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[inaudible conversations] [inaudible conversations] good afternoon, everybody. Well good afternoon, everybody. Thank you for joining us on this panel and nice to see familiar faces in the audience, andy, nice to see you. Im excited about the Panel Discussion that weve had today because its a very, very timely issue. This is the topic im excited about talking about here is the issue with working families, inflation, and how we can use fin tech to solve some of povertys pressing problems. Working families are facing a time of rising inflation, energy costs and food costs, everything in everyday life. Workers are too often seeing the paychecks lagging behind and businesses are facing a difficult time hiring, as we enter into this time of economic hardship, we know that households will face financial hardships, and we also know that reducing that hardship is going to require policy makers, forProfit Institutions, not for Profit Institutions and everyone in between to come together to explore a new and innovative ways to improve assets to Financial Institutions. Too often, when individuals fall short of money, they either have nowhere to go or the places they turn end up costing them more than they can afford and puts them into a long run problem, into a tailspin. Policy makers look for reducing costs for americans looking to Access Financial services, we know that new Financial Technologies can be helpful in this goal and weve Seen Technology disrupt and reduce costs for consumers in a wide variety of industries, and the Financial Services industry should also be subject to this disruption. But as this occurs, we also need to ensure that these new technologies, also have Consumer Protections that ensure that individuals are not taken advantage of. This, in my opinion, would require a light, but real touch by regulators in this arena. This is why im very excited about the panelists that we have before us today. We have individuals who are on the cutting edge of payment technologies, such as earned wage access, as well as some of the foremost scholars and individuals thinking through the issues. I want to quickly introduce our panelists and then get into some q a and then for the audience, im going to come to some of you as you raise your hands so start thinking about your questions as well. First, we have rahm, a financial tech entrepreneur, someone ive known quite well for some period of time. His mission is to meet the unique needs of those living paycheck to paycheck, hes a serial entrepreneur, an engineer and i want him to tell his story about what earning is and earned wage access is, but to briefly summarize, earn in, helps people from more than 400,000 Companies Access wages otherwise would have been held up in the pay cycle. Were going to talk a lot about the pay cycle in the panel today. Rahm holds mms in Technology Science and mba from Purdue University school of management. Next we have ida rademacrer, from the aspen institute, the vicepresident there, and as aspen Financial Security institute. And she has expertise in economic inclusion, research and policy with her record as a collaborative and creative thinker to expand the effort to bring to the national forefront a Solutions Focused discussion of how america can actually improve Economic Growth by addressing growing levels of wealth inequality and Household Financial insecurity. Her efforts have resulted from the creation of several new cutting edge initiatives, including, the expanding prosperity impact collaborative and the recorrecting work and Wealth Initiative and the Aspen Leadership Forum on retirement savings. Through these projects, ida and her team are building a cross disciplinary leaders and change agents together who are deeply probing critical challenges with u. S. Households and shaping policy innovations that can improve the wellbeing of all americans. Next, came all the way from the brookings institution, next door, we have aaron klein, center fellow at brookings institution, a senior fellow in economics in brookings and focused on Financial Technology and payments and macro economics and infrastructure and policy. Part prior to joining brookings, he was Regulatory Reform initiative between 2009 and 2012, when we were at similar stints and he served as Deputy Assistant security of the economic and Treasury Department and Regulatory Reform issues including crafting and helping to secure passage of doddfrank and Consumer Protection act of 2010. He was the Senate Banking staffer at the time if im not mistaken and played leading roles in responding to Economic Crises and housing response reform and transportation infrastructure policy and native american policy. So, we have here, a panel that is expertise in this area, so, ida, i want to start with you, real quick because youve taken a very good macro view of these things. Were here to talk about Financial Inclusion, but fundamentally, were talking about Financial Inclusion because we care about Financial Wellbeing. What is missing in your assessment from our current Financial Services marketplace that promoted you to lead the initiative to call on the treasury for a National Strategy on inclusion . Why did you do that . What is lacking that called for that . Thanks, paul and thank you so much aei for having this conversation, i love having the crowd and look forward to the q a later. The upside part of that answer is that, theres probably more going right for real Financial Inclusion that leads to wellbeing, than we have had in a long time, in terms of Financial Service, with the levels of innovation and leadership in the Public Sector and the private sector. The reality though is that the sum is still not greater than parts. There are lots of different siloed initiatives and innovations and well hear about some today. There are lots of beginning to be understanding what it really takes to deliver wellbeing for a household, what gives them digitty and agency and choice, but theyre still not a birds eye view of how the different pieces connect, because peoples Financial Lives arent siloed, the payment pieces and the savings pieces and whats going on, daytoday, and week to week, is still not connected. So, we ended up supporting