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Innovations in Financial Services

The Treasury Financial Empowerment Innovation Fund (“Innovation Fund”) supports the development, testing and evaluation of new products, services and strategies that make safe and affordable financial services available to more Americans 
In late 2014, Treasury awarded more than $6.2 million in multi-year research contracts with nonprofit and for-profit entities, academic institutions and state and local government agencies to implement pilots and evaluations in the areas of expanding access to financial services among underserved populations; retirement savings; classroom based financial capability; and making informed higher education decisions.  The projects vary widely in methods and complexity, ranging from evaluations of existing strategies to the development, testing and marketing of totally new products and services. 

Insights and Takeaways as of Spring 2017
While several of the Innovation Fund projects are still in the implementation stage, the following bullets highlight key learnings to date. 
·         Straightforward, factual and step-by-step information works best for introducing new financial services and products to lower-income consumers.  Email messages are more effective when they are tailored to the particular needs and interests of the consumer.  
·         Prepaid card users, particularly those with prior history with credit products, are open to using a secured credit card in tandem with their prepaid card as a means for strengthening their credit.
·         Children and youth prefer “hands-on” and fun financial education curricula that simulate real life.  For teaching financial education in schools, it is critical to have the support of school administrators and teachers.
·         Mobile games appear to be helpful for high school students who are exploring attending higher education and who are learning about student aid. 
·         Personalized counseling or mentoring and mobile games can reach students with information and encouragement for attending higher education.  Near-peer coaching may be helpful also for increasing student’s financial decision-making skills.
Additional Insights
Retirement Savings Strategies
The Center for Social Development and Intuit, Inc. tested communications to inform lower-income online tax preparation customers about opening a myRA account at tax time.  myRA is an online starter retirement savings account developed by the U.S. Treasury (
Early Insights:
·         Low-income TurboTax Free File customers are interested in learning more about myRA.
·         Straightforward email messages are more effective than aspirational messages for introducing myRA accounts to low-income tax filers.  Timing of email messages makes a difference.  Emails delivered near the start of tax filing season increase the likelihood that the recipient will respond positively to offers to open a myRA account at tax time.     
Classroom Based Financial Capability Curricula
The University of Wisconsin piloted and evaluated the My Classroom Economy method in fourth and fifth grade elementary school settings, and MindBlown Labs and Commonwealth both created and evaluated mobile games geared to high school youth.
·         The My Classroom Economy method was found to be effective for teaching money and budgeting concepts to fourth and fifth grade youth participating in the pilot.  More research is needed on using the method in additional grades.
·         Teachers found the My Classroom Economy intervention useful and parents reported participating students were more engaged in thinking about money management.
·         Mobile games can reach high school youth with lessons and information for financial decision-making.  More research is needed, including on the importance of pairing the games with classroom based curricula.
Higher Education Decision-Making
Three projects are examining strategies for providing lower-income high school and college students with guidance on attending and paying for higher education.  College Possible administers an intensive “near peer” coaching and mentoring program, UAspire uses one-on-one sessions and text messages, and Commonwealth developed the “Ramp it Up” mobile game for this purpose.
Early Insights:
·         Personalized counseling or mentoring appears to be effective for reaching high school students whose family members have not previously attended college and for providing these students with information and encouragement for attending higher education.  Near-peer coaching may be helpful for increasing student’s knowledge of financial concepts and financial decision-making
·         Texts and game-based messages can be effective for helping students learn about college application and financial aid procedures and deadlines.
The Brookings Institution and the Urban Institute are studying the effects of giving high school students information on “return on investment” of attending different colleges.
Early Insights:
·         An early component of the research found that many students are not likely to consider return on investment information in their choices of where to attend college, due to the reality that many students opts for schools relatively nearby their home towns.  For more information, see Choice Deserts:  How Geography Limits the Potential Impact of Earnings Data on Higher Education  More research may be helpful on this topic. 
The University of Wisconsin’s Borrow Smart project compared the effectiveness of the Department of Education’s online loan counseling system with the Cennate Corporation’s online LoanLook counseling. 
·         The LoanLook interactive student loan counseling does not result in significant differences in amounts of student loans borrowed, in comparison to the Department of Education’s text-based straightforward online counseling system, when used by students attending a national for-profit online university. More research may be helpful to understand why.
Expanding Access to Financial Services among Underserved Populations
Banking Up, a national prepaid card provider, developed and piloted a new prepaid card feature that helps users qualify for, obtain, and use a secured credit card as a means for building their credit.
·         Banking Up’s new credit building product appeals to active prepaid cards users with annual incomes in the mid-range of all prepaid card users (approximately $25-$40,000).
·         The most effective marketing messages for this product give step by step explanations on using the product.   Messages distributed via the prepaid card app are effective also for informing customers about the new credit building product.
·         Lack of clarity on the regulatory environment may inhibit prepaid card providers from providing this type of product.    

The City of San Francisco and the San Francisco Housing Authority are helping public housing residents build credit and strengthen their financial capability.  The housing authority is allowing the residents to pay their rent electronically and to schedule automatic rental payments, and the authority is reporting timely rental payments to credit bureaus.  In addition, the city is providing residents with financial coaching, access to affordable bank accounts and/or prepaid cards, and incentives for saving for emergency needs. 
Early Insights:
·         Housing authorities and rental community management companies can be certified as data furnishers for reporting rental payment data to the Experian credit bureau.  To be effective in rental payment reporting, the housing authorities must have strong data systems.   Housing authorities and management companies may need to obtain residents’ prior approval before sharing rental payment data with credit bureaus.
·         Many residents at the San Francisco public housing communities are cautious about participating in financial capability programs
The New Jersey Department of Children and Families is demonstrating the change from distributing foster youth stipends via paper checks to electronic payments in the form of payment cards and direct deposit.
Early Insights:
  •   Youth and young adults who are aging out of foster care quickly adapt to electronic payments and are interested in using apps and on-line systems for tracking their receipt of benefits and learning about financial decision making. 
Last Updated: 4/11/2017 9:55 AM

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