Compass Principles for the Underbanked
Banks and credit unions of all sizes are exploring ways they can better meet the needs of financially underserved consumers. Corporate leaders are exploring comprehensive strategies to meet transactional needs such as cashing checks, sending money home and paying bills; borrowing needs of buying necessities until the next pay check or handling an emergency; and the savings goals of planning for a stronger tomorrow. The key question remains, “How do we ensure these products and services are high quality?”
My organization, the Center for Financial Services Innovation (CFSI), recently introduced the Compass Principles to help guide companies and their leaders to create high quality financial services. These principles affirm standards of excellence in the design and delivery of basic tools that people use to manage their daily financial lives, such as checking and savings accounts, prepaid cards and small-dollar loans. The principles are:
- Embrace Inclusion: Responsibly Expand Access
- Build Trust: Deliver Clear and Consistent Value
- Promote Success: Link Smart Design with Actionable Guidance
- Create Opportunity: Provide Options for Upward Mobility
These principles are grounded in core values, first and foremost being the idea that financial services products must be sustainable and scalable. Offerings must be profitable in order to provide lasting solutions for customers. For each principle, CFSI provides a definition, success indicators, and examples of how to apply the principles to transaction, saving and credit products.
For example, to build trust, consumers must be able to clearly understand and derive value, without pitfalls, from their financial products and services. Providers who achieve this goal will develop ongoing, long-term relationships of support and accountability. An example of putting this practice into action is allowing reasonable grace periods to enable consumers to avoid late payment fees and penalty interest rates.
By proactively helping consumers, providers demonstrate that they care about their customers. By consistently helping and doing what you say you will do, you will build trust. You will develop happy customers that look to you first for their financial services needs and are active in referring others to your company.
The Compass Principles can be used as a checklist to guide high quality design. Company leaders can review the principles and examples to inform product development. At key steps, they can honestly assess whether or not their own offerings uphold these goals. If not, the can apply the principles in a way that fits their business model and their customer needs. In this manner, the principles provide a roadmap for companies as they develop new products or modify existing products.
There is much work to be done to transform the Compass Principles from words on a page to a blueprint for action. They need to be discussed and debated throughout the marketplace, by financial services providers, consumer advocates and policymakers. Robust cross-sector dialogue is critical to generating shared understanding and giving the Principles credibility. Companies can and should engage in this dialogue.
Looking ahead to 2012, I’m optimistic that we will see more financial institutions offering comprehensive products and services to meet the needs of financially underserved consumers. And I’m confident that CFSI’s Compass Principles will help ensure they are indeed high quality offerings.