On Wednesday, the Consumer Financial Protection Bureau (CFPB) issued a report regarding the use of mobile financial services (MFS) by underserved populations. The CFPB was clear that the report was not “intended to identify areas in which the Bureau may or will take regulatory, supervisory, or enforcement action.” Rather, it was intended to summarize comments received in response to a request for information on this topic.
The report covers:
- the scope and types of MFS available to underserved populations,
- opportunities for MFS to reach these consumers,
- challenges and risks, and
- recommendations for moving forward.
The CFPB notes that, while the use of MFS has risen significantly for the general population, the same is not generally true for consumers in underserved populations. MFS channels include mobile banking through phone or tablet, personal financial management tools available on websites and mobile apps, text messaging, prepaid products, mobile (point of sale) payments, mobile billing, mobile money transfers, and cash-accessed digital channels. The CFPB reports a general consensus that MFS provides an opportunity to reach underserved populations and enhance their access to financial services from both banks and nonbank providers. And, according to the report, most commenters agreed that, pass-through costs aside, MFS could lower banking costs to these consumers.
But increasing the use of MFS is not without challenges and risks. Commenters expressed concerns about increased costs to the industry in implementing and maintaining these services, as well as concerns regarding data security, privacy, fraud prevention, compliance with other statutes such as the Telephone Consumer Protection Act (TCPA) and the Electronic Signatures in Global and National Commerce Act (E-SIGN Act), a lack of digital financial literacy among targeted consumers, and an already “vanishing branch network” in underserved neighborhoods, which MFS might replace. The recommendations from commenters for moving forward include educating consumers and, obviously, addressing these challenges and risks. It remains to be seen, however, how the CFPB will balance these concerns with any action it takes regarding MFS and its mission to expand the availability of financial services in underserved populations.
A copy of the report is available here.