what senator koontz had senator coons had called for and what was out there, the idea of a north star being Financial Wellbeing for all households and whats the financial infrastructure to deliver on that and we certainly saw that during covid when the payments, the households and businesses were hung up with some of those last mile problems. And to our delight, over 110 companies and civil rights organizations, every Industry Association related to finance in all sectors signed on with the idea of a comprehensive, coordinated government quarterback to help think about Financial Inclusion as a foundational piece of inclusive growth in this country. So, we think its the right time. There certainly seems to be the private sector will to do this and happy to talk about how in particular, the components as we come into a very inflation driven environment, will matter for households. Briefly, where are we in the stage of the effort . We have weve made a call and this growing stake holder coalition and youre always welcomed, others, to ask about it is in working groups and helping to inform and were continuing to find support on the hill and support inside of the administration for it. So, its not a done deal, but there seems to be a threw line to get this done. Okay. Rahm. I want you to tell us your origin story, ive heard it, and some of the other panelists have heard it, its interesting. Your he on the cutting edge of payment technologies. Tell me, what is earn in, what is earned wage access and what possessed you to even into this in the first place . Yeah, so, the way it started, quite by chance. I was running another company and out there, i found that some of my employees were getting everdraft fees and pay day loans and that doesnt make sense to me, because i was baying them well. And paid and couldnt wait until the following friday and it was the day already worked and i tried to get the system to do that and the system couldnt do it, and kind of i said, well, i just give you mon for the days youve worked when the system finally does its thing, and pay me back. And theyd do that for a couple of years and in the office. And i moved from cincinnati and if i would do that, and i knew how the systems work and i could tell if theyre working or not. And so i continued to do it for them and over messenger, and then not the most convenient way, but keep getting messages and developed a way, if you need money you fill out that form. And they had the wage page up and people trying to use it. So i did it for them as well. And what i realized is that if you give somebody access to their money when they need it, life is much simpler, and paying bills on time, no more Overdraft Fees, no more pay day loans and if i tried to make it into a product that scales to some people, id feel bad by myself. And every day, and we started paying people in and employees if you get paid two weeks before you go to work, but its not that way you get paid two weeks after you work. It doesnt have to be that way. The technology exists its almost crazy its a two week batch. And the house side of the hill, one month batch, right . Four weeks. But go on, please. Just imagine if google said give me your resources and in two weeks ill give you the results. And thats the system that we have. You did for your employees at your business, you started and you built a crude web page. Did the concept earned wage access exist then were there other people doing this or you just it was happening, and in lots of Small Businesses the manager or the Business Owner was doing it for the employees, it wasnt done the way. So i probably started doing it like in person, maybe 2008, 2009, and then we made it into a company, only in 2013. Thats really, really the issue. And i want your reaction to that, you think about payments and how it affects workers in a very unique way. What, from your perspective, does government need to do to make the payments and function better for working class citizens either directly or by allowing businesses to serve customers in a way that isnt currently done because of regulation . So what is wrong with the system today and whats wrong with the regulations of the system today and what should be done about it . Thank you for the question, speaker ryan and thank you, ai for hosting this important conversation . Im going to start out with the fact that i think that everyone in this room can agree with. Friday is going to be september 30th is going to be a friday and we can all stipulate late you need more analysis. What happens you get paid on friday, september 30th, you get a check and its thereafter tuesday, october 4th, not quite clear when in the day it will magically get credited to your account. What do you do for the weekend . How do you live, how do you pay rent . How do you pay the automatic bills coming into the month, right . 40 to 50, 55 of americans are living paycheck to paycheck at some level, right . Weve designed a system that assumes you always have money and assumes you dont care when the money comes in and that assumption works great for half of americans who always have a thousand bucks in their account. Who get agree checking and get all the other benefits and who is paying for that system is the people who are living paycheck to paycheck, Overdraft Fees, one out of 11 americans pay 350 a year or more in Overdraft Fees. Heavy overdrafters. Theyre the ones subsidizing free checking and you ask the question, why do we have this system . And the rest of the world has realtime payments. Bank of england in 2008 and europe was complicated and had legacy systems and they got it in 2019. We dont have it. Why, the Federal Reserve chose not to do it and simple policy choice and whats the ramifications of that. Over 100 million in wealth transferred from People Living paycheck to paycheck, pay day 100 million. If we did it when the bank of england did it in 2008, sand brand new coming out, called the iphone, thats the Technology State that we were. In england in 18 months did realtime payments. We dont have it. Right. The private sectors developed some, realtime payment and in terms of regulating the Payment System and how fast that checks clears and operating their own system, the automatic clear house, ach system so