Watering the financial desert

Millions of Americans don’t have access to basic financial services. Can corporations offer an economic lifeline?

By Gareth Ross, Head of Enterprise Technology & Experience, MassMutual

Residents of Frayser, a community in the north of Memphis, Tennessee, have come on hard times. A community in north Memphis, Frayser was built around the railroad in the late 1800s. Throughout the 20^th century, it grew quickly. Big factories moved in. Corporations, schools, and services came with them. But by the 1980s, those plants had closed down. People left the community. Corporations stopped investing. Today, the majority of jobs in the city are part-time or temporary. And, eighty-five percent of Frayser children qualify for free or reduced-price lunch.

Frayser’s plight isn’t just the consequence of the erosion of industry. The city has struggled to counteract socioeconomic decline in large part because there is a dearth of financial resources for its citizens. Frayser is an example of the financial gap present in underserved communities nationwide. People in this community don’t have access to, don’t trust or are not aware of the financial service resources that most Americans use regularly. It’s a place with only two banks, but sixteen alternative financial service providers, such as pawn shops and same-day lenders. It is a place where pretty much everything—rent, paychecks, groceries—is paid for in cash or by money order to prevent checks from bouncing.

The circumstances are not unique. Across the country, sixteen million adults don’t have bank accounts, while twenty-three percent have borrowed money from a place like a pawn shop or payday lender. For many people, this creates a vicious cycle that makes them less financially secure with each passing year. If your only option is to pay your rent by money order, that costs you extra money. If you need money after a family emergency, you might get a payday loan with an annual interest of 400 percent. In fact, families that utilize these types of alternative financial options can spend up to 10 percent of their income on interests and fees—the same amount American families spend on food each year.

Put simply, this lack of access to basic financial systems and tools conspires to ensure that countless low-income communities, including Frayser, stay low income.

There’s a lot we can and must do to address this problem. But above all, it starts with people. People helping each other out. People investing in each other. People opening up new opportunities for others—and coming up with new solutions. When people have somewhere reliable, they can turn to when they’re making critical decisions about their future, or just figuring out what options they have and how to use them, it matters—a lot.

The good news is, corporations can help. It might mean making concerted efforts to expand services, financial and otherwise, to underserved places or working with community leaders and activists to pilot programs that address longstanding problems. MassMutual is examining this through their program, the Live Mutual Project, in which they have identified community resources to create easy-to-navigate solutions. MassMutual is currently in the early stages of this program in Springfield, MA and Memphis, TN with efforts underway to leverage their knowledge, connections and resources to help people expand their own relationships and access the services they need for a better future.

Digital innovation can offer solutions too.  It’s important to remember that technology is a tool, not a singular solution. That means we can think broadly about how to address these challenges. We can figure out how to use the power we have to bring people closer together. We can build stronger communities where people lift each other up. The only question is: are we up for the challenge?

As leaders of industries working to expand the limits of what’s possible, it’s up to all of us to consider how to help the people being left out and left behind in our country. Together, we can build stronger communities—with financial services and networks people can count on.

Learn more about the Live Mutual Project here. 

Related content from MassMutual: 

The neighborhoods that industry forgot

Amid robust economy, many are left behind

Fighting poverty one relationship at a time

Sources:

Federal Deposit Insurance Corporation, “FDIC National Survey of Unbanked and Underbanked Households,” Oct. 20, 2016.

Federal Reserve, “Report on Economic Well-Being of U.S. Households in 2016-May 2017,” June 14, 2017.

This content is paid for by Massachusetts Mutual Life Insurance Company (MassMutual) and published by WP BrandStudio. The Washington Post newsroom was not involved in the creation of this content. Learn more about WP BrandStudio.