related challenges, Ms. Rhine
advised that 31 percent of banks indicated that consumers’ lack
of understanding of financial products and services was a major
obstacle in serving the unbanked and underbanked as compared to 6
percent of banks indicating that lack of familiarity with the
financial or banking needs of underserved consumers was a major
obstacle. She further advised, with respect to regulatory
requirement challenges, that 35 percent of banks cited the
regulatory environment as a major obstacle in offering financial
products and services to underserved consumers; that 65 percent
of banks cited the regulatory environment as a major or minor
obstacle; and that, of those banks citing the regulatory
environment as a major or minor obstacle, 40 percent indicated
that customer ID was a major obstacle, 35 percent indicated that
fair lending and compliance risks were major obstacles, 34
percent indicated that the Bank Secrecy Act and anti-money
laundering regulations were major obstacles, and 20 percent
indicated that third-party relationship risk was a major
obstacle.

Addressing survey findings by asset size, Ms. Rhine pointed
out that the largest banks tended to have lower initial deposit
requirements on basic accounts and accepted a broader range of
foreign ID for account opening purposes; that small and midsize
banks were more likely not to charge maintenance fees on basic
accounts, had lower required balances to avoid fees, and charged
lower fees when they applied; that the largest banks were more
likely to engage in a greater range of educational and outreach
activities; that the largest banks were more likely to report
actively marketing products or services customized to the needs
of the underserved and to offer a wider array of auxiliary
products and services; and that small and midsize banks were more
likely to make unsecured, small-dollar personal loans, to charge
less for auxiliary products and services, and to make funds
available on the same day when cashing checks. In conclusion,
she identified several opportunities for financial institutions
to expand access to underserved consumers, including expanding

December 13, 2012


279

of banks offered the same service to noncustomers, with a median
fee for both accountholders and noncustomers of $5; that 68
percent of banks offered money orders to accountholders, whereas
only 33 percent of banks offered money orders to noncustomers,
with a median fee of $3 for both accountholders and noncustomers;
that 86 percent of banks offered bank checks to accountholders,
whereas only 35 percent of banks offered them to noncustomers,
with a median fee for both accountholders and noncustomers of $5;
and that 68 percent and 57 percent of banks, respectively,
offered domestic or international remittances to accountholders,
as compared to only 11 percent and nine percent of banks,
respectively, offering domestic or international remittances to
noncustomers. He further noted that 88 percent of banks offered
small-dollar, unsecured personal loans, with 43 percent of banks
offering such loans with no minimum loan amount and 53 percent of
banks offering such loans with a minimum amount of $2,500 or
less; that 81 percent of banks offering small-dollar loans had a
repayment period of at least 90 days; that nearly 89 percent of
banks offering small-dollar loans reported an annual percentage
rate on the loans of 36 percent or less; and that most banks
could approve a small unsecured loan in less than 24 hours. He
then turned the discussion over to Ms. Rhine to discuss the
survey findings on financial education and outreach and the
challenges identified by banks in serving the unbanked and
underbanked.

On the issue of financial education and outreach, Ms. Rhine
advised that 81 percent of banks reported offering free
counseling to underserved consumers, with 58 percent rating the
activity as very effective or effective; that approximately 50
percent of banks reported offering instruction on basic financial
topics, funding to community partners, and technical expertise;
that 30 percent of banks reported engaging in all four types of
financial education and outreach; and that K-12 schools were the
most frequently identified locations for providing financial
education and outreach, with 74 percent of banks identifying such
sites, followed by bank branches, identified by 53 percent of
banks, and non-profit and community organizations, identified by
41 percent of banks. Turning to challenges identified by banks
in serving the unbanked and underbanked, Ms. Rhine advised that
the survey inquired about three types of challenges: business
challenges, product-related challenges, and regulatory
requirement challenges. With respect to business challenges, she
stated that 32 percent of banks indicated that fraud was a major
obstacle in serving the unbanked and underbanked; 24 percent of
banks indicated that profitability was a major obstacle; 28
percent of banks indicated that underwriting was a major

December 13, 2012


that might motivate families to save, and serving as a catalyst
to bring together disparate initiatives to promote savings. She
stated that the focus of the presentations would be to talk a bit
about what can be done prospectively in the savings arena. She
then introduced Reid Cramer, Director of the Asset Building
Program, New America Foundation, to provide an update on trends
in savings, debt, and net worth, and Nancy Register, Associate
Director, Consumer Federation of America (“CFA”), to discuss the
CFA’s America Saves campaign.

Mr. Cramer, after explaining that the New America Foundation
is a nonpartisan public policy institute based in Washington,
D.C., advised that the foundation’s asset building program is
designed to incubate ideas around savings and helping families
build up an asset base, consistent with a growing body of
evidence that savings and assets promote economic security,
mobility and long-term social development. He reiterated Ms.
Lazar’s comments regarding the role of the public sector in
elevating the public purpose of promoting savings and asset
building, acknowledged the Committee’s work in that area, and
applauded the FDIC’s leadership on economic inclusion.