theyre the operator and regulators. If we told blockbuster youre in charge of developing streaming, would we have netflix . Thats the mistake we made and the people that suffered are People Living paycheck to paycheck and those who prospered with the Overdraft Fees, the check casher, the pay day lenders, people that werent so fortunate to have a good boss that took care of you and ended up going to somebody less reputable. And its really infuriating to me, because the rest of the world is light years ahead of us in this. So, i would give us something here to talk about. Give us the glass half full. The glass half full, one, you have some companies stepping in to bridge the gap. Two, you have some Financial Services banks trying to the right thing and move forward on the overdraft stuff, reduce their punitive fees, do some other things, early wage access, Companies Like square and uber, trying to pay their workers and move things. Companies like visa who figure out push duct to reverse the transaction to clear things faster, right . And then you may have this thing called fed now that the fed says theyre going to start operating. Yeah. Seven years since they said they were going to start studying it, they had a thing called fed 2020, and all by 2020, that was 10 years ago and they started this thing and we still dont have tim skeptical of those initiatives. I think we actually made huge mistakes in our covid distribution payment. We had millions of americans waiting on paper checks coming to them in september and october from march of 2020. And by one report, you have over 60 Million Dollars of cares act money went to check cashers, so, technology and private sector folks are making progress and doing workaround and real problems are facing americans every day. Let me ask you, where are good workarounds so curing. What are promising moves in government and obviously in the industry that you see, steps in the right direction . Yeah, i mean, i think the a couple of things with this, what earn ins, with rahm, with your personal story and engineering mind, right, you focused in on a specific problem. And this is with Entrepreneurial Solutions and Underlying Technology can do. You can focus on specific pain points for them and prove that you can do that in a way that has a business demand and that is solving real problems and saving households money. The problem in the long run, is you have an era of tech, is that you end up with 47 different apps on your phone. And that 40 different slices of your Financial Life being managed, and we havent actually centered on the full curated set of, not just apps, but systems that people need, payments need to work and government to people payments, p government to business payments, and work and payroll systems need to work for household and we need know know in terms of financial household wellbeing, its not Rocket Science what weve found over and over and this is research that bears out in the qualitative and quantitative work and people need routinely positive cash flow, people need to experience routinely positive cash flow in their life. That can be from their earned income coming in when they need it and can be from the way that nonlabor income comes into their life, i. T. Or a Social Security payment. When your income is lumpy and you can solve it through technology and government can, from a regulatory perspective and understand that somewhat with what it can do for market innovation and degree that finance is becoming a bit of a utility for utilities in this country for households to be fully participating in their Economic Life of the country. We need to solve it not in one off ways, but systematically. One of my colleagues says when youre 50 of folks who have 1,000 in the bank and when youre not, when youre the other half of that, you need to behave for the system and that means you dont have enough of the mental bandwidth or played out times to be there for your kids to think about the next step of education you might want to take and youre so busy managing this complicated Financial Life and youre an exquisite manager of that. People who live on the margins have incredible ability to understand the complexity and manage it, but we can make it easier and it can be good for the economy and i think it can lead to more innovation over time. But right now, all of the innovation isnt adding up to wellbeing for households in the way it should given the level of investment going into that space right there. And lets go there. How do you approach that. How does earned wage access approach it and since we talked about how inflation is eating away at paychecks, how does it help cope with inflation and how does that compare to the other options they have, which are pay day loans, overdraft, you know, high credit card fees . How does earned in and earned wage access tackle this . The individuals using wage access as a tool to help them get to a better place and some of the data that we see is our customers, the people that are saving about a billion dollars a year in Overdraft Fees so theres lot of cost avoidance happening. Your customers. Our customers are saving a billion dollars a year in Overdraft Fees and because of that, and the banks using the Overdraft Fees no longer attractive and helping everyone because Overdraft Fees are coming down. What is common . 