How families can build wealth despite a broken system

Financial Inclusion at City: A Deep Dive with Lisa Fryson

Key Concepts:

• Financial Inclusion: Expanding access to financial products and services for underserved populations.
• Underbanked: Individuals with limited access to traditional banking services.
• Credit Readiness: The state of being prepared to responsibly manage credit, beyond simply being "creditworthy."
• Financial Resilience: The ability to withstand financial shocks and maintain financial stability.
• Money Mindset: An individual’s beliefs and attitudes towards money.
• Alternative Underwriting: Utilizing non-traditional data points to assess creditworthiness.
• BankOn Certified Accounts: Low-cost checking accounts designed to bring more people into the banking system.

I. Defining and Approaching Financial Inclusion

Lisa Fryson, Head of Financial Inclusion at City, defines financial inclusion as “creating more on-ramps and access to the products and services that people need to address their financial lives.” City established a dedicated team in 2022 to accelerate these efforts, focusing on developing products, services, and marketing strategies to support broader economic progress. Fryson emphasizes that financial inclusion isn’t solely about assisting those struggling financially; it also encompasses individuals who have made different financial choices but could benefit from improved access and guidance.

II. Targeting the Underbanked and Low-to-Moderate Income Populations

City’s approach to financial inclusion targets both the underbanked and low-to-moderate income consumers. A key product example is the “Access Checking Account,” a BankOn certified account designed to provide low-cost access to banking. Beyond products, City prioritizes providing advice and guidance to help customers navigate their financial journeys. Fryson highlights the importance of creating “on-ramps” into the banking system, acknowledging that trust in financial institutions can be a significant barrier.

III. Root Causes of Being Underbanked

Fryson identifies several reasons for individuals being underbanked, including limited access to services and a lack of trust in financial institutions. However, she notes progress has been made in creating more access points. The discussion acknowledges that being low-to-moderate income doesn’t automatically equate to being underbanked, and vice versa.

IV. Addressing Generational Trauma and Financial Wellness

The conversation touches upon the psychological aspect of financial well-being, referencing “financial therapy” and the impact of past generational traumas on current financial behaviors. Fryson acknowledges that a person’s “money mindset” significantly influences their financial situation, noting that people spend approximately 4 hours a day thinking about money, which can manifest as stress. City aims to reduce friction and simplify banking through digital tools for spending tracking and planning, as well as providing one-on-one support through branch teams and phone consultations.

V. Balancing Profitability with Social Responsibility

A critical point raised concerns the inherent tension between a bank’s profit motive and its role in serving underserved communities. Fryson asserts that City’s purpose – “enabling economic progress for everyone” – guides its approach. She highlights City’s investments in inclusive solutions, citing two examples:

• City Financial Pathways: A website consolidating inclusive products and services alongside educational resources, designed based on direct feedback from underbanked consumers and community partners.
• Affordable Housing Resident Initiative: A program focused on helping residents of affordable housing complexes learn about rent reporting, connect with non-profits, and potentially pursue homeownership.

Fryson emphasizes the importance of balancing the bottom line with the bank’s responsibility to do good in the community.

VI. Expanding Credit Access and Alternative Underwriting

The discussion pivots to the role of credit as a “gatekeeper to opportunity.” Fryson introduces the concept of being “credit ready” versus simply “creditworthy,” suggesting that individuals can be prepared for responsible credit management with the right support. City is exploring “alternative underwriting solutions” to assess creditworthiness beyond traditional methods, aiming to expand access to credit for those who may be overlooked. She mentions companies like the one discussed (presumably "U") that are focused on reporting rent payments to credit bureaus.

VII. Prioritizing Financial Tools and Normalizing Financial Conversations

Fryson recommends three key financial tools for parents to prioritize:

1. Healthy Money Mindset: Reframing beliefs about money and recognizing its potential.
2. Savings Habit: Consistently setting aside a portion of income, even small amounts.
3. Continuous Learning: Staying informed about financial matters and seeking guidance as needed.

She stresses the importance of normalizing financial conversations within families, suggesting monthly “money meetings” and utilizing available community resources. She shares a personal quote: “Start by starting,” acknowledging that initiating these conversations can be challenging but crucial.

VIII. A New Year’s Financial Resolution & Long-Term Vision

For 2024, Fryson recommends establishing a savings and investing habit, tailored to individual circumstances. She differentiates between building a foundation for those with limited resources and planning for future growth for those with more financial flexibility, emphasizing the importance of having a plan for unexpected income (bonuses, tax returns, etc.).

IX. Measuring Progress in Financial Inclusion

Fryson states that there isn’t a single metric to measure improvement in financial inclusion. Instead, she emphasizes tracking the number of people on a path to “financial resilience” and ensuring that historically underestimated populations achieve similar rates of financial success as more affluent groups.

Notable Quotes:

• “Financial inclusion is really about creating more on-ramps and access to the products and services that people need to address their financial lives.” – Lisa Fryson
• “Time is currency.” – Lisa Fryson
• “Everybody’s worthy of credit, are you credit ready?” – Lisa Fryson
• “Educate yourself so you can advocate for yourself.” – Lisa Fryson
• “Start by starting.” – Lisa Fryson (quoting a motto on her desk)

Data & Statistics:

• People spend approximately 4 hours a day thinking about money.
• A Prosperity Now study predicts Black median wealth will be at zero by 2053.

Conclusion:

The conversation with Lisa Fryson provides a comprehensive overview of City’s approach to financial inclusion. It highlights a commitment to not only providing access to financial products but also addressing the underlying psychological and systemic barriers that prevent individuals from achieving financial stability. The emphasis on education, alternative underwriting, and community engagement underscores a holistic strategy aimed at fostering long-term financial resilience and closing the wealth gap. The discussion acknowledges the complexities of balancing profitability with social responsibility, but ultimately positions City as an organization striving to make economic progress more accessible for all.