Mr. Cramer then launched into his presentation on trends in
savings, debt, and net worth, reporting that prior to the
recession, since the 1970s, there had been a decades long decline
in personal saving, with the rate of savings just before the
recession hit having declined to historic levels; that the
decline in savings bottomed out between 2005 and 2007; that in
2007, there was an immediate response to the crisis, with people
responding to the economic uncertainty by increasing their
savings; that the public sector responded with, among other
things, The American Recovery and Reinvestment Act of 2009 and
the Troubled Asset Relief Program, which stabilized the economy;
and that the savings rate was once again waning even though the
recovery has been quite modest, with savings rates currently at
levels below historic norms. He next compared the ratio of
private debt to gross domestic product (“GDP”) from 1916 to 2011,
noting that debt levels had been growing since the 1950s; and
that there were spikes in the debt levels, one just prior to the
Great Depression and one just prior to the Great Recession, the
only two periods when the debt ratio grew by 40 percent in a
decade or less and when the amount of private debt exceeded 100
percent of GDP.

Turning to trends regarding median value for unsecured debt

by race, median household net worth, and median wealth by race,
Mr. Cramer advised that for all families, there was a decline in

December 13, 2012


282

more relevant because it was specific to particular products and
their usage.

Regarding the survey findings on fraud as the largest
perceived major business-related challenge in serving the
underserved, Professor Fuchs asked whether there exists evidence
that the unbanked and underbanked are more likely than other
consumers to commit fraud and, if not, what could be done to
alleviate the misperception, in response to which Mr. Ernst
recalled that institutions that had participated in the Model
Safe Accounts pilot had reported that potential fraud-related
concerns had not been demonstrated and agreed that, perhaps,
additional emphasis on disseminating those findings might be
helpful. Mr. Murphy, noting that KeyBank uses biometrics and
state-issued ID in its check cashing program for underserved
consumers, advised that the losses in the bank’s underserved
program were much better than losses in its mass market effort,
in response to which Mr. Fish suggested that perhaps that
information could be used to educate larger banks about how they
can reduce charge-offs and extend penetration into underserved
communities.

Regarding the implications of prepaid cards for checkless
checking accounts, Mr. Eakes, noting that it appeared that
checkless checking accounts, particularly those that feature
direct deposit, have the greatest potential to be the platform
product for reaching the unbanked, expressed surprise that only
three percent of midsize banks offer such accounts and pondered
whether checkless checking accounts were perhaps being supplanted
by prepaid cards. Chairman Gruenberg observed that prepaid cards
do raise an important set of issues, giving rise to a need to
consider whether such cards are a potential alternative to the
account-based debit card, and asked whether banks view holders of
prepaid cards as, in effect, accountholders for purposes of the
services they provide. Mr. Eakes suggested that there is an
emerging view that prepaid cards could be used as the fundamental
account upon which banks can pursue the same kind of relationship
building activities that spring from other products and services.
However, Mr. Annibale advised that, in most banks, prepaid card
holders who do not have any other relationship with the bank do
not get much in the way of service, having to address card issues
online or by phone, because prepaid cards are in many ways a
separate operating business.

With respect to recommendations for further analysis of

survey data and possible future areas of inquiry, Mr. Orozco,
noting that staff had expressed confidence in the

December 13, 2012


298

hosting two webinars, the first of which had been held the
previous week and the other to be held in January.

In the brief discussion that followed, Committee members
were unanimous in their support of the need for action to boost
the savings rate in the United States, with various comments and
suggestions offered. Mr. Ryan strongly encouraged savings
programs and offered his opinion that support for such efforts
was very relevant to the FDIC’s role and mission, suggesting that
whatever the FDIC can do to share its research on effective
programs would be helpful to bankers. Mr. Cisneros, underscoring
the positive results of various savings incentive programs
launched by members of the Financial Empowerment Coalition,
encouraged the FDIC to stay in touch with coalition member cities
and perhaps even invite them to present to the Committee more
detailed information on the programs. Ms. Levere, noting that 43
percent of American households now live in liquid asset poverty,
stressed that this is a watershed moment and that there is no
better time to pair financial inclusion with a pathway towards
savings, even if the initial emphasis is on emergency savings,
and to figure out the FDIC’s role, the appropriate message, how
the message links to other messages and mobile technology, how to
link the message to policy, and where policy incentives might be
introduced. Mr. Beck, agreeing with Ms. Register that planning
is critical to effective savings, expressed support for
participating in programs like America Saves and communicating to
banks the FDIC’s endorsement of the program. Mr. Annibale,
noting the difficulty of inducing people to save at a time when
interest rates are so low, suggested the need to focus on goal-
oriented savings accounts that are more relevant to the targeted
population, such as back-to-school savings accounts and
remittance savings accounts. Mr. Eakes, after giving recognition
to Ms. Levere, Mr. Cisneros, and Mr. Annibale as national leaders
in promoting savings, encouraged the FDIC, as a next step, to
determine how best to make savings programs scalable, perhaps by
working with institutions like a large corporation, a city, or a
union. Mr. Henderson, citing the Educational Testing Service
report findings on “Fault Lines in American Democracy: Civic
Knowledge, Voting Behavior, and Civic Engagement in the United
States,” suggested that the core questions about how to enhance
savings and promote banking relationships have a much broader
impact than savings per se and should be considered within the
context of their impact on civic knowledge and engagement.

