Innovation Trends in Nonprofit Financial Services to the Underbanked

By illustrating the support offered by the Center for Financial Services Innovation (CSFI), this paper seeks to understand and analyze the increasing opportunities created by financial institutions in collaboration with innovative nonprofits to serve underbanked markets.In 2005, CFSI received almost 1,000 inquiries that yielded just fewer than 100 applications for funding. Out of these, it selected 4 projects for funding.

The innovations submitted to CFSI fell into three broad categories:

• Financial products;
• Marketing or distribution channels;
• Business or revenue model.

The innovation proposals that CFSI received and funded bring to light some of these emerging trends in finance services:

• Collaboration between financial institutions and innovative nonprofit organizations - These partnerships build on the core capabilities of each collaborator and provide a springboard for more robust solutions;
• Change in the role of nonprofits from "Supporting Players" to "Leadership" in articulating the needs of their constituents;
• Eagerness shown by mainstream financial markets to capture this growing market;
• Nonprofits' response to the needs of underbanked consumers by offering important lessons, from dissecting demographic segments into easy-to-target consumer groups to:
  • Blending and bending product categories to give birth to original products;
  • Pioneering dynamic new channels for distribution.
• The enhanced ability to evaluate the performance of new ideas at the earliest stages of development and to make more informed decisions concerning future strategies as key factors in the success of these collaborations;
• Nonprofits' active development of solutions that are viable, sustainable, and potentially profitable creating opportunities for the broader business sector.