35 on the average transaction, 42, and usually paid back two days. Its a 35 fee and 42 charge. And i think one in 12 of like the streaming services transactions, one in eight, in the transactions leads to overdraft fee, so just think of it for like hulu every 100 the bank makes 40. Which is amazing on the overdraft side of it and you have great stats on this, im sure, but less late fees on bills and income effect as well. Were seeing wages go up when someone starts using a product and it happens in a couple of different ways, so our customers typically cant lock 50 or 100 in the gas tank. Theyre buying 5, 10 at a time. Something unexpected happens, they cant buy gas and miss work. With the app they can download the previous days earnings, and their income goes up. Also like interesting cases were seeing the wages go up. One story that we got was from a customer who works at retail, and in the different tips of jobs, and theres a better step up, the step up where you get to like manage that department in multiple branches and she couldnt take it because she had to front the gas money to get reimbursed. So she denied the advancement and Employment Opportunity because she didnt want to front the gas money. Exactly. And then when the next time when she got that offer, she had it and she took it because she could now manage that. To see things like that as well, where were seeing things go up, and someone has access to their wages. So, walk me through. How does this disrupt the pay day lenders, and because before, in the old days, which is 10 years ago, if somebodys really strapped, they need get their car fixed to go to work and therefore, its either fix the car, go to the pay day, and breaking the terms. How did this what is this doing to that . And now not only seeing the disruption coming to them. You look at how much like so the median bank balance for our customers is 125 and the way they make decisions if thats how much you have, youre trying to get to pay day and you dont worry how expensive it is long you have the pay day. Thats why they take the Overdraft Fees. Overdraft fees are not happening my by mistake, people are use it go as a tool. You have 125 in your bank account, you have about 645. The median acued accrued unpaid wages and the way you make decisions is different. Ive had to make the decisions to make the pay day, and so you can buy things at the right point in time and pay your bills on time. And so, you kind of act people making the better decisions. And not go to pay day lenders. Aaron, what happens if banks reduce or eliminate Overdraft Fees, will low income consumers still end up paying for the Overdraft Fees a different way . Are we pushing on a balloon . And depends, some banks eliminate overdraft. Most also decide to give you earlier access to your direct deposit. Notice the similarity that rahm is talk about. The money, the more they can hold it, the more profit. When they give up the overdraft profits it doesnt make sense to hold the money so long. And the Federal Reserve can put a regulation out tomorrow, requiring you to have the first 5,000 to every chk check you deposit out the door from the act of 1987. Theyve not going to do because the systems cant process that quickly and operating versus regulating the Payment System. So, youre seeing the banks giving up, predominantly larger banks, right, a lot of larger banks have cut their Overdraft Fees and changeded policies and started to give people up to 5 100 for doing that and a group of small banks for the group is an entire model. Wood forest, ever heard of it . And made more. Where are they. Theyre branches in walmart, in maryland, the southeast, theyve made over 100 of profit on overcraft fees in the last seven years and lost money in Everything Else they do. Another bank, armed forces bank, want to guess who they serve on military bases, and think about people paycheck to paycheck, our military personnel, had a lot of them overseas and hardships. A group of institutions that have targeted this overdraft customer. Another like pay day lenders do. Yes, every single pay day loan goes to a person with a bank account. Why do i know this . The only way to get a pay day lone hand a post dated check. And Check Cashing stores, they have a bank account. Theres a misconception that the problem of pay day lending and Check Cashing problems are the unbanked. Wrong, they have a bank account and going to a alternative financial provider like this or western union, 15 to 20 are going there for the fdic and going there because of Services Provided by mainstream Financial Institutions are nopt services that work for them. And so to come degree, the bank are voluntarily and i commend them, lowering the Overdraft Fees and bank of america, doesnt cost them 35 to give you an overdraft. Its a punitive amount designed to encourage you not to do it and now some institutions reorder from largest to the smallest, because that maximizes their fees. Because were not yet in a realtime Payment System for no good reason and right, deal with the reality that you are. And so, theres, you know, theres competitive pressure, thanks to fin Tech Companies doing this and again good perception of this and the recognition that this system isnt going to work and i dont think that were going to get there without a Regulatory Regime that puts people first and reorders. We have a Financial System where the will he is money you have, the more money it costs you to access your own money. So. Let me go to an entrepreneur then about this. Policy people, d. C. People, you think differently. Youre an entrepreneur. You look at this from different angles. Rahm, what in your opinion should government do to help make this disruption really, really spread nationwide . What should we do to get these kinds of services and these kinds of innovations through had a regulatory structure in the hands of americans . How tech can be a force for good. Just like the things that we already see with our product, where Overdraft Fees are coming down, incomes are going up, and nonfinancial benefits where people are the first final celebrating anniversaries on the right days and a whole bunch of benefits and to recognize that innovation can be part of the solution and i think the second, the data that also shows that, the other thing i think is to be receptive to paradigm changes and weve kind of made the employee be the central to the employer. And like thats an unusual paradigm, but it works. And its let us spread to 400,000 companies and and thats because of technology. Theres no way to do that without technology. And like we have 100,000 companies that have less than 20 employees that have our product and if you have to do it like the way the prior generation did, with integration and with the partnership of the company and how many people have they earned in that . Several million. Several million. So, you must see data constantly and continuously . Yes. And we actually, we see it, we have a really good pulse on whats happening with the customer base, and some of the datas been used and for some of the policy responses like what is happening during covid. Yeah. And then i had one more thing on like, how to think of Technology Like for policy makers. I think its like willing to question why things work the way they do. And one of the things, and like youve all been working this morning, when you open the bank account, why is not money not there, its because its not in your bank system, its in a different system and the technology moves from one to the other. It can happen, and its not because of technology, its so there can be a policy approach to get your money as youre working every second and that can eventually happen like you see everything becomes continuous so we get there. Because all of these things, like who does who benefits from a twoweek pay cycle. Differently not the employee. Can i . What you said about energy on household and how your Business Model is on that, and i think thats one of the best advances that not just 1. 