Chairman Gruenberg, observing that the discussion on

household savings and trends had been very useful, indicated that
staff would give some thought to what tangible and constructive

December 13, 2012


aed

Minutes
of
The Meeting of the FDIC Advisory Committee on Economic Inclusion
of the
Federal Deposit Insurance Corporation
Held in the Board Room
Federal Deposit Insurance Corporation Building
Washington, D.C.
Open to Public Observation

December 13, 2012 - 1:58 P.M.

The meeting of the FDIC Advisory Committee on Economic
Inclusion (“ComE-IN” or “Committee”) was called to order by
Martin J. Gruenberg, Chairman of the Board of Directors of the
Federal Deposit Insurance Corporation (“Corporation” or “FDIC”).

The members of ComE-IN present at the meeting were Robert A.
Annibale, Global Director, Citi Microfinance and Community
Development; Michael Barr, Professor of Law, University of
Michigan Law School; Ted Beck, President and Chief Executive
Officer (CEO), National Endowment for Financial Education; Kelvin
Boston, Executive Producer and Host of PBS’ Moneywise with Kelvin
Boston; José Cisneros, Treasurer, City and County of San
Francisco, California; Martin Eakes, CEO, Self-Help/Center for
Responsible Lending, Durham, North Carolina; Lawrence K. Fish,
Former Chairman and CEO, Citizens Financial Group, Inc.; Rev. Dr.
Floyd H. Flake, Senior Pastor, Greater Allen AME Cathedral of New
York; Ester R. Fuchs, Professor, School of International and
Public Affairs, Columbia University; Wade Henderson, President
and CEO, Leadership Conference on Civil Rights, and Counselor to
the Leadership Conference on Civil Rights Education Fund; Andrea
Levere, President, Corporation for Enterprise Development,
Washington, D.C.; Bruce D. Murphy, Executive Vice President and
President, Community Development Banking, KeyBank National
Association; Manuel Orozco, Senior Associate at the Inter-
American Dialogue, and Senior Researcher, Institute for the Study
of International Migration, Georgetown University; John W. Ryan,
Executive Vice President, Conference of State Bank Supervisors;
J. Michael Shepherd, President and CEO, Bank of the West and
BancWest Corporation; and John C. Weicher, Director, Hudson


289

discussion, he offered highlights from three recent reports, one
issued by the Board of Governors of the Federal Reserve System
(“FRB”), entitled “Consumers and Mobile Financial Services”; one
issued by the PEW Research Center (“PEW”), entitled “Cell Phone
Activities 2012”; and one issued by Javelin Strategy & Research
(“Javelin”), entitled “2012 Mobile Banking Financial Institutions
Scorecard: Three Keys to Mobile Money Movement Success.”

Regarding the FRB report, Mr. Miller reminded Committee
members that Jeanne M. Hogarth, one of the authors of the report,
had presented the findings to the Committee at its April 26
2012, meeting, and advised that the FRB had issued an update to
the report in September 2012. Elaborating on some of the
highlights, he advised that 87 percent of all American adults own
a mobile phone, with 91 percent of underbanked consumers having a
mobile phone versus 90 percent of the fully banked and 63 percent
of the unbanked; that underbanked consumers make comparatively
heavy use of both mobile banking and mobile payments in
comparison to the fully banked, with 28 percent and 17 percent of
the underbanked, respectively, having used mobile banking and
mobile payments within the last 12 months as compared to 21
percent and 12 percent, respectively, of the fully banked; and
that even 12.2 percent of the unbanked had used mobile payments
within the last 12 months. He further advised that, in the
mobile banking arena, most activity remained fairly simple,
citing as examples checking an account balance or a recent
transaction, and that in the mobile payments arena, activity was
increasing, with 47 percent of study respondents indicating they
had used mobile payments technology to pay a bill.

