Family Finances

It’s Time for the US to Commit to Public Financial Health by Building More Inclusive Financial Systems

October 25, 2021  • Ida Rademacher & Financial Security Program

Since March of 2020, the world has had a crash course on public health. For the first time in most of our lives, we watch as leaders around the globe develop, coordinate, execute, and continually adapt population-level strategies to protect the physical health of humanity.

Now it’s time for a public financial health strategy here in the US—one that takes a systems-level view of what’s driving the poor financial outcomes of 42 million people in the US, and that outlines a systemic approach for improvement.

Leaders in the Senate are poised to take up this challenge. While most of the country focused on the deadlock in Washington, Sen. Chris Coons called for a bipartisan Presidential Commission to create a national, interagency financial inclusion strategy at the 2021 Global Inclusive Growth Summit. The commission is the necessary next step in the development of a public financial health strategy for America. 

At the Aspen Institute Financial Security Program, we have been collecting hard data and personal narratives on the financial lives of people in America for six years. Our accumulated reporting shows that a key contributor to the poor financial well-being of people in America is the combination of exclusivity and flaws within our financial systems. The pandemic provided us with a well-defined case study.

The pandemic has proven that when our consumer-facing financial systems are put under pressure, large parts fail—and they fail primarily by leaving out the most vulnerable and historically excluded in American society. This is not a pandemic-specific problem — exclusion is baked into our current systems, and recent efforts to root it out are scattershot at best — but the brokenness exposed by the pandemic put the problems into sharp relief.

Though our government, the private sector, and community organizations moved quickly to blunt the economic impact of the crisis, millions of Americans were passed over by the response. Economic Impact Payments had trouble reaching those with no bank accounts, and when they did unbanked recipients paid an estimated $66 million in check cashing fees. Unemployment Insurance, already wildly imbalanced from state-to-state, struggled for months with the influx of claims, and half of unemployment claimants experienced payment delays in June 2020. While 52% of Americans had to dip into emergency savings, another 43% of adults in households making less than $50,000 a year reported having no emergency savings in 2021. Paycheck Protection Program loans were approved at higher rates for big businesses than small ones, and many banks required a deposit account or existing loan to process an application. The effects of this disparity fell disproportionately on individuals and businesses within Black, Indigenous, and communities of color, who often lack access to credit, financial services, and even the physical presence of financial institutions in their communities. 

Making sure that every person in America has easy access to safe and affordable bank accounts, savings and retirement accounts, credit, insurance, and safety net programs when needed would be a critical—and monumental—first step toward national public financial health. Longstanding exclusion from financial services, particularly for people of color, requires us, at minimum, to become explicit in word and deed about making our financial systems accessible to all. But access alone will not be enough; people must also be able to engage with, utilize, and reap the benefits of financial tools and services in ways that help them build both short-term stability and long-term financial security.

We need a national strategy that directs associated federal agencies to study their role in the problem, develop coordinated strategies, and create the appropriate tools. These include regulations, enforcement powers, enabling infrastructure, and market facilitation where necessary. These tools should be developed in conversation with the private and social sectors, who deliver the vast majority of our financial services.

But we cannot stop there. An inclusive financial system is about more than the accounts and payments rails designed to move, store, lend, grow, and protect money. It also must include basic facilitators like digital identity and broadband access, and must acknowledge that government safety net and retirement savings systems fail to serve millions of people in America.

Additionally, we must acknowledge that there are many sectors in our society whose purpose is to deliver non-financial goods—like healthcare, housing, higher education, or justice—which squeeze revenue out of our fellow Americans. Administrative fees, interest, financing charges, financial penalties, and intermediary products like debt consolidation in healthcare or the courts are now too costly to ignore; they put tremendous strain on households while also creating a drag on our national economy. We will not achieve public financial health without addressing the harm non-financial sectors are inflicting on the financial security of too many people in America.

The current situation is dire. Even as we begin to emerge from the cloud of the pandemic, paying bills on time is a problem for 25% of Americans, and 30% worry daily about the amount of debt they carry. Thirty-two percent are having difficulty paying for usual household expenses including food. Forty-one percent of Black-owned small businesses, 32% of Latinx owned, 26% Asian-owned, and 25% women-owned closed due to the pandemic by April 2020, compared to 17% of white-owned small businesses.  

Establishing a Presidential Commission on financial inclusion such as the one recently called for by Senator Coons is a critical next step. This bipartisan commission could include leaders who have provided financial services directly to historically excluded communities and include a mix of financial services experts and practitioners. It could work across the service silos that often exist between disparate federal agencies, financial service providers, and community-based organizations to assess the inclusiveness of our current systems, evaluate the potential for technology to achieve financial inclusion in underserved communities, and set a national strategy for the federal government to coordinate across sectors to build inclusive financial systems across the United States.

The time is now. The poor state of our national public financial health is on display, with the cracks in our financial systems fully exposed. At the same time, we find ourselves in a unique moment where financial services providers have made bold public commitments to become truly inclusive, where recent advances in technology help make those commitments possible, and where government officials are ready and willing to call for change. Let’s not squander this moment.

To improve household financial security, a Presidential Commission to create a national financial inclusion strategy is the right thing to do. From a national standpoint, a truly inclusive economic recovery depends on it.

Ida Rademacher is the executive director of the Aspen Institute Financial Security Program. 

About The Aspen Institute Financial Security Program
The Aspen Institute Financial Security Program’s (Aspen FSP) mission is to illuminate and solve the most critical financial challenges facing American households and to make financial security for all a top national priority. We aim for nothing less than a more inclusive economy with reduced wealth inequality and shared prosperity. We believe that transformational change requires innovation, trust, leadership, and entrepreneurial thinking. FSP galvanizes a diverse set of leaders across the public, private, and nonprofit sectors to solve the most critical financial challenges. We do this through deep, deliberate private and public dialogues and by elevating evidence-based research and solutions that will strengthen the financial health and security of financially vulnerable Americans.

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