0, but the embedded finance and where block chain can even take us will be very much about figuring out what is really needed by consumers. The Banking Systems that we have and the regulatory systems that have grown up around them are all about managing the risk. System for the system. I think that the realities that we all experienced during covid are that one of the risks to the system that we dont account for in any Regulatory Regime is the underlying instability of the Household Level when payments stop. When jobs come to a halt for a little while and you need a government payment to kick in on when youre reversing back out of that. The idea that we could fundamentally manage risk at both the regulatory and the Financial Service level for the households and the economy spouse simultaneously it calls for the curiosity and the leadership at the regulatory level, too, and to kind of prioritize the simultaneous because we have billions that leak out of Retirement Fund the way when somebody changes jobs and its not portable. And the same kind of technology with portability of retirement. Technology that understands peoples risk and pool risks for insurance products. The same reason for calling for a National Approach is thinking about the entire toolbox reinvented with the kind of products and services that really help people focus on using incredibly Productive Lives not just as consumers in the economy. And you said something earlier about the challenges of people and i needed shortterm money because i had a car break down and a problem of expense. Its often actually a problem with income, right . So my kid was sick so i missed work for a day instead of getting paid for two day, i got one day off. And a lot of people dont have paid sick leaves and kids at various points. And so, so you say, okay, the gig economy is going to pay for that, youre going to come up short, your rent is due on friday, you missed tuesday, and the financial planning, people who live paycheck to paycheck, could planning. And people who have six figures less. And theyre budgeting more, but than most families, but what do you do. You go, im going to drive that extra uber, im going to solve something on the gig economy and youre going to get future wage, but if that money isnt in your account and accessible to use by the time the payment is due, what good has that done . It doesnt surprise me that uber is one of the First Companies to start same day pay and i heard thats more popular among the drivers than when they started allowing tips and that corresponds with other data, People Living paycheck to paycheck prefer stability. If you say to somebody would you rather be more person in your weekly raises or get pa 5 raise and be more variable . Theyll take the certainly. Not because they dont want more money, this is america, after all, but they know with certainty they can reduce their expenses. Theyre paying a lot of money because of the volatile life thing and one of the things that early wage access does, it falls for the volatility problem the way that same day pay or other solutions would have. Because otherwise, we have a mismatch between possible solutions and the reality of actually getting that money in your account thats accessible. Okay, so, we have a supply entrepreneur here and want to find the way to flip the we have an entrepreneur who has offered this service, but you government thinkers, reformers and i mean that in the nicest possible way, how do we get government the Financial Services, other than health care, i dont know that theres a more regulated industry out there. So, how do we get give me basically go to the end of the process here youre instig instigating. What does the Regulatory Framework look like . So we can have the necessary Consumer Protection, but have the open space to allow supply side, Entrepreneurial Solutions to the underbanks and the unbanked because there are obviously unbanked as well. What does it look like at the end of the day . How do we create this framework . Ill be interested in aarons piece of this. And ram, yours, too, for this matter. My own sense is that technology is changing what finance and what the financial industry is and who is a Financial Service provider so fast. Yes. And what needs to happen alongside fin tech is reg tech, regulators understanding and what is the technology that underlines their ability to do. Sand boxes . Sand boxes, even the allowance of, you know, had a lot of our research when we do a global scan of regulatory sand boxes, was, it wasnt even just actually having the sand box, it was having the regulators signal they were open to hearing about what your product was and what you were trying to solve for and just learned, there is a learning curve and again, youve got regulators whose job is to manage Systemic Risk and so part of this is the mindset. Because when i think about the end goal, we have a very brittle and stratfied and siloed set of regulators for every different kind of insurance. Every different kind of banking product. Some of its at the state level and some of it it is, thats why the u. K. Has done something that we havent, even though theres a lot of parallels, we have such a complex system. I often say if youre going to make an omelette, youve got to break some eggs. At some point weve got to figure out not just another layer of regulatory complexity for a fundamental disruption there about how