Moving to the PEW study, which he indicated was released on
November 25, 2012, Mr. Miller advised that the focus of the study
was not so much on mobile banking or payments, but on the use of
mobile technology. He reported that 80 percent of cell phone
users send or receive text messages, that 56 percent use their
cell phones to access the internet, that 43 percent use their
cell phones to download applications (“apps”), and that 30
percent use their cell phones to engage in mobile banking. With
respect to cell phone use by demographics, he also reported that
men and women were equally likely, about 30 percent in each
instance, to check balances or conduct other banking using their
cell phones; that younger consumers and more highly educated
consumers were more common users of mobile banking; and that
black and Hispanic consumers, between 34 and 35 percent, were
significantly more likely to engage in mobile banking than non-
Hispanic whites, at 26 percent.

December 13, 2012


284

foreign ID for account opening purposes, suggested that it might
be helpful for regulators to provide greater clarity to the
banking system regarding the acceptability of such ID.

After thanking Committee members for their comments and
suggestions, Mr. Ernst briefly reported on the progress since the
presentation of the Household Survey results to the Committee at
its meeting on September 12, 2012, noting that staff had
summarized the feedback received from Committee members and, in
some instances, was undertaking additional research with the data
in hand and, in other instances, was evaluating potential changes
to the survey instrument; that, since the survey was scheduled to
be next administered in June 2013, with little time to work in
all of the suggestions, revisions to the survey might well be an
ongoing process; that staff had made a number of presentations on
the survey findings since the report’s release in September, with
phenomenal engagement from all quarters; and that a written
update was included in the meeting materials.

Chairman Gruenberg then advised that staff would prepare a
similar update on the Bank Survey for presentation at the
Committee’s next meeting, at which point feedback on the two
surveys could be viewed jointly to see where they might overlap.
After praising staff’s excellent presentation and the feedback
and insights offered by Committee members, he announced that the
meeting would briefly recess. Accordingly, at 3:18 p.m., the
meeting stood in recess.

* * * * * * *

The meeting reconvened at 3:40 p.m. that same day, at which
time Chairman Gruenberg introduced Jonathan N. Miller, Deputy
Director for Policy and Research, DCP, panel moderator for the
“Mobile Financial Services Update.”

Mr. Miller began by providing an overview of the work of the
Mobile Financial Services Subcommittee since its official
creation at the Committee’s September 12, 2012, meeting, first
reminding Committee members that the subcommittee’s charge was to
look at new mobile technologies to determine they can be used to
help unbanked and underbanked consumers promote deeper and longer
lasting relationships with insured depository institutions, then
reporting that the subcommittee’s work to date had involved
gathering information from a number of external sources to
understand how mobile is or is not being utilized by the unbanked
and underbanked and, conversely, by banks and other companies
offering mobile financial services. By way of background for the

December 13, 2012


281

offerings of basic, low-cost checking and savings deposit
accounts; offering additional transaction services to underserved
households, including noncustomers; enhancing small-dollar loan
product marketing; utilizing partnerships with community
organizations to promote checking and savings account ownership;
and considering expansion of retail strategies to build
relationships with unbanked and underbanked consumers.

Mr. Ernst then asked Ms. Burhouse and Ms. Osaki to join him,
Ms. Rhine, and Mr. Robbins at the presenters’ table; announced
that at the end of the session, he would take a few minutes to
report back to the Committee on staff’s progress on the feedback
received on the Household Survey; and opened the floor for
Committee member observations, comments, and questions. In the
discussion that followed, Committee members and staff addressed a
number of issues raised by the survey findings related to
financial education; regulatory challenges, particularly the
perception of fraud associated with financial services programs
for underserved consumers; and the implications of prepaid cards
to the availability of checkless checking accounts. In addition,
Committee members made recommendations for further analysis of
survey data, possible additional areas of inquiry in the future,
and potential regulatory action.

Regarding the survey findings on financial education, Mr.
Beck advised that he was impressed with the number of banks
reporting financial education activities, emphasized the
importance of assessing the costs and evaluating the
effectiveness of such programs, and suggested that one way to get
consistent program delivery and reliable metrics on program
effectiveness would be for institutions to use existing
resources, such as the FDIC’s Money Smart programs. Ms. Levere,
pointing to the survey finding that many banks identified lack of
understanding of financial products as a major obstacle to
serving the unbanked and underbanked, suggested that financial
education activities should be geared toward addressing that lack
of understanding. Mr. Murphy, also commenting on the disconnect
between financial education offerings and the lack of
understanding of financial products, suggested that, in his own
experience, consumers are more confused about the product options
and financial tools available to them than by the complexity of
products, and that he found the Money Smart program to be
effective in helping clients to understand the product base. Mr.
Annibale, noting the effectiveness of partnerships with community
organizations in targeting underserved communities, suggested
that financial education provided through such partnerships was

December 13, 2012


295

with technological innovations and consumer preferences, but that
families have a need and an interest in effectively managing
their finances and participating in the savings process, with
savings being a major determinant of economic security and
mobility. He stated that, while access to the banking system
remains an obstacle for certain segments of the population, it is
imperative to overcome that obstacle by connecting families to
high-quality and low-cost products, an imperative that should be
elevated as a policy goal; and that, while there is a need to
create public incentives focused on savings, perhaps the
Committee’s focus might best be geared to learning more about
consumer preferences and how consumers can be provided with
account features and structures that are attractive and meet
their needs in the marketplace.

