In 2002, Wal-Mart asked me to start up a financial services business to serve Wal-Mart customers.
The first thing we realized—at least from the perspective of many Wal-Mart customers— was that the financial services industry was not serving them well. Financial services providers were offering products and services that were perfectly legal.
Yet, to the average American without a lot of extra money at the end of each pay period, what they were facing didn’t always seem fair.
At Wal-Mart, we knew the better we served our customer, the better it would be for us. We had the advantage of a company philosophy that asked not how much we could charge, but rather how little could we charge and still make a good return for our shareholders. We had the ability to market the fees for our products in transparent ways. From the beginning, we decided to set a higher bar, to be very inclusive and welcoming, and it worked. We made money and our consumers saved money. As a result, they were in a better position to manage their financial lives day-to-day.
Unfortