Speeches and Congressional testimony

US Office of the Comptroller of the Currency: Quarterly Journal, Sep 2002

But it's not only their competitive pricing that makes such accounts attractive to those who would otherwise be dealing with a nonbank. They provide a safe and cheap repository for funds. No more lost or stolen checks; no more hassles to cash a payment check; no more risk of carrying around a wad of cash and becoming a target for predators. The paycheck goes directly into the bank account, and with a debit card the customer can draw funds as she needs them, at an ATM or at point of sale. And if the bank has been innovative, the customer may even be able to make basic payments from the account by electronic transfer, either without cost or at a cost far less than a money order.

For the bank there are also important benefits: no processing of paper checks, no risk of overdrafts, the opportunity to establish new customer relationships that may be developed into something more.

For example, if such customers need small loans, for a car or appliance purchases-or even payday-type credit-a direct deposit account, which already enjoys cost advantages over a paper-based account, offers the possibility of prearranged electronic debits, significantly reducing not only the processing cost, but the bank's risk of default, as well. And they are favorably considered in a bank's CRA evaluation.

Banks are also taking the initiative to address the shortterm borrowing needs of their customers, and here again, technology can be a big part of the solution.

In one noteworthy development, a prominent national bank has begun to offer a product that provides access to low-cost cash advances for direct deposit customers. Funds can be obtained directly from the bank's ATM network or by speaking to a telephone agent who will transfer the funds into the customer's account. The bank has also automated the underwriting process, cutting costs for both parties to the transaction and virtually eliminating the waiting period for established customers-a matter of considerable importance, as we've seen, for the emergency borrower.

Let me commend those of you who have added such innovative products to your offerings-and challenge those of you who haven't done so to think of even better ways of delivering these services.

But despite what Emerson said, it's not enough to build a better mousetrap; the world has to know about it before anyone will beat a path to your door. You have to give people a reason to break old patterns and habits; you have to let them know that they do have better options. And that brings me back to the importance of financial literacy. A quick cautionary note is in order here. There can be a fine line between education and marketing, and it's a line that should be heeded in an educational setting. But this is an instance in which the facts-plain and uninflated-are on your side. Bank products and services-and the value of banking relationships-should sell themselves to informed consumers.

Coupled with innovative, technology-based approaches to product delivery, I believe that educational outreach holds tremendous potential for reducing the ranks of the underbanked. The potential rewards-for the economy and the banking system-certainly make the effort worthwhile.