Ms. Register began her presentation by first providing
background information on the CFA and America Saves, noting that
the CFA is an association, founded in 1968, of about 267 pro-
consumer organizations, including Consumers Union, AARP, credit
unions, electric and housing co-ops, and grassroots
organizations; that America Saves is a CFA initiative, featuring
a national social marketing campaign that seeks to motivate and
support low- to moderate-income (“LMI”) households to save money,
reduce debt, and build wealth; that individuals sign up for
America Saves by identifying a goal, and amount and a timeframe
for saving; and that, since its launch in 2001, 306,000 people
have signed up, either taking a pledge or creating their own
saving plan. Continuing, she advised that America Saves works
with the American Savings Education Council to help organize the
annual America Saves Week, which was launched in 2007; that
America Saves Week offers an opportunity for organizations to
promote good savings behavior to their clients, constituents,
members, or volunteers and for individuals to annually assess
their savings and to take financial action; and that, because it
is a social marketing campaign that seeks to influence behavior,
it is important to maintain a constant flow of information
between the grassroots and national levels for purposes of
providing additional information and continually revising
policies, products, services, and support that is responsive to
current needs.

Elaborating on the methods used to maintain the constant
flow of information in the America Saves program, Ms. Register
advised that the campaign conducts an Annual Savings Survey for
America Saves Week; that the program has started an America’s
Savers survey, with separate surveys for local campaigns to
assess the community impact; that the program receives tips and

December 13, 2012


207

Next, Ms. Rhine presented key findings in the areas of
product development, marketing and advertising, and retail
strategies. With respect to product development, she advised
that 4 in 10 institutions developed products and services for
underserved consumers. With respect to marketing and
advertising, she advised that banks see community partnerships as
important strategies to reach underserved consumers, with 39
percent of banks identifying community outreach collaborations;
and that the second and third most often cited marketing channels
were print advertising and direct mail, with 29 percent and 8
percent of banks, respectively, reporting use of those channels.
With respect to retail strategies used by banks to make their
branches more welcoming and convenient for all consumers, she
advised that the most frequently cited strategies were automated
telephone banking, reported by 62 percent of banks, and
multilingual staff, reported by 43 percent of banks, with the
third most frequently cited strategy being off-premise ATMs,
which was reported by 40 percent of banks.

Mr. Robbins then presented key findings on deposit and
auxiliary products offered by banks. He began by pointing out
that access to a basic bank account and financial services are
fundamental building blocks for families seeking to establish a
solid financial foundation and pursue opportunities for asset
building and wealth accumulation. He noted that, as a means of
understanding factors that may affect the ability of banks to
serve unbanked and underbanked consumers, banks were asked to
describe the characteristics of their most basic or entry-level
checking and savings accounts, regardless of whether they
specifically targeted such consumers, and that the
characteristics included the minimum opening balance requirement,
the monthly maintenance fee, the minimum account balance required
to avoid a fee, and whether fees differed depending on the
accountholder’s use of direct deposit. Regarding minimum opening
balance for their most basic checking account, he reported that
48 percent of banks required $50 or less to open such an account
without direct deposit, 42 percent of banks required precisely
$100 to open the account, six percent required more than $100 to
open the account, and that the median minimum deposit to open a
basic checking account was $100, with or without direct deposit.
With respect to a monthly maintenance fee on basic checking
accounts without direct deposit, Mr. Robbins reported that 65
percent of banks charge no such fee, 22 percent of banks charge
in excess of $3, and 10 percent of banks charge fees ranging from
$1 to $3; whereas for basic checking accounts with direct
deposit, 72 percent of banks charged no monthly maintenance fee,
although 17 percent of banks still charged a fee of more than $3.

December 13, 2012


288

mobile payment component of a mobile banking or financial
management app. He then turned the discussion over to Ms. Osaki.

