Five Questions With Jennifer Tescher, president and CEO, CFSI
Jennifer Tescher is president and CEO of the Center for Financial Services Innovation (CFSI), the nation’s authority on consumer financial health. CFSI aims to transform the financial services experience in America by making it an industry priority to increase access to high-quality financial products and services for underserved consumers.
Since founding CFSI in 2004, Tescher has become a nationally known expert on this topic, with a monthly column in American Banker, frequent interviews and articles in the financial press, and major speaking engagements at a broad spectrum of industry and policy events. Tescher also launched CFSI’s annual conference, newly titled “Emerge: The Forum on Consumer Financial Services Innovation,” which presents cutting-edge thought leadership and showcases innovators, executives, and emerging companies in the financial services industries.
CFSI challenges and encourages financial institutions to develop products and services that enable good financial health for all Americans. In a nutshell, what business case do you make when you promote this idea to senior executives?
Financial services companies have long assumed that what Americans wanted was to get rich – and that was indeed how the country defined success. But aspirations have been shifting over the last 20 years, and it turns out that what consumers really want is to get healthy – physically, environmentally, and financially. To remain relevant in a 21st century, technology-driven, post-Dodd Frank world, financial institutions need a new competitive edge. We believe financial health represents a new and powerful basis of competition. After all, it’s what their customers really want.
CFSI takes the view that the terms “unbanked” and “underbanked,” which the financial services industry has long used to denote consumers who don’t (and perhaps can’t) use traditional banking products and services, have outlived their usefulness. Can you explain?
These terms were effective in spreading awareness of consumer challenges. They helped to galvanize financial service providers and policymakers to pay attention. But, yes, we think the labels have outlived their usefulness. They define the segment by its relationship to banking products and services. That is a limited criterion that overlooks other important factors affecting consumers’ financial lives. They also suggest that a bank account is the solution, but we have learned that access is critical but insufficient. We also live in a world where lots of players beyond banks are involved in people’s financial lives, and the old terminology doesn’t reflect that.
Ultimately, we believe that we should be focused on the ultimate outcome we seek for Americans, and that is financial health.
This requires products and services that directly address the needs of Americans who are struggling financially and may or may not have a relationship with traditional banking products. To do this successfully, we need to better understand the drivers of consumers’ financial behaviors and decision-making.
A recent CFSI report, Understanding and Improving Consumer Financial Health in America, found that 57 percent of American adults – approximately 130 million people – are struggling financially. What does “struggling” mean in this instance?
Financial health comes about when your daily systems help you build resilience and pursue opportunities. Based on our study, struggling means those Americans who are, to varying degrees, lacking a sufficient financial cushion, poorly positioned to achieve financial mobility, and having difficulty managing their day-to-day financial lives. For instance:
- 30 percent of American households say they could only make ends meet for three months or less if they were to experience a sudden drop in income.
- 27 percent of Americans report having less than $1,000 saved for retirement.
- 43 percent of Americans describe themselves as struggling to pay bills and credit payments.
In light of the study’s findings, what would be your top recommendation to financial institutions interested in improving the nation’s financial health?
The products and experiences that financial institutions offer, and the ways they engage with their customers, play a major role in helping consumers get, improve and maintain their financial health. Putting consumers at the heart of product strategy and design allows providers to develop tools and services that empower consumers and support their success.
We have created a framework for this called the CFSI Compass Principles. The principles are guidelines that define how the industry can design and deliver the basic tools that people need to manage their day-to-day finances and improve their financial health. The four core principles are:
- Embrace Inclusion: Responsibly expand access.
- Build Trust: Develop mutually beneficial products that deliver clear and consistent value.
- Promote Success: Drive positive consumer behavior through smart design and communication.
- Create Opportunity: Provide options for upward mobility.
The future of the industry is going to depend on products that achieve these goals – that are good for providers and customers alike.
CFSI clearly sees financial health as something no single metric can capture, but would you agree that extending credit scores to millions of consumers who cannot get them today would be a positive step toward improving the nation’s financial health?
Yes, we applaud and support efforts that aim to offer more consumers the opportunity to attain and maintain a credit score.
We know that more than 30 million American consumers have problems accessing traditional forms of credit because they lack sufficient credit history, and having a good credit score is a critical element of financial health. This is a problem for many types of consumers – low- to middle-income, recent immigrants, young people on their own for the first time, and many others with thin or no credit history. Innovative approaches have grown to notable scale, and consequently, millions of Americans have gotten the credit they deserve. And more organizations are joining in the effort. Still, we believe there is more work to do in credit building. The future is promising.