we think about that and at the heart of that, of course, the risk is Consumer Protection in the meantime. Whats really going to happen to folks, but it is, its hard to say the end goal right now, because it does require a conversation among people who dont agree with each other and thats where i think the leadership opportunity is right now. Thats the rub. Aaron and i at lunch were talking about tarp and i was a banking member at that time and that was not a time in American Services and economy. And remember talking to regulators frequently in those days. Regulators dont get burned if they stop at innovation, they get burned if something falls apart under their watch. So, everythings a nail and theyve got a hammer. How do you reverse that mindset and allow for in kind of innovation which might end up with some kind of risk . Ill give you a great example of that, right, which is that we have 5,000 banks, more than that number of credit unions, fantastic. Right . Let this competition, let this diversity go. Regulators need to stop looking at overdraft as a source of profit for banks that make them less likely to fail and start asking the question, right, are you a bank . I would have a regulation no bank can make more than 50 of net profit for two or more consecutive years for Overdraft Fees. Simple concentration of risks. From my research, six, seven banks, do that and those are not banks, those are check cashers with a bank charter operate ago feebased system. And ai, conservative place, do you have an objection, you have a charter. You cant make your life based on Overdraft Fees, have a Business Model majority of profit anything else than one single fee. Regulators should put those banks, cease and desist. Stop bad behavior. But how do you encourage risk taking Entrepreneurial Services pan that culture among the regulatory class . First, ive been a big proponent sometimes banks need to fail. The first year in American History we didnt have a single bank failure . 2005. Second year, 2006. I remember on the Senate Banking committee regulators coming up and saying we did such a great job this year, no one failed. Look at how wellregulated this system is, right . If you came to washington every year, every restaurant was the same and nobody failed. Is that the sign now you dont want systemic failure, you dont want to domino the Financial System is interconnected and weve lived through that experience and we dont want to do that again. Theres a distinction between line for innovation and competition and let some bank changes the overdraft and fin techs come in and provide services. And they dont all have to become banks. No, they dont. But you if you take the deposits to make loans, youre a bank. We separate banking and commerce and we need to separate that difference between providing Financial Service two words, services and finance. If you take deposits and make loans, right, then thats a different set of regulatory structure, but the other point i want on regulatory, we have structural problem with the Federal Reserve, and so should you be operating and regulating the Payment System . Do you have a structural conflict of interest when americas asked you to regulate all the systems and operate your own . Thats a structural complex and i think until we resolve that, either culturally by preferencing the regulatory side or legally by divorcing the two youll continue to have a structure they wont do the job as regulator until they fix that. Our operaing is so antiquated. Its not like like a vhs, its like reeltoreel. And the whole commission, theres ongoing, not just until the end of time, but where is a measured structured place to have this conversation with rigor and inform it with data and come out with the answers to a question. Data, and come out with the answers to your question. So much is coming. We cannot fix Financial Inclusion unless we know what is the finance system 10 years from now, what does this disruption mean for households . Lets add the systems. And lets add the systems. I dont mean to imply managing systemicat risk is not a core piece of it, but increasingly if that is at odds with other finance system facilitates peoples Financial Lives, then were not doing our job. What you described is a bank. Thats not what you are. Thatsre not what earning is. You saw a hole in economy that need to be filled, a need that was being underdressed and youve address this need and you are addressing it right now. What presently stand in your way of deploying this further . And address the question of regulator with think about when they see this new product risk. Where is the risk to the regulator . Well so, the way i see it from like my said weber product that consumers like, consumers are using a lot but it was never contemplated in a previous the regulations. Most people try to fit inside an existing box. Is that this or this or this . If it is not then it is suspicious. And because of that that are so many Consumer Needs that are not being met. Like, supportability concept. If you take your account number and move it to any bank and you didnt have to worry about switching banks because of direct deposit is which, automatic bill pay is which. Just like phones, you can speed if you can keep your phone number your whole life now. The new vice chair for bank regularization michael barr wrote a paper, i recommend you read, talked about bank portability of accounts wiens at the university of michigan. Ease and government now. But it mean imagine a noncompetitive you be at the cost of switching her cell phone were losing your number, right . Totally different type of Market Competition unlocked by government requirement they set up the switching think otherwise we will not poach each other stuff. Its a perfect example. Ram trying to develop solutions, it is top if it does not fit in an existing box. Even if there is a clear consumer benefit, it has to fit inside of a box. Overdraft, it is ok to do it, even though it is bad for consumers. The constant between some things are permitted for people, some things are good for people but not permitted. Paul that is a part of your effort. Ida the one thing i would say about the cautionary note, you are solving for the person who is illiquid. They need the