Ms. Osaki identified P2P transfers and bill pay, mobile
imaging technology, and alerts and notifications as features of
mobile banking apps that staff found particularly interesting and
relevant to the unbanked and underbanked because of their
potential to add value to the way consumers engage in banking and
financial services. She cautioned that the FDIC was not
endorsing any of the aforementioned features and that the review
offered by staff was not a comprehensive assessment of the
products, citing as examples omission of any discussion of cost
or regulatory implications, but suggested that some of the
features highlighted in the presentation and perhaps others staff
had yet to discover might help make banking services more
attractive and sustainable for underserved consumers. First
addressing P2P transfers and bill pay, she noted that the
Household Survey has shown that the leading reason unbanked
households would want to open a bank account in the future would
be to write checks and pay bills and that convenience is the
primary reason households use transaction alternative financial
services instead of banks and that, therefore, P2P and bill
payment functionalities could perhaps contribute to making
banking services more attractive to the unbanked and underbanked.
She noted that one interesting application of P2P transfers that
could be relevant to the underserved was in the area of
remittances, with one company contacted by staff indicating that
it provides international remittance services online or via
mobile web browser and that one-quarter of its users sends
remittances through their mobile phones.

Next explaining that the feature of mobile imaging
technology requires users to have smartphones with a camera and
access to apps, Ms. Osaki advised that the most common
application of the technology was remote deposit capture, which
offers the ability to make deposits by taking a photo of the
check with a mobile phone. She observed that when remote deposit
capture services include the option of immediate funds
availability, the service would be even more appealing to
unbanked and underbanked consumers, especially those who use
check cashers; and indicated that staff had talked to
representatives of several companies that provide or are
interested in providing remote deposit capture with immediate
funds availability, which would require one party to provide the
remote deposit capture technology and another party to guarantee
the funds made immediately available to consumers. She further
indicated that mobile imaging technology can be used for other

December 13, 2012


290

shared their observations about the information presented.
Professor Barr, noting that staff’s presentation had emphasized
the potential positive aspects of mobile financial services, but
that he personally is inundated with messages encouraging him to
spend rather than to save, asked whether the mobile banking
environment might be more complicated than alluded to in the
presentations. In response, Mr. Miller agreed that while
innovation can be helpful, it also can be harmful and that the
environment in which mobile banking services are offered is
complex and ambiguous, but that staff’s goal was to try to
identify ways in which the technology could be used in a positive
manner to bring the underserved into the banking system.
Professor Fuchs, noting that it did not seem as though it would
be much more expensive for those banks currently offering mobile
banking services to their high-income customers to extend the
service to low-income clients, asked whether emphasizing the low
cost factor might present an opportunity to incent banks to
actually offer mobile banking services to the underserved. In
response, Mr. Shepherd stated that, from his perspective, if
banks, especially community banks, could extend mobile banking
services to their unprofitable customers, it would likely
decrease the cost by half, thereby allowing many banks to compete
with larger institutions on the element of convenience and
expanding mainstream banking to unbanked and underbanked
consumers. Chairman Gruenberg asked what staff viewed as the
next steps, in response to which Mr. Miller indicated that staff
would continue to get the lay of the land and start thinking
about how best to encourage banks to start using mobile
technology to reach out to the unbanked.

In the way of suggestions, Mr. Beck recommended that staff
include the financial blogger community in its research, noting
that financial bloggers are a fast-growing group, each of which
has their own followers that can run into the tens of thousands;
that most of the information they post relates to how to use the
financial system intelligently, with an emphasis on frugality;
and that financial bloggers are an incredibly diverse group,
capable of reaching various subsets of the community. Ms. Levere
recommended that staff look at the “Weight Watchers” model of P2P
connections and social networking as a means of facilitating
better financial behavior; think about how to use behavioral
messages and programs, particularly with children and youth, as a
key methodology to move people from unbanked to banked status;
and explore what policy incentives can be used to significantly
advance mobile banking and facilitate the building of assets in
underserved communities. Mr. Orozco recommended that
consideration be given to several indicators introduced in

December 13, 2012


276

Mr. Ernst, after expressing that it was his privilege to
facilitate presentation of the Bank Survey results, introduced
his fellow panelists, the co-authors of the Bank Survey report,
Sherrie Rhine, Senior Economist, DCP, and Eric Robbins, Regional
Manager, FDIC Division of Insurance and Research (“DIR”), Chicago
Region. He noted that, in seeking to identify promising ways to
expand economic inclusion, the Bank Survey and Household Survey
should be taken together and that, as a consequence, the authors
of the Household Survey, Yazmin Osaki, Financial Analyst, DCP,
and Susan Burhouse, Senior Financial Economist, DCP, would join
Ms. Rhine and Mr. Robbins to participate in the discussion with
Committee members after presentation of the Bank Survey findings.
He then advised the Committee that, unlike staff’s presentation
of the 2011 Household Survey results, the presentation of the
2011 Bank Survey results would not offer much in the way of
direct comparisons to the 2009 Bank Survey because the survey had
changed significantly, going from a multi-hour survey to a 30-
minute survey. He observed that, although reducing the response
time had boosted response rates, it frustrated efforts to make
direct comparisons. However, he expressed confidence that, going
forward, the FDIC would build on the 2011 data. He further
expressed his belief that, because of its strong methodology, the
results of the 2011 Bank Survey would provide a factual
underpinning for some of the survey topics that are frequently
the subject of news reports and other studies based on less
formal methods.

