This past week, I was invited to a workshop run by the Center of Financial Services Innovation (CFSI) and hosted by J.P. Morgan Chase. The workshop started early in the morning with breakfast and introductions. The next hour was spent setting context for the workshop, describing the goals for our activities, and planning logistics for our “field activities” (described below).
During the intro presentation, we covered many of the sobering facts concerning the financially underserved community. One specific statistic that I hadn’t seen before was that nearly 90% of the U.S. adult population preferred income stability to income growth. Both are clearly desirable, but it was surprising to me that the breakdown was so heavily skewed towards stability. To supplement the figure, we walked through the finances of a real household in N.Y. in which the husband is a construction worker, and the wife worked in childcare. On average, they made enough money to get by, but the month-to-month fluctuation of their income was staggering.
The takeaway for me was that any financial empowerment program should not just assume that a higher income or more money is going to solve every problem. A key focus should be on teaching people how to reduce or manage the weekly or monthly fluctuations in their income. It also made me think about just how crucial it is to have a emergency fund.
The second part of the workshop involved putting ourselves in the shoes of the underserved communities. We were tasked with completing several financial transactions the same way that many lower income households accomplish them. The tasks were:
- Cashing a payroll check
- Cashing a personal check
- Purchasing a reloadable debit card
- Adding money to the reloadable debit card
- Sending money via Western Union
- Receiving money via Western Union
- Getting a money order
- Visiting a pawn shop
Our assigned location was in Harlem and was centered at the intersection of Malcolm X Blvd and 125th St. We had about 20 minutes to develop a plan, so we used our phones to locate a few check cashing places, Western Union locations, and other local financial shops. After that we took off on the subway, and quickly arrived to start working on our tasks. While we weren’t able to finish everything, here are quick highlights from what we did get to.
Cashing a Check
Part of our package included a payroll check made out in my name, that we needed to cash. The first check cashing place we went to rejected us because the check was issued by an out-of-state company. Thankfully, we hadn’t waited in line for that long and decided to leave and try another place. The second check cashing place we visited didn’t have that restriction, so I was able to cash my $80 check and get back about $78.40. Thankfully, NY regulates these rates and has set a standard 2% fee.
Prepaid/Reloadable Debit Card
Part of the assignment was to also buy a reloadable/prepaid debit card. Although I wasn’t aware of this, many people use these to give money to kids, babysitters, or themselves when they don’t want to carry plain cash. To purchase a new $10 card, I had to pay a $3.95 fee. Later, when I wanted to add $20 to this card, I had to pay another $3.95. For a total transaction amount of $30, I paid $7.90 or about 26%. At least for those given values, that is a pretty hefty fee.
In order to send money, we decided to locate a Western Union store. We quickly realized that we could send money from a Duane Reade store, and accomplishing this task was relatively easy. The particular Duane Reade we went to had a Western Union machine that was able to guide us through the whole process (yay technology!). However, when we went to receive this transfer at a Rite-aid, there was simply a Western Union telephone that we could use to call Western Union. This process was much harder as the call quality was terrible and it involved transcribing a lot of information. While I didn’t personally conduct these two transactions, and therefore didn’t mark down the fees, I still realized how slow and inefficient this process is in the age of Venmo, Square, Apply Pay, etc.
- The people who worked at the check cashing stations were very helpful. Perhaps they could tell that it was our first time, but they did a great job explaining the products and what information was needed. This job must require endless patience.
- The wait times weren’t too bad, but I can’t imagine waiting in line multiple times a week, and potentially with small children.
- The fees were probably the most upsetting part of the exercise, because for every single transaction, we had to pay a few dollars to get it done. Tragically, and paradoxically, it confirms the notion that ‘being poor is very expensive’.
As we debriefed with the other attendees, I noticed everyone was a little more energized to help solve the problems we witnessed. Many of the J.P. Morgan employees pointed out that they have a ‘Liquid’ card, which could help eliminate many of the fees we incurred. Another attendee made a great point that instead of trying to solve these issues with new products, we could also try to improve the technology of the existing institutions to better serve their customers.
This workshop was extremely valuable to me because although I had written about these topics before, I had never truly experienced the difficulties of being unbanked. That is not to say that a half-day’s worth of pretending can truly help me understand. On the contrary, I felt even more empathetic for people who aren’t ‘pretending’ and have to accomplish these tasks every single day.