Paul ryan led a discussion on inflation and Financial Technology with policy experts and industry stakeholders. They discuss to elimination of Overdraft Fees, financial regulation, and editorial practices of payday lenders and checkcashing services. From the American Enterprise institute, this is one hour. Good afternoon, everybody. Whoa, the voice of god. Good afternoon, everybody. Thank you for joining us. It is nice to see familiar faces in the audience. I am excited about this Panel Discussion we have today. It is a very timely issue. The topic i am excited about talking about here is, the issue with working families, inflation, and how we can use fintech to solve some of povertys more pressing problems. Working families are facing sustained rising inflation, energy costs, food costs, and everyday life has gotten more expensive on an increasing basis. Workers either paychecks lagged behind. Businesses face a difficult time hiring. As we enter this time of Economic Hardship we know that households will face initial hardship, we also know that reducing that hardship will require policymakers, forprofit institutions, notforprofit institutions and everyone in between come together to explore new and innovative ways to improve access to Financial Institutions. Too often when individuals fall short of money, they have either nowhere to go or the places they turn end up costing them more than they can afford. That puts them into a longrun tailspin problem. As policymakers look towards reducing cost for americans to Access Financial services, we know that new Financial Technologies can be helpful in this goal. We have Seen Technology disrupting reduce costs for consumers in a wide variety of industries. And the Financial Services industry should also be subject to this disruption. If this occurs, we also need to ensure that these technologies also have Consumer Protections that make sure individuals are not taken advantage of. This, in my opinion, will require a light, but real touch by regulators in this arena. This is why i am very excited about the panelists we have here today. We have individuals on the cuttingedge of Payment Technologies such as earn wage access, along with some of the foremost scholars and individuals thinking through these issues. I want to introduce the panelist and get into some q a, for the audience we will come to some of you as you raise your hand. First, he is a financial tech entrepreneur, someone i have known for a period of time, meeting the unique needs of those working paychecktopaycheck. He is a serial entrepreneur, an engineer. I want him to talk about what earn access is but to briefly summarize, earn in currently helps people from more than 400,000 Companies Access which is that would have otherwise been held up in the pay cycle. We are going to talk a lot about the pay cycle today. He holds an mms from the institute of technology and science and an mba from purdue universitys school of management. Next we have ida. She is Vice President of the aspen institute. She is a vp there and executive director of the aspen Financial Security program. Since joining the institute in 2015, she has combined her expertise in economic conclusion, research, and policy with her reputation as a collaborative and creative thinker to expand the effort to bring to the national forefront a solutionsfocused discussion on how america can improve Economic Growth by addressing growing levels of Health Inequality and Household Financial insecurity. It has resulted in the creation of several new cutting edge initiatives including the impact collaborative and the reconnecting work and wealth initiative, and the Aspen Leadership Forum on retirement savings. They are building a cross disciplinary community of leaders who are probing critical financial challenges facing u. S. Households and shaping markets and policy innovations that can improve the Financial Security and wellbeing of all americans. Next, came all away from the Brookings Institution next door. Senior fellow at the Brookings Institution. Senior fellow in economic studies, focused on Financial Technology and regulation, payments, macroeconomics, and infrastructure financing and policy. Prior to joining in 2016 he directed the financial reform initiative. Between 2009 and 2012, when we were at similar stents, he served as Economic Policy at the treasury department. He also helped secure passage of dodd frank wall street perform protection act of 2010. He was a banking staffer at the time. He also played a leading role in responding to the economic crises, transportation policy and native american policy. We have here a panel that is expertise in this area, i want to start with you real quick. Because you have taken a very good macro view of these things. We are here to talk about Financial Inclusion. But fundamentally we are talking about Financial Inclusion because we care about the Financial Wellbeing. What is missing 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 . Thank you, it is great to have this conversation and i look forward to the q a later. The upside part of the answer is that there is probably more going right for real Financial Inclusion that leads to wellbeing that we have had in a long time in terms of Financial Service, levels of innovation and leadership in the Public Sector and private sector. The reality is that the sum is not greater than the parts. There are lots of different silo initiatives, lots of different innovations router about today. There are lots of understanding about what it takes to deliver wellbeing for households to give them dignity, agency, and choice. There is still not a birdseye view about how all of the pieces connect. Peoples Financial Lives are not siloed. The payment pieces, the savings pieces, what is going on daytoday and week to week is still not connected. We ended up supporting what the treasurer called what the senator called for with the national Financial Inclusion president ial commission. We want to see how much support was out there. The Financial Wellbeing of our households and what infrastructure could deliver on that . We certainly saw that during covid, when all the payments were hung up with some of the last mile problems. To our delight, over 110 companies and civil rights organizations, every industry associated related to finance and all sectors signed on in support of the idea of a comprehensive, coordinated government quarterback to help think about Financial Inclusion as a financial peace of inclusive growth in this country. With think it is the right time. There certainly seems to be the private sector will to do this. I am happy to talk about how, in particular the components as we come into a very inflationdriven environment, will matter for households. Paul where are we on the stage in the effort . We have made a call, a growing stakeholder coalition, and youre always welcome to ask others about it. We are continuing to find support on the hill and support inside of the administration for its. It is not a done deal but there seems to be a through line to get this done. Paul i want you to tell us your origin story. We have heard it, it is really interesting. You are on the cuttingedge of Payment Technologies. Tell me, what is earned wage access and what possessed you to get into this in the first place . Sure. The way earnit started, it was quite by chance. I was running a Rather Company and my employees were getting Overdraft Fees and payday loans. It did not make sense because i was paying them well. I spoke with one of them, the problem is she needed money the next day, cannot wait until the following saturday. It was wednesday, i want to pay her for the day she already worked. The systems could not do it. So i said, that. It started off like that and i did this for a handful of my employees. For a couple of years it was always in person. I moved to the bay area and they wanted to know if i would still do it for them. I did not mind doing it, i knew how the systems worked and i could tell if they were working out. I continued to do it over messenger. That was not the most convenient way. I would keep getting messages. We had this app for people to use. I did it for them as well. What i realized is that if you give somebody access to their money when they need it, they ir lives are more simple. No more late fees, no more Overdraft Fees, no more payday loans. If i could make it into a product that would scale if for more people i would not about myself. Through the industrial revolution, people were paid everyday. That is where we started paying people in batch. It is in favor of companies, not in favor of people. As employees, if we had a choice we would rather get paid two weeks before we go into work. Instead you get paid two weeks after you work. It does not have to be that way. The technology exists. It is crazy that it comes in a two week batch. The house on the hill does a one month that, four weeks. Just imagine if google waited two weeks give you results. You would not even think of a system like that. Paul you did this for your employees at your business, you built a crude webpage. Did the concept of earned wage access exist then . Were there other people doing this . In a lot of Small Businesses managers were doing this for their employees. It was not done in a way that scaled. Paul what year was this . Probably started doing it, in person, maybe 2008, 2009. Then we made into a Company Early in 2013. Paul that is really something. Aaron, like a chore basic reaction to that, you think i want to get your basic reaction that comey think a lot about payments and workers in a unique way. What from your perspective does government need to do to make the payment function better for working class citizens, either directly or by allowing businesses in a way not currently done because of regulation. What is wrong with the system today . What is wrong with the regulations of the system today . What should be done with it . Thank you speaker ryan for hosting this. I want to start out with a fact i think everyone in this room can agree with. September 30 is going to be a friday. You do not need more analysis. What happens if you get paid friday, september 30. Do you have a check . You go to deposit in your bank and it will be there tuesday, october 4. At some point. It is not quite clear in the day when it will magically be credited. What do you do for the weekend . How you live . How do you pay rent . How do you handle all the automatic bills . 40 to 50 of the americans are living paychecktopaycheck. We designed a system that assumes you always have money and assumes you dont care when the money comes in. That assumption works great for the half of americans that have 1000 in their account, who get free checking, all of the other benefits. Who is paying for that system is the people who are living paychecktopaycheck. Overdraft fees, one out of 11 americans pay 350 a year in over draft fees. Heavy overdrafters are the ones subsidizing free checking. You ask why we have the system . Realtime payments. Bank of england did it in 2008, europe was a little complicated. They had a few legacy systems in the european union. They got it in 2019. We do not have it. Why . The Federal Reserve chose not to do it. Simple policy choice. What has been the ramifications . By my cancellations, over 100 billion of wealth transferred from People Living paychecktopaycheck to payday lenders, check cashers. 100 billion . If we did realtime payments when the bank of england did it in 2008, there was a there was something brandnew coming out called the iphone. That technology in england, in 18 months, to realtime payments. We dont have it. The private sector has developed some alternatives. Earned weight access, some other things. But we made a critical mistake. We put the Federal Reserve in charge of regulating the nations Payment System, how fast the check clears, when that money comes into your account, but they are also in charge of operating their own system. They are the operator and regulator. If we told blockbuster you are in charge of developing streaming, would we have netflix . That is the mistake we have made. The people that have suffered are the People Living paychecktopaycheck. The people that have prospered are the banks, the check cashers, payday lenders, not the people that were not so fortunate to have a good boss that took care of you, went to somebody a little bit less reputable. It is really infuriating to me because the rest of the world is light years ahead of us in this. Paul give us something to talk about here. Give us a glass halffull. Aaron you have some companies stepping in to bridge the gap. Two, you have Financial Services, banks trying to do the right thing and move forward on the overdraft stuff, reduce punitive fees. You have early wage access, you have technology, Companies Like square, uber trying to pay their employees. You have a company like visa who has done something called push debit so they can clear things faster. And then you may have this thing called fed now. They said they are going to start operating, it has been seven years since they said they would start studying it. They had a thing called fed 2020, they said they would have it solved by 2020, that was 10 years ago. I am very skeptical of those initiatives. I think we actually made huge mistakes in our covid distribution payments. We had millions of americans waiting on paper checks that were coming to them in september and october from march 2020. One report showed over 60 million of cares act money went to check cashers. So technology and private sector folks are making progress. And they are doing workarounds and innovative hacks because there are real problems facing americans every day. Paul let me ask you then, where are the workarounds occurring . You are at the beginning of the effort to try to get this government approach on this. Where are any promising movements in government, in industry that you see . Steps in the right direction. Ida a couple of things with this. Earnin, with your personal story, with your engineering mind, you focused on a specific problem. This is what Entrepreneurial Solutions can do. You can solve specific pain points, solve for them, and prove that you can do that in a way that has a business demand, solving real problems and saving households money. The problem in the long run, is you end up with 47 different apps on your phone with 40 different slices of your Financial Life being managed. And we have not actually centered on the full, curated set of not just apps, but systems that people need. Payments need to work. Government to business payments. Government to business payments. Payroll system to work for households. And we know, in terms of Household Financial wellbeing, it is not rocket science. What we found over and over, and this is Research Bears out in the qualitative and quantitative work, his people need to experience routinely positive cash flow in their life. It can come from earned income, coming in when they need it. It can be in the way that nonearned income comes into their life. Social security payments. When your income is lumpy and your expenses are lumpy, and you can solve it through technology, the good news is government, from a regulatory perspective, it needs to understand what it can do to facilitate market innovation. And to the degree that finance is becoming a bit of a utility for households in the country to be fully participating in their Economic Life of the country, we need to solve it, not in oneoff ways, but thinking systemically. One of my colleagues often says when you are the 50 of folks who has 1000 in the bank or more, the system behaves for you. When you are not, you behave for the system. It ends up taking an awful lot of your life. And that means that you do not have enough of the mental bandwidth or plainout time to be there for your kids, to think about the next steps of education you might want to take. You are so busy managing this complicated Financial Life, and you are 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 is not leading up to wellbeing for households in the way that it should given the level of investment going in to that space right now. Paul how have you approa