Ms. Rhine then provided an overview of the Bank Survey,
noting that its objectives were to identify and quantify the
extent to which insured depositories reach out to serve and seek
to meet the banking needs of the underserved; identify the
challenges affecting the ability of insured depositories to serve
unbanked and underbanked individuals and households; and identify
strategies that insured depositories use to offer financial
products and services to unbanked and underbanked individuals and
households. She also noted that the survey was voluntary; that it
consisted of an internet-based questionnaire administered to a
nationally representative, random, stratified sample of 707
retail bank headquarters, with 587 banks, or 80 percent,
responding; that, through the survey design, banks were grouped
into one of three asset categories-those with assets greater than
$38 billion, those with assets greater than $1 billion but less
than $38 billion, and those with assets of less than $1 billion;
and that the survey was administered between November 2011 and
February 2012.

December 13, 2012


299

action the FDIC can take beyond what has already been done, and
perhaps seek input from national leaders and revisit the issue at
the Committee’s next meeting. He also observed that one of the
items highlighted by the discussion was that using account-based
debit cards is probably the most realistic platform for expanding
unbanked and underbanked access to financial institutions,
underscored his desire to build on that foundation, and expressed
hope that staff also could at the next meeting report additional
progress on the model transactions accounts. He noted that
KeyBank and Citi Group, from which the Committee had already
heard, are undertaking efforts in that regard and indicated that
he and Mr. Cisneros were working on a movement to expand that
effort, with the hope that additional institutions working on
similar efforts would soon be invited to make presentations to
the Committee. In summary, he stated that, with continued work
on the mobile banking issue and the release of the 2011 Household
Survey and 2011 Bank Survey, the Committee is engaged in a strong
series of initiatives. He then introduced Thomas M. Hoenig, Vice
Chairman, noting that he was the President of the Federal Reserve
Bank of Kansas City for 20 years, and its Director of Supervision
prior to that; that he was one of the national leaders on
financial regulation; and that it was a tribute to him of his
willingness to take on the role as Vice Chairman of the FDIC, and
asked if he would like to make any remarks.

Vice Chairman Hoenig, indicating that it was his first
meeting with the Committee, stated that he found the information
presented and discussions interesting and that the issues were
ones in which he had long been interested. Citing mobile
payments and its evolution and the opportunity for international
remittances presented by decoupled debit, he observed that there
are all kinds of possibilities on the horizon, but suggested that
the challenge would be to effectively harness the possibilities.
He then thanked Chairman Gruenberg for asking for his remarks.

There being no further business, the meeting was adjourned.

fo_

Robert E. Feldman

Executive Secretary

Federal Deposit Insurance
Corporation

And Committee Management Officer
FDIC Advisory Committee on Economic
Inclusion

December 13, 2012


275

Institute’s Center for Housing and Financial Markets. Deborah C.
Wright, Chairman and CEO, Carver Bancorp Inc., New York, New
York, participated via telephone.

Alden J. McDonald, Jr., President and CEO, Liberty Bank and
Trust, New Orleans, Louisiana; Robert K. Steel, Deputy Mayor for
Economic Development, The City of New York; and Peter Tufano,
Peter Moores Dean and Professor of Finance, Said Business School,
Oxford University and Founder and CEO of D2D Fund were absent
from the meeting.

Members of the Corporation’s Board of Directors present at
the meeting were Martin J. Gruenberg, Chairman, and Thomas M.
Hoenig, Vice Chairman. Richard Foley, Acting Designated Federal
Officer for the Committee and Acting Senior Counsel, Corporate,
Consumer, Insurance, and Legislation Branch, FDIC Legal Division,
also was present at the meeting. Corporation staff who attended
the meeting included Luke H. Brown, Kathleen S. Brueger, Susan
Burhouse, Alexander S. Cheng, Kymberly K. Copa, Carolyn D.
Curran, Christine M. Davis, Patricia B. Devoti, Keith S. Ernst,
Robert E. Feldman, Lekeshia Frasure, Janet R. Gordon, Benjamin
Gray, Leneta G. Gregorie, Matthew Homer, Kathryn S. Iverson,
Arleas Upton Kea, Sally J. Kearney, Ellen W. Lazar, Christopher
Lucas, Jonathan N. Miller, Janet V. Norcom, Erika Noyes, Yazmin
E. Osaki, Luke W. Reynolds, Sherrie Rhine, Eric W. Robbins,
Claude A. Rollin, Richard M. Schwartz, Eric J. Spitler, and Tanis
M. Stewart.

Chairman Gruenberg opened and presided at the meeting. He
began by providing an overview of the meeting agenda, advising
that the meeting would begin with a presentation of the results
of the FDIC’s 2011 Survey of Banks’ Efforts to Serve the Unbanked
and Underbanked (“Bank Survey”), followed by an update on mobile
financial services and the potential to use mobile banking as a
vehicle to expand access to financial services offered by insured
financial institutions, and ending with a discussion of one of
the key issues highlighted in the results of the FDIC’s 2011
National Survey of Unbanked and Underbanked Households
(“Household Survey”), specifically the issue of household savings
trends. He then turned the discussion over to the moderator of
the first panel, Keith Ernst, Associate Director, Consumer
Research and Examination Analytics, Policy and Research Branch,
FDIC Division of Depositor and Consumer Protection (“DCP”).

December 13, 2012


286

Addressing the findings of the Javelin study, Mr. Miller
noted that the study focused on the 25 largest financial
institutions and reported that twice as many consumers use text
messaging than mobile web or mobile apps, with 72 percent using
text messaging versus approximately 34 percent using mobile web
or apps; but that, despite more common use of text messaging
among cell phone users, relatively few of the top 25 institutions
allow access to accounts via text, with 76 percent allowing text
access as compared to 92 percent for mobile apps and 85 percent
for mobile web. He advised that the Javelin report also noted a
trend towards banks building more movement capabilities, such as
mobile bill pay, person-to-person (“P2P”) transfers, and remote
deposit capture, into their mobile offerings; and suggested that,
to the extent that funds are made quickly available, remote
deposit capture is likely to be particularly beneficial for lower
income consumers because of the convenience feature.

Concluding his overview, Mr. Miller indicated that, in
addition to reviewing external research reports, staff had begun
looking at some of the commercial mobile apps currently
available; had divided them into four large, sometimes
overlapping categories - mobile banking, mobile payments,
personal financial management, and financial education; and had
engaged in a number of conversations with developers of the apps.
Noting that many of the apps identified are associated with
prepaid cards, he stressed that, although many of the apps were
developed to provide financial services outside of the banking
system, staff’s focus was the opposite, to determine how the apps
could be used to bring consumers into the banking system. He
then introduced Matt Homer, Policy Analyst, DCP, and Ms. Osaki,
who he indicated would provide additional information about
staff's efforts to understand app-based offerings and insight
into staff’s conversations with some of the experts in the field.

Mr. Homer, noting that mobile apps are dynamic and
constantly evolving and that the work plan of the Mobile
Financial Services Subcommittee included keeping the Committee
informed about developments in the marketplace and establishing
the groundwork for future work plan actions, advised that, with
those thoughts in mind, staff was exploring how mobile
technologies are being leveraged by financial service providers
and used by consumers, and how those technologies may be used to
bring unbanked and underbanked consumers into the financial
mainstream; reviewing mobile apps currently used in the
marketplace and the features of those apps that may have value to
the unbanked and underbanked; and engaging in a dialogue on these
issues with stakeholders, including mobile app developers and

December 13, 2012


289

purposes such as signing up for direct deposit and bill pay
services.

With regard to the feature of alerts and notifications, Ms.
Osaki advised that the most well-known application allows users
to sign up with their bank to receive low balance alerts or
notification of whether a check has cleared; that timely text
messaging provides consumers with awareness of their finances in
real time, information that seems particularly beneficial for
consumers that tend to keep low balances; and that text messaging
is also being used in a proactive way to help users meet
financial goals. Elaborating on the proactive use of text
messaging, she reported that staff had talked to representatives
of a company, currently seeking a bank or credit union partner,
that provides an Hispanic-targeted savings coach, with a user
designated savings date, that sends proactive Spanish language
reminders about the savings date, questions the user about how
much he or she wants to save, prompts the user to submit the
total savings for the day, and encourages the user to continue
saving.

Concluding her presentation, Ms. Osaki advised that staff
was also learning how companies are adding other elements to
leverage the convenience and real time features of mobile
technology and making financial education and financial
management tools more powerful and actionable, citing as an
example of the former element a company that uses incentives such
as positive peer pressure to help users set savings goals that
are shared with friends and family, and as an example of the
latter a company that, in partnership with a credit union,
intends to link financial education and management tools to
specific financial accounts, with automatic transfer to a savings
account of funds not spent on, for example, a cup of coffee. She
stated that the common elements of many of the examples cited
throughout the presentation were convenience and real time
financial awareness for all consumers, but especially the
unbanked and underbanked; that staff would continue to explore
the mobile banking landscape and talk to industry experts to
learn more about technologies and models that could potentially
contribute to improving the quality of banking engagement; and
that the information gathered would be used to inform the FDIC’s
research and its economic inclusion partnerships and pilots.

A brief discussion ensued, during which Committee members
asked and staff answered several questions, Committee members
offered several suggestions to staff to facilitate and guide
their efforts in the mobile banking arena, and Committee members

December 13, 2012