Banking Up Is Awarded Innovation Fund Research Contract by the US Treasury to Evaluate Broader Access to Credit for Prepaid Cardholders

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The US Department of the Treasury has awarded a project contract to Banking Up to evaluate an innovative approach for strengthening low income Americans' access to consumer credit, as part of the Treasury's Innovation Fund initiative.

We are very pleased to have obtained support from the Government for our effort to innovate in broadening access to credit to as many deserving Americans as possible.

The prepaid industry has grown immensely in the past 5 years, but prepaid cards cannot help build credit files or credit scores, which leaves up to 60 million underbanked and unbanked Americans with a poor or no credit history. The lack of good credit options that help build FICO scores have left many low to moderate income consumers in a perpetual state of financial exclusion.

While the law requires creditors to consider all available credit scores, the market reality is that FICO scores are indispensable for the vast majority of consumers at this time because most lenders still rely on them.

The project will consist of selecting consumers with a sufficient history of responsible spending and saving from continued use of a prepaid debit card, and offering them the option of a secured credit card.

Unlike prepaid debit cards, secured credit cards contribute to credit scores by reporting activity to the main credit bureaus. Therefore a consumer with both a prepaid debit card and a secured credit card in her or his wallet can benefit from both the safety and convenience of everyday payments with a prepaid card and the credit-building capability of a secured credit card.

To minimize the chances that the secured credit card could be used irresponsibly, a mobile application will be distributed to help participants manage both their prepaid and secured credit card and to deliver contextual financial guidance to them via mobile push messages in real time.

The main goal of the project is to:

  • identify which types of active and responsible prepaid card users can also become responsible secure credit cardholders,
  • test how much and what type of transaction data from prepaid cards will help the most in evaluating credit worthiness,
  • and evaluate if financial guidance delivered to them over the air in the context of their card activities can improve markedly their chances of improving their credit score.

The project will also involve research and analysis of legal and policy matters surrounding the use of card transaction data and of mobile applications for financial assistance.

Joining Banking Up will be two prominent specialists in Consumer Financial research and regulatory policy:

  • Michelle Jun, a former Senior Attorney with Consumers Union, the policy and advocacy division of Consumer Reports. Ms. Jun now runs Payments Law (, a consultancy providing regulatory guidance to entrepreneurs, startups, companies, and nonprofit organizations in the field of consumer financial services.
  • Dr. Vanessa Perry,a consultant and respected scholar recognized for research on consumer behavior in housing and financial services, who currently serves as Associate Professor of Marketing, Strategic Management and Public Policy at the George Washington University School of Business.

“It is exciting that Banking Up’s Evaluating Safe Prepaid-to-Credit Pathway project is among the select group of grantees. This selection acknowledges the pressing need to provide more innovative solutions to an important long-standing issue that affects many low and moderate income consumers: access and availability to good credit products that seeks to provide better solutions for long-term financial success” said Michelle Jun.

According to Vanessa Perry, “Experts in consumer credit know relatively little about the effects of financial information on financial behaviors, such as saving, credit card usage, and payment. By tracking consumers who have access to ongoing financial guidance, we will be able to test whether informational interventions have a positive impact on financial decisions. If effective, this approach has the potential to change the way that we think about credit risk.”

"We are very pleased to have obtained support from the Government for our effort to innovate in broadening access to credit to as many deserving Americans as possible" said Patrice Peyret, CEO of Banking Up. "We are also delighted that Mrs. Jun and Dean Perry have agreed to bring their invaluable expertise to this project, and add the rigor needed in researching the results on consumers and the regulatory and policy implications."

Learn more about the goals of the US Treasury Financial Empowerment Innovation Fund:

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Patrice Peyret

Daniel Cruz
Department of the Treasury
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since: 10/2009
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