With U.S. consumers struggling in a difficult economy, the need for affordable and reliable alternative financial services products continues to grow. In an attempt to crystallize guidelines for financial service providers to follow, the Center for Financial Services Innovation issued a draft paper that highlights prepaid cards as tools that will expand access to financial services for underserved consumers.
In The Compass Principles: Guiding Excellence in Financial Services, CFSI offered up four principles the service providers should adopt:
2. Build trust
3. Promote success
4. Create opportunity
According to the CFSI, service providers should consider the specific financial needs of low and moderate income consumers and select appropriate partners and distribution channels to reach those consumers. Top of the list of products for underbanked consumers are network-branded, general purpose reloadable (GPR) cards, as well as transit and government benefit cards that also function as GPR cards.
The CFSI said credit products that help underserved consumers achieve financial inclusion will utilize alternative credit scoring bureaus that enable thin- or no-file consumers to build credit histories. The prepaid card industry in the U.K. has innovated hybrid cards that add this functionality (for more information, see "Under the hood of hybrid cards," by David Parker, SellingPrepaid E-Magazine, Jan. 18, 2011, issue 11:01:A).
In the savings product category, tools that pair transaction accounts with savings "wallets" will provide convenient means for consumers to save, the CFSI said. Such a product is the Union Privilege Union Plus prepaid card (for more information, see "Union Privilege makes savings a plus," SellingPrepaid E-Magazine, Oct. 31, 2011, issue 11:10:B).
The CFSI believes that delivering clear and consistent value to consumers helps service providers foster ongoing and long-term relationships. Providers can do this by helping consumers avoid "unnecessary fees" rather than strive to maximize revenue via fees. For instance, providers can limit the number of times a customer is charged the same fee within a given timeframe and intervene in an educational manner when customers are being repeatedly assessed fees that otherwise could be avoided.
Providers should offer customers tools that encourage greater participation in, and understanding of, personal money matters, the CFSI said. For example, providers can leverage technology to enable consumers to set their own spending limits. Additionally, providers can communicate through text message alerts to help consumers better manage spending.
Finally, the CFSI makes the case that safe, entry-level financial products will give underserved individuals tools to help them create wealth. As consumers grow savings and improve their own financial literacy via these products, they will require different financial products to meet their changing needs.
In its conclusion, the CFSI stated that, given the financial straights many consumers are currently in, an opportunity exists for financial services to "define what the industry can do to make people's lives better." Implied in that goal are the financial benefits of loyal, long-term, financially savvy customers to service providers.
The CFSI is soliciting industry feedback on the Compass Principles via www.compassprinciples.com. 
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