Do The Poor Need Bank Accounts…Or Something Else?

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According to The World Economic Forum, 1.7 billion adults don’t have access to bank accounts. Since starting at MasterCard in 2001 and throughout my time at Citi and American Express, I’ve seen “the unbanked” on almost as many slides as “data”. Both, were supposedly huge, untapped opportunities. (And at ruthlessly pragmatic financial firms, they shared the same level of altruism: none.) Both were wildly oversold, but for different reasons. The data goldmine hovered between tin and copper. Privacy regulations, contracts and opt-outs made the shiniest, targeted nuggets untouchable. The unbanked faced different problems – inflexible technology and the high costs of a complex, multiparty system. The economics of serving the poor were…poor. Since then, some things have changed, but the most important, have not. America’s unbanked need something very different.

Recently, companies like mPesa, a mobile payments provider in emerging markets like Africa, proved that the poor can be served profitably, at scale, at a fair price. But their model works best in places without legacy infrastructure. In the west, similar solutions face heavy compliance and processing costs.

In the US, smartphone penetration gives fintech startups like Robinhood, Simple, Square’s Cash app, and Paypal’s Venmo deeper reach into the under-banked. Mostly to the young, tech savvy, and educated. People with economic upside. Companies like Green Dot (prepaid cards) and payday lenders can get deeper into the unbanked, but at crushingly high fees.

What never comes up in board rooms is why some Americans are unbanked in the first place. Our brand of poverty is distinctly American.

Globally, poverty rates are plummeting, but a 100-year global population boom keeps absolute numbers stubbornly high.

While emerging countries, like China, struggle to develop credit scoring, banking and communications infrastructure to support millions ascending from poverty, Americans are doing something else – watching people fall. We have all the technology, wealth, and know-how, but not the desire. Everyone reveres the ascent, but we fear and shun the decline.

America’s decline is subtle because it’s an incongruous mix of amenities and deprivations. The same person can have a smartphone and freezer full of breaded chicken tenders, but no job, healthcare or prospects. Some suffer from serious illness or addiction to meth or opioids.

Unlike younger, more able bodied Africans, Asians or Latin Americans, our poor are surrounded by modernity, but lack the tools, incentives, or will to fully participate in it.

Youth and hunger have an innate momentum. That’s why can lend a Kenyan woman $200 and she’ll have a flourishing pottery business in three months.

Decline has no momentum. It’s a gradual decay. To those mired in it, access to loans won’t muster much entrepreneurship. It demands a completely different set of solutions. Free stock trades and low transaction fees rank well below hope, stability and reliable income.

One thing that hasn’t changed is avoidance of root causes.

While a small minority truly dedicate themselves to this cause, they toil away in silence. But every two years, one political party weaponizes poverty into a short burst of righteousness. All the trimmings of caring (signs, marches, slogans), minus the plan or commitment. Meanwhile, the other party trumpets personal accountability, then calls it a day. They don’t bother pretending. I’m not sure which is worse.

It’s not entirely their fault. We all want to do the right thing, no matter our politics, but that demands confronting some uncomfortable truths:

1. Segregation: The people in the best position to help have successfully isolated themselves from poverty. Out of sight, out of mind. And I don’t just mean billionaires. Even hipsters with all the right hashtags, live in communities where real struggle is a stylistic flourish. A choice made to pursue making candles or artisanal maple syrup, not HVAC installation or Excel-lence at Goldman.

In the absence of gangbangers, tent cities, or soup lines, few will care that deeply about an abstraction.

Others – jaded New Yorkers like me – see so much begging and homelessness, we’ve crusted over with indifference.

2. Too big to care: We often discuss poverty at the wrong level. It’s not a Federal issue – or even state. The suffering, treatment, and benefits remain profoundly local. We can chip in national funds, but local solutions look different. They involve families, local businesses, and face-to-face interactions that can’t survive the 1000-mile journey to D.C.

“Social capital in the community exists in the interest, even the intrusiveness, of one adult in the activities of someone else’s child.” –  late sociologist James Coleman

We don’t “intrude” this way anymore because we’ve surrounded ourselves with strangers. The transition from small communities to cities changed every encounter from presumed trust to distrust or fear. Reinforce that 1000 times and no wonder no one believes their neighbor’s prosperity is in their best interest. After all, he’s now an adversary, not the guy who gives your kid a lift to school. At best, he’s someone else’s problem. Maybe the government’s.

3. Expectations: We’ve entered a strange, divisive, and deeply disingenuous point in our history. Tribalism and political correctness no longer allow us to be honest, even with ourselves. Many don’t think twice about setting vastly lower expectations for the poor than they’d tolerate from their own kids or loved ones. Conflating incompetence and bad decisions with poverty is as damaging when you’re supposedly helping as it is when you’re actively hurting.

It’s also odd that we want to condition people to depend on strangers or wait for bureaucrats to save them, instead of giving them tools to save themselves. The same way Russian, Chinese, Pakistani, Middle Eastern and African immigrants rose from poverty to high-earning professionals in a single generation. Growing up a poor immigrant, I lived – and witnessed – this reality all around me. Today, Indians and Asian immigrants out-earn whites by a lot in this country. Their formula is one we should all mimic.

This disconnect can be fixed by acknowledging one simple truth – that helping and high expectations can coexist. People can value family and accountability (stated right-wing positions & demonstrated left-win ones) while embracing programs that give people a hand-up. Whatever we spend achieving self-reliance will more than pay for itself when the poor re-engage with society as taxpayers, voters, and role-models.

Assuming we can muster the desire to try, there’s no one solution to poverty. Like replacing fossil fuels, it’ll take a portfolio of alternatives. Yes, financial services will play a supporting role, but not the lead.

Our poverty prevention portfolio needs to borrow ideas from places that have made progress – across every demographic. It might look something like this:

Poverty Profile


YouthMentoring works, but programs like Big Brothers/Big Sisters have serious volunteer shortages. Newer programs like Bottom Line focus more on education. There are countless others you can Google. Every community has success stories. I’d love to see musicians, athletes, entrepreneurs, and academics who’ve made it out, use their prominence and networks to build more.
Apprenticeships have always been and continue to be the best way to learn. What used to be a way to pass the family trade from one generation to the next is now re-surging. It’s something I’ve been expecting. In fact, all it takes is registering your company to offer an apprenticeship or clicking here to find one.
Vocational school is the solution no one wants to talk about. Parents have been sold big dreams about college, not shop class. But college, beyond the top 20 schools and handful of “trade majors” has terrible ROI. The majority of grads enter jobs that don’t require degrees while millions of high-paying, skilled jobs go unfilled. Offering vocational school and modern variations, like McKinsey’s “Generation” program, are reliable paths out of poverty and into the middle class.
Pro-family educationResearch by the left-leaning Brookings Institute showed that three actions eliminate all poverty: graduating high school, getting a job, and getting married before having kids. While some scoff at such provincialism, it’s a formula that’s dead-simple, works in our imperfect society, and places power over poverty directly under each individual’s control, instead of institutions that have failed them for decades.
adults/ parents

Worker mobility: Cities like Minneapolis have had successful job training programs like Twin Cities RISE!, but years of research show these programs often fail. A better solution than fixing workers is paying them to move to where the jobs are, using  mobility vouchers, among other similar solutions.
Entrepreneurship programs: I’ve personally been involved with organizations like Defy Ventures, which turns ex-convicts into entrepreneurs, but you don’t have to go to prison to learn these skills. Inner city entrepreneurship options are popping up like Chicago’s ICCC and others fueled by organizations like the Kauffman Foundation. We can do more to expand these. The hunger is there, sometimes literally…
ParentsIncentives: Many tout Universal Basic Income as a cure-all. Unconditional benefits for everyone. Unfortunately, poverty is more complex than that. It sometimes requires incentives, especially when it comes to child care. No one’s had more success with public assistance incentives than Brazil, where “payments are dependent on the family’s children staying in school until 17, and attendance must be at least 85% up to 14 years and 75% for the remainder. Another form of conditionality is that children get the full set of vaccinations in their first five years and that mothers attend pre and post-natal care.” Brazil’s Bolsa Familia program has already improved infant mortality rates, decreased poverty rates, and improved health and education. We can adapt some of their ideas to our needs.
Childcare: If we expect people to work and contribute, we may have to find better child care solutions. We have not done a great job here and the gap between haves and have-nots is widening – not just among the poor.

Homeless/ Addicts
JOBS! I love what mayor Richard Berry is doing in Albuquerque. His There’s a Better Way program hires panhandlers for day jobs beautifying the city. A van picks up panhandlers who are interested in working, pays them $9 an hour plus lunch and offers participants overnight shelter as needed.
Family re-connection: I can’t emphasize enough how much family is the first and best line of defense against poverty. While we don’t have a time machine, we do have social media, which Miracle Messages uses to reconnect people who’ve lost their way to those who care about them – and can care for them. There are many other ways to foster this re-engagement – something institutions can never replace.
Addiction & mental health services: Including mental health coverage in ACA/Medicaid was a great first step. Some states and faith-based organizations offer more intense rehab for free. With mass opioid addiction, expect a long and unsatisfying national conversation, while real solutions emerge locally.
Housing: It’s hard to argue with the stats – simply giving out housing has proven to be over three times more effective than alternatives. Of course, other problems won’t just go away, but as a first step solving based on good data beats moralizing.


I have to admit, this post took an unexpected turn. It started as a simple story about financial services for the unbanked, but became about the forgotten people those technologies can’t really help. But money and poverty do have something in common. Both are manifestations of our beliefs.

If we believe a piece of paper with a dead president’s picture has value, it does! A fellow believer will gladly trade you a box of fusilli for it. Poverty also exists because we believe that it should. Because…

“They screwed up, need to make better decisions, and work harder to succeed, like I did.”

“Government needs to do more!”

“It’s not fair to expect much from the poor.”

“Let’s give them enough money to survive…or subsist.”

“They’re not in my community. I don’t know them. Let their loved ones help.”

Their condition is a manifestation of our values. At least, in part.

If you’re reading (or writing) this, you have the luxury to look away. Most of us probably will. Because we can. I don’t say that to pretend I’m any better. I’m not. I’m on this journey with you. My realizations are here as much for me as they are for you. I hope we can do something productive with them. All of us.

Bonus: What About the $15 Minimum Wage??

One poverty solution that has gained national momentum is a $15 federal minimum wage. I find it obtuse and problematic for a number of reasons:

  1. Federal solutions don’t have a great track record, nor can they accommodate the economic diversity of a 350 Million person population.
  2. Federal programs never go away – even when they prove to be terrible ideas with massive unintended consequences. We’re still subsidizing farmers and oil for God sakes!
  3. A one-size-fits-all federal minimum wage makes no sense across rural countries in Georgia and high priced downtown San Francisco.
  4. Every state, city and county has full authority to set theirs as high or low as they want – and create needed exceptions for students, low skilled workers, small businesses or certain industries. New York State passed one recently. So has Seattle. It’s the best method for doing this.
  5. Minimum wage is best managed closer to points of accountability, like education. Parents can march into an under-performing schools to demand change. They can’t do the same at the federal department of education, which is completely removed from the point of service delivery. Same applies to workers and employees.
  6. In some industries, raising the minimum wage will simply accelerate what is already inevitable: automation. Once that takes hold, we will have more high paying jobs, but maybe a fifth as many workers.

Featured photo by Johann Walter Bantz on Unsplash

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