money, they dont have the money. That is different from the other data that says, not just 40 of americans living paychecktopaycheck, but at the end of the year they are insolvent. You cannot fix all of that with tech. To the degree that you can make households affordable, there are things that you can do to drive down the cost in the entrepreneurial space, you need to have routine cash flow. Benefits innovation is a huge thing for innovations. We need to help family to more than just manage scarcity. The whole point is that people have durable wealth to decide for themselves how to live their lives and pass on opportunity. You cannot talk about the future of wealth on this you grapple with the fact that increasing number of americans live in net debt. And it is not because i have a mortgage, it is unpaid bills, fines, fees. People can often get a bad credit score before they even get access to credit because of what we said before. Aaron without opening into the bleeding heart, what is really infuriating, there are a group of people who are illiquid for whom the cost of addressing their liquidity becomes so great in the cycle of debt, payday lending traps and all the rest, the actual cost of the system tips them into insolvency. That part is so frustrating. Paul that is something that he is trying to solve with earned wages. Aaron america was set up to allow for bankruptcy, to allow those who are insolvent to have a Second Chance. Bankruptcy is in the constitution. We were set up to allow the truly insolvent to have a Second Chance for another pass at life. What is infuriating is when the system drives the liquid into the insolvent. Ram maybe i would share one story, but we see with consumers on overdraft. We have seen a number of consumers who will, instead of paying bills on their card, because they get overdrafts, they get one overdraft to take out cash. They take the cash and go to a sameday bill place where it is about 10. They didnt want three Overdraft Fees. They take one fee and they make the reexpress bill payment fees. They understand how the system works and they figured out a way to get around it. Paul and the marginal tax rate on an extra dollar is mind blowing. Let me open up to the audience. On the sandbox issue, you have the tunisians who are doing centralbank Digital Currency using block chain, which beats the bad players, western union. Shouldnt we have our companies do this in africa and developing world before coming here . You see these mistakes with fintech, Brian Monahan and jamie dimon are spending billions on stuff that doesnt work. Should it be africa first . You have the brainpower to do this. Do it now rather than doing it at home . We still have payday lenders. We may as well have the post office do banking at this point. Aaron i would be careful on that. A group of people in new york in the 1960s wanted to figure out a better way than going to the bank and getting cash to go out to the restaurant over the weekend. The invented something called a diners club, which today we call debit and credit cards. Plastic magnetic strip cards invented in america. Visa, mastercard, american express. These are Global Companies headquartered in america. Take your approach. Trying to figure it out with alipay, wechat pay, because in china the merchants refuse to take the cards and the fees associated with it, and they have digitized their way out of the banking system. That led to a whole set of china, developing the cbd, not because theyre trying to take over the view of the dollar. Paul they were not surveilling. Aaron control is a much bigger issue there. The Financial Services sector is one of our great exports, one of our great economic strengths. We should be at the forefront of innovation, not the back of it, because we are so afraid of what could possibly go wrong. Paul other questions . Im a Research Assistant with a few people here at brookings. Based on the last point you made, it seems like a point who need realtime payments the most needed because they dont have roughly two weeks of liquid cash. Realtime payments may save 350 on Overdraft Fees. While that is a lot for most households, it is not two weeks of liquid cash. Is there evidence that people that have access to realtime payments bill longterm savings so they dont perpetually live paychecktopaycheck . Paul ram, you see the evidence. What is your take on it . Ram we see people come two ways when there is an earned income crisis. When we look at their financial profile six months down the road, it is much better. It is difficult to see what is happening. Is it a timing issue . We see there are fewer Overdraft Fees, bills being paid on time, incomes going up. Does that get them to a place where they are comfortable or not . Tough to tell. Also it is not a oneoff. You are in a tough spot, and then you recover. Your car breaks down again, a child becomes sick. You need to be able to get back on your feet. Paul anybody else . In the green. Michael, atu. The underlying problem is people dont have enough money to begin with. If you are on a paychecktopaycheck balance, you lose your job, you have an illness in the family, you have a crisis, you are in trouble. Until you create enough of a safety net, minimum wage for people to live reasonably, you are not going to solve this problem. They dont have enough income at the beginning to solve their problems. Paul that is a much bigger policy conundrum. But the point being here is fintech can solve a lot of the problems that are not being solved right now. Aaron there is a jewish prayer that says not to reject Incremental Solutions that make things better because they dont get you the whole way. We didnt solve the whole problem, so its not good enough. Celebrate each little bit of solution. I am very sympathetic to your point on living wages, sympathetic to a lot of things in the Income Distribution that have gone wrong in this country that have a lot of policy solutions. But one of the things that we have observed, overdraft was not anything 30 years ago. There was a banker who figured out to reorder your credits and debits to maximize Overdraft Fees and got a giant bonus. There is a ceo of a Banking Company in minneapolis that named his yacht overdraft. You know the Financial Institutions in the midwest. You have an exploitable population at a moment of necessity, and a system that is not designed for them, that was built to serve a very different system in the 1950s, 1960s, different workers with Different Technology that has not been modernized. There are more payday lenders in america than mcdonalds. Paul what is interesting about fintech, it is not tied to a geography. Before these Fintech Solutions emerged, you got what where you lived. If your town has nothing but payday lenders or banks with Overdraft Fees, that is where you went. This is providing geographical freedom for people to get out of these culdesacs and get their continuous pay. Ida to your point, with technology, things are going to be disruptive. In the cycle of technology, inclusion to the wnd the better wellbeing has been a nice to have historically. Until the forces of disruption align around that being and objective. Fintech should be at the table along with the overall question of how much do people make, where it is routinely positive cash will come from . Technology should be at the table. A lot of the problem solvers are there. But it will not happen by accident. Inclusion doesnt happen by accident. This doesnt happen unless we take a leadership position on that. And that is not a partisan position. That is one for every constituent. Paul i am watching the clock, let me ask you this. Aaron you asked for a solution. Every bank should be required to offer a free account. 20 of new accounts. Thousands of banks offer these kinds of services. Having a bank is a privilege, a charter, not a legal license. If you have a bank charter, you should be required to offer this kind of account. They are profitable accounts, it is not free, it can have a small monthly fee, and that can be a service offered. There are answers out there if you put having a working system as your goal. If you are maximizing bank profitability, you will derive a different system that is much more difficult for illiquid people. Paul ram, take us home. It is 3 15. In the house, we stay on time, not like those guys in the senate. Give us your final thoughts on this. Ram i think it is interesting, me being more on the technology side. The government side trying to make stuff into things that already exist. If we want inclusion, by definition we want some event does not exist. We cannot want inclusion but also keeping everything the way that it is. Accepting that the status quo is not acceptable. Aggressively try to find ways to get to a better place in the future. Paul i spent 25 years on capitol hill. Almost every day having an newer newer come in from somewhere over the country and say, i have a solution to a problem in society, but these laws and regulations do not let me do it. I could do so much more if this alphabet soup agency let me do this. It is always fun to watch an entrepreneur come to washington and listen to policy people talk. What is exciting about this moment we are in, the pace of change in Financial Technology, in fintech, web3. 0, ai, quantum, everything that is happening right now, it is so rapid, government is so behind on this stuff. But what you are showing us is there is a glimpse into solving a lot of problems out there and that we can solve without creating that tarp day like we had in 2008, so we dont have massive Systemic Risk. I want to conclude on the note that there are Amazing Things happening out there in the country. Amazing entrepreneurial creations, engineer designs that are really solving societies most stubborn problems. Fintech services, if youre looking at a country facing inflation, how many people are living paychecktopaycheck you said 45 to 50 Serious Problems that require lots of different answers and solutions. But one of those things that is a real glimmer of hope are the Financial Services are being developed to fix a lot of these problems. Please join me in thanking these panelists for sharing their insights today. Than please join me in thanking these panelists for sharing some other insights with us today. So thank you very much. [applause] only a a minute over. Thank you, everybody. Appreciate it. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] on monday britain says goodbye to its longestserving monarch as a state funeral for Queen Elizabeth ii is held at westminster abbey. You can watch the service live monday at 5 30 a. M. Eastern on cspan, cspan now, or or online at cspan. Org. Cspans campaign 1222 coverage is your front row seat to the Midterm Elections. Watch it as it happens on the campaign trail. Speeches, meet and greets, debates and other events during this years senate house and gubernatorial races and dont miss a single election moment because you can take is with you on the go with cspan now come our free mobile video app and visit cspan. Org campaign 2022, your website your website for all of Midterm Election coverage on demand when you misapplied as well as statebystate maps and charts to track results from every primary. Cspans campaign 2022, your unfiltered view of politics. Cspan ipsos a free mobile free mobile app featuring to unfiltered view of whats happening in washington live and ondemand. Keep up with the day because events with live streams of floor proceedings in hearings from the u. S. Congress, white house events, the courts, campaigns and more from the world of politics all at your fingertips. You can also stay current with the latest episodes of washington journal and find scheduling information for cspans tv networks and cspan radio plus a variety of compelling podcast. Cspan now is available at the apple store and google play. Download it for free today. Cspan now your front row seat washington anytime anywhere. There are a lot of places to get political information but only at cspan2 you get it straight from the source. No matter where you are from or where you stand on the issues, cspan is americas network. Unfiltered, unbiased, word for word. If it happens here or here or here, or anywhere that matters, america is watching on cspan. Powered by cable. Venture capitalists specializing in Cyber Technology investment participated and Panel Discussion at the billington cybersecurity summit in washington, d. C

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