The Ford Foundation has been working to close the racial wealth gap for over two decades, a gap much in the news these days, and one part of that effort has been to help "unbanked" low-income people escape from the shady world of payday lending and worse, and access the financial services that middle-class people take for granted. To that end, Ford recently gave $1 million dollars to the Center for Financial Services Innovation (CFSI) to continue its work on building financial tools for the underserved.
Ford is making the two-year grant through its Economic Opportunities and Assets program, and the money is for an "exploratory program" with the goal of "promoting a financial marketplace that provides high quality products and services that improve the financial health of low-income households."
You can see the other nonprofits funded by Ford in the assets grant-making basket here.
The Center for Financial Services Innovation (CFSI) describes itself as the "nation’s authority on consumer financial health." CFSI leads a network of "financial services innovators" committed to building financial products for the underserved, and includes a long list of banks, credit unions, and credit card companies. CFSI sees itself as "seeding the innovation that will transform the financial services landscape."
That's an important goal. An estimated 68 million adults lack bank accounts in the U.S., a staggering number, and it's the reason that vampire-like payday lenders and pawnshops operate everywhere.
A key argument that CFSI makes to anyone who'll listen is that since unbanked Americans are getting killed by high interest payments and fees, there's a huge opportunity here for institutions and entrepreneurs who can "develop high-quality, affordable solutions to address the financial health of underserved consumers." A study found that in 2013, "underserved consumers spent $20 billion in interest and fees on subprime auto loans" alone. That's a lot of dough.
Meanwhile, technological changes—particularly all the financial apps available for mobile phones—make it easier than ever to hook up unbanked people with financial services that will help them get ahead, as opposed to bleeding them dry. A focus on technology is big at CFSI, and several of its board members have a tech background.
You can see the logic of Ford supporting CFSI. Innovative actors have turned so many corners of American life upside down lately. Shouldn't that dynamic energy also be able to provide the poor with products to help them build wealth and stability? You'd think so, and Ford is putting money on that idea. The Annie E. Casey Foundation and the Omidyar Network are also behind CFSI.
Of course, major banks and credit cards have an obvious incentive to support CFSI, so it's no surprise to see that its funders also include American Express,Bank of America Charitable Foundation, Citi Foundation, Morgan Chase, and U.S. Bank.