“I’ve always been a good saver,” says Stevenson. “I’ve never understood it when people say, ‘I can’t save any money because I don’t make a certain amount of money.’ No, you set aside a little bit. And you just keep doing it. Period.”
Stevenson shares this philosophy with the men he coaches at Ujamaa Place in his role as employment counselor. He also happens to share with many of them a lack of trust in the mainstream financial system.
Years ago, Stevenson walked into his bank looking to make a routine withdrawal. Instead of fulfilling his request, the teller told him he’d need to speak with a personal banker: His account had been seized. “There was no explanation,” says Stevenson. “No phone number to call, no way to get more information. My money was just gone. All of it.” He was left to navigate the situation on his own, with no support in which to turn.
Shaken and discouraged by the loss of his entire savings, Stevenson decided to step away from mainstream banking altogether. By the time he felt ready to give banking another try four years later, he again hit a snag: Stevenson learned that due to his banking history, he had been blacklisted by ChexSystems, a national consumer reporting agency. As a result, he couldn’t open an account at all.
“That was the end of me and banking,” says Stevenson. “I got a Walmart Money Card, went home, and put all my money back in my shoebox.” In turning to the alternative financial services – or “fringe” – market, Stevenson ensured he’d at least have a way to cash his paychecks and pay his bills. But he quickly ran into the downsides of those “conveniences.”
“You pay to put money on your card,” he says. “You pay to withdraw money. You pay for money orders to pay your bills. Nothing is free.”
Stevenson estimates he’s spent $5,000 in fees to access his money over the past three years. Yet despite his frequent repeat business, he says the Walmart MoneyCenter won’t even cash his check if it doesn’t look a certain way.
“I realize this isn’t an actual bank,” he says. “But I miss the days when the people who handled your money were people you saw out in the community. They knew you and did what they could to help you.”
The bigger picture: How banks shift the burden to low-income individuals
Stevenson’s experience of getting caught between the mainstream and the “fringe” financial market is not unique. Nor is the amount of money he spends to access his own funds. “Unfortunately, people have figured out ways to extract massive amounts of money from very poor individuals,” says Jen Alstad, Founder of bswing and consultant to Prepare + Prosper. “Big capitalism—which is our system in the US—centers everything around what works best for the bank.”
Years ago, Prepare + Prosper—along with a leadership team that spanned leaders from nonprofits, government, banks, and start-ups—envisioned a new financial services model that could center and support customers regardless of their income or banking history. They saw that offering as a cross-sector effort shared by banks, nonprofits, and community access points (including government and employers) — all coming together to create a new way of banking. With her expertise in human-centered design, Alstad helped Prepare + Prosper organize and facilitate listening and co-design sessions with community members.
The members of this focus group qualified as either “unbanked” (someone who has no access to federally insured accounts) or “underbanked” (someone who has access to mainstream banking but who still must turn to “fringe” financial services to meet financial needs).
Prepare + Prosper had been listening to their customers for many years, incorporating real-life insights into services and partnerships with banks and credit unions. The goal of these specific listening sessions was to learn 1) what it would take to restore the customers’ trust in a banking relationship and 2) what kind of features, products, and fees customers would want in a community bank.
FAIR gives underserved customers a voice — and a choice
“Every aspect of the FAIR products and services grew out of these listening sessions,” says Alstad. “Prepare + Prosper heard that the most important things to customers are transparency and predictability — both of which are in short supply in mainstream banking.”
That lack of transparency can be the hardest part to navigate, says Julia Sisson, former Financial Wellness Coordinator at EMERGE Community Development, a FAIR distribution location. And especially for individuals who are already marginalized due to institutional racism, poverty, and/or bigotry, it adds another level of exclusion.
“I think many people have a built-in trauma response to money going anywhere other than right into their hands,” says Julia. “Maybe they’ve had their account seized. Or they’ve watched the credit union across the street close its doors and just disappear. In every case the message is, ‘You’re on your own.’”
Julia has observed a major disconnect between mainstream financial institutions and the people EMERGE serves. “There used to be a credit union across the street from us, but they left. That flight doesn’t surprise me, given the lack of willingness to reach out and listen to the people who live here.
“And so why do those financial institutions even deserve these individuals’ money?” she wonders. “They don’t.”
Rethinking banking for the underserved customer
Across income levels, traditional banks have proven themselves out of touch with customer needs, charging $30 billion a year in overdraft fees, according to a Moebs Services, a research firm focused on financial institutions. Banks have also demonstrated little appetite for investing in the underserved market, whose customers spend $189 billion in fees each year in the alternative financial services marketplace according to the Financial Health Network.
“The great thing,” says Julia, “is that we don’t actually have to fix the old way. We can create a new way, and let people decide what works for them. FAIR is paving that way forward.”
Once a new FAIR customer receives their initial coaching session and onboarding with a community partner (such as EMERGE or Prepare + Prosper), account management happens almost exclusively online. The emphasis on digital access lets FAIR serve community members who live in “financial deserts.” Such areas get created when traditional banks either avoid the neighborhoods, or close their doors to move across town, stripping wealth as they go.
The digital approach also enables scaling within FAIR’s unique distribution model, which features a decentralized network of community partners customers already know and trust.
A radical inversion of trust
“No matter what your banking history looks like, FAIR wants you as a customer,” says Jen. “Behind that business decision is a belief that people are creative and resourceful, and that they always make the right choice based on their understanding of their available options.”
“That’s a very different approach from the one most mainstream banks take. But despite the way traditional banks often treat people on the lower end of the economic spectrum, it’s not that these customers don’t know what they’re doing. It’s that the old system hasn’t worked for them.
“FAIR breaks the mold in a number of ways,” Jen continues. “One way is by setting up as equal stakeholders the consumer, the organization (FAIR), and the bank. This shared responsibility really is a radical inversion.”
Trusted distribution partners throughout the community
One way FAIR demonstrates its relationship-centered approach is by taking the customer experience out into community. Customers encounter FAIR products and services in familiar places where they already receive services, go to work, or gather for worship.
“Most banks have a take-it-or-leave-it attitude. It’s disrespectful, and it makes no business sense,” says Alstad. “We would never tell a customer to ‘just trust us.’ We embed our services in the places where trust already exists, and we go from there.”
“That community aspect is what made me want to give FAIR a shot,” says Stevenson. “And I think it’s going to go over well with Ujamaa participants. They will be able to sign up right here, in the same place where they come to class and receive services. It means a lot that they came to me—I didn’t have to go looking.”
With his strong commitment to saving, Stevenson appreciates that FAIR offers a savings account and a credit builder loan in addition to checking. “We expect our participants to complete certain milestones before we consider them alumni,” he says. “And at least on the financial front, FAIR has everything a person needs to start building wealth and working their way back to the mainstream financial market.
“I believe we all need to be engaged in traditional banking,” he adds. “For better or worse, your opportunities are limited if you aren’t playing in that league. Being able to walk into a traditional bank gives you confidence and courage.”
The future of FAIR
FAIR is already thinking about the future, says Alstad. “In the state of Minnesota alone, there are around 256,000 unbanked or underbanked households. That’s a pretty ripe growth path. Our aspiration is to show this is a better way to manage your money than going through the fringe market financial services industry.”
Though new to the FAIR products and services, Stevenson already notices a difference in his outlook. “I think the word ‘fair’ gets tossed around a lot,” he says. “I’ll admit I was skeptical at first. But these products and services actually mean what they say.”
“To me, this is an example of the way ‘fair’ should look.”
