As Prepared for Delivery on July 8, 2020
Thank you very much, Tom, for that kind introduction, and thank you all for joining us today. It’s my pleasure to be here, at least virtually, to discuss several urgent issues that are at the forefront of our minds. I’m grateful to the Institute of International Bankers for hosting this summit, which comes at an incredibly welcome and impactful time. As Shakespeare said, “Three hours too soon is better than a minute too late.”
Over the course of just a few short months, we now find ourselves in a very different world. Indeed, the world we knew in January now seems like the distant past. Over the last six months, we’ve faced a series of challenges with global implications:
First, of course, the coronavirus pandemic has tragically taken hundreds of thousands of lives worldwide and placed a tremendous strain on public health systems and social life.
Second, there is great uncertainty resulting from the pandemic’s economic repercussions. And because there are so many unknowns, many companies are finding it challenging, to say the least, to provide financial forecasts and outlooks.
Third, the tragic murder of George Floyd – yet another example of abuse of authority against a black man – has brought uncomfortable issues about race and class to the forefront of our public discourse.
For those in leadership positions – including most, if not everyone on this call – any one of these crises would have been difficult enough to manage, to say nothing of having all three strike simultaneously.
What I find interesting about these three distinct challenges, however, is that they all, in one way or another, are forcing us to confront the inequities that exist within our global society.
Here in the United States, African-American, Latino, and all communities of color are being affected disproportionately by the spread of the coronavirus. Likewise, minority-owned businesses have been particularly affected by the suddenness and depth of the economic shock. And the protests throughout America’s cities have revealed the pain, frustrations and anger that have long been simmering throughout the black community.
And it’s important to note that none of these inequities are unique to the United States. Indeed, I’m sure many of you are witnessing similar dynamics in your own countries and local communities. So the question we must ask ourselves is: what can we do to remedy those inequities?
Finance As A Creative Force for Problem-Solving
For those of us who work in and around the financial services industry, this is an especially urgent question, because critics often cite our industry as one of the drivers of inequity. I’ve spent my career working with financial firms in the private sector, or on regulatory issues in the public sector, so I know from experience that the financial services industry is often mischaracterized, if not downright maligned unfairly.
At the same time, however, we must recognize that our industry has failed to live up to its highest ideals at times. That pains me when it happens because it undermines trust and feeds that misguided critique of the industry.
The financial industry I have known for over two decades is a creative force that solves problems. It’s the free market that drives capital to the best ideas. It helps people save and invest for retirement. It helps a newly married couple buy their first home.
I’ve seen how the financial services industry plays a key role in helping families achieve financial freedom by building generational wealth; helping entrepreneurs to get their small businesses off the ground; and helping to create jobs and strengthen communities. Critical to each of these goals is a healthy, vibrant financial sector.
It’s time to start telling a new story about the financial service industry’s contributions to society. And, just to be clear, I’m not suggesting another shiny marketing or public relations campaign. Rather, I’m talking about taking action to realize what’s best in this industry through service to your clients and stakeholders. That story, and that action, must focus on the values of financial inclusion — bringing more people into the mainstream financial system.
One of the things I passionately believe is that financial inclusion is the civil rights issue of our time. If we get this right — if we create conditions where people can break the cycle of debt and dependency, obtain capital, and achieve financial security for themselves and their families — then I believe many problems will ultimately take care of themselves.
This isn’t a new commitment for me; it’s something I’ve been working on since I began working in finance. Earlier in my career, I worked on community investment issues in the private sector, with a heavy emphasis on financial inclusion and shared prosperity. Over the years, and in various ways, that commitment has continued in my public service career. Today, I lead the independent financial regulatory agency that oversees the U.S. system of federally insured credit unions, and financial inclusion is a central part of my agenda here.
What I’d like to do today is give a brief overview of how the financial industry can encourage and incentivize financial inclusion. And I’ll say at the outset that it’s not an exhaustive list. Rather, it’s a set of guiding principles we can use to achieve greater financial inclusion.
Principles for Greater Inclusion
First, we need real institutional commitment to the values of diversity, equity, and inclusion, which I’ll call “DEI” for short. I’m sure everyone here well knows why DEI is so important. We have endless numbers of studies and surveys, stretching back at least three decades, making the strategic business case for DEI.
In 2018, for instance, McKinsey and Company published its “Insights on Diversity and Inclusion” report, which found that, across the board, companies committed to the values of diversity, equity, and inclusion outperformed the competition. According to the report:
- Diverse companies were better at attracting and retaining top talent;
- They enjoyed superior financial performance, including profitability; and
- They had higher levels of employee satisfaction and engagement.
Far too often, organizations and executive leaders treat diversity as simply a “human resources” issue. To be truly effective, however, diversity must be more than that; these values require a commitment to cultural change at every level and must extend throughout the organization. It cannot simply be a matter of “checking the boxes” to show that you’ve got the right proportional representation of women, people of color, and LGBTQ+ people in the C-suite or on a corporate board. A commitment to a strong DEI program must inform all of the organization’s strategic planning and operations.
For the financial services industry, in particular, diversity is vital when it comes to reaching and serving a wider range of people. That’s why we must consider diversity in a much more expansive way, beyond the standard categories.
For example, we must ask ourselves: Are we doing everything we can to reach people with low and moderate incomes? Are we including disabled and differently abled individuals in our financial inclusion plans? What about people in hard-pressed urban communities, or conversely, distressed rural communities, where financial service options are thin on the ground? Each one of us should be thinking critically about these and other questions because they are at the core of true financial inclusion.
Second, we must use financial technology in ways that will result in greater financial inclusion. I recognize that all of your institutions are looking at how fintech can be used to improve efficiency or customer service, especially as the pandemic has driven increasing numbers of banking customers into a digital world. But let’s not forget that fintech tools can also enable us to connect with minority communities, rural communities, and other underserved populations. There are tremendous opportunities here, so let’s continue the great work our industry is doing on that front.
For example, in West Africa, the World Council of Credit Unions, through its Technology and Innovation for Financial Inclusion project, is working with the Confederation of Financial Institutions of West Africa to create a digital credit union. By exploring opportunities for partnership with technology and business development providers, the project’s goal is to improve small and medium enterprise lending strategies in developing countries.
Third, we need continued innovation in financial products that promote greater inclusion. The financial services industry has shown great creativity in developing new types of products, but we haven’t always directed those creative energies toward helping the people and communities who need help the most. That seems to be changing for the better, and social impact investing is an excellent example of that change.
For example, not too long ago, we saw the launch of a new exchange-traded index fund in the U.S. markets that focuses on investing in companies with “strong racial and ethnic diversity policies.” to encourage investment in companies that are leading the way on diversity. That’s a compelling and interesting approach.
I’m also interested to see other types of social impact investing that could help support underserved urban populations or encourage investment in distressed rural areas. And I’d like to see that same spirit of innovation put to work on behalf of microfinance projects or alternative lending products that will help us to put other unbanked or underbanked populations on the road to prosperity.
Turning Ideas Into Action
Earlier in my remarks, I mentioned that most of my work these days is with credit unions, and I encourage all of you to closely examine what the credit union industry is doing on these issues. In the United States, the credit union industry has more than 121 million members nationwide and more than $1.6 trillion in assets. And though these are cooperative, member-owned financial institutions that differ in many ways from your business models, one thing I believe we can learn from credit unions is how impactful a strong commitment to community service and community development can truly be. This embodies the “people helping people” ethos that has guided the credit industry since its inception nearly a century ago.
Over the last 18 months or so, I’ve logged countless hours and miles visiting credit unions throughout the United States and talking with credit union leaders, volunteers, and staff. The collaborations I’ve seen virtually everywhere I go are very powerful. And that collaboration is the key to achieving real financial inclusion.
And while I’ve spoken today about broad issues, what we’re truly talking about here is having an impact on real people.
That’s the goal, right? Last year, I spoke with a woman in Maryland who’d been excluded from the financial system for most of her adult life. After joining a credit union and participating in a financial coaching program, she built over time a credit score that enabled her to obtain access to mainstream financial products.
Today, she is on the road to financial freedom and homeownership. That’s just one example, but I could point to scores of others.
Here’s the bottom line: When we talk about addressing inequities that are hurting our global societies, we must move beyond offering soothing platitudes and ethereal, pie-in-the-sky statements of support.
What we must focus on instead is action. We must focus on what we can do to address those inequities. We must identify and implement solutions at a concrete level, within our realm of influence, to make the changes we need to see.
The famous Russian writer Leo Tolstoy once said: “Everyone thinks of changing the world, but no one thinks of changing himself.” What I appreciate in that thought is its humility – the idea that if one wants to make a true change, they must begin within their own sphere of influence, where they can make the biggest difference. But once you make that change, it will inevitably have larger reverberations throughout the world.
I believe it’s time we make that true change within the financial industry – and that change begins with a true, sustained commitment to financial inclusion.
But we can’t simply sit back and wait for someone else to come along and fix it. It begins with leadership, and it begins with recapturing the best sense of finance as a force for good that’s innovative, productive, constructive, and dedicated to problem-solving and making a positive difference in our world. I look forward to working with all of you in partnership to bring that vision to fruition.
In closing, I’ll leave with a quote from a former banker, who has now answered a higher call to serve, the Archbishop of Canterbury Justin Welby, “We do not have the luxury of saying ‘something must be done’ without doing anything ourselves.” Thank you to the Institute of International Bankers for the very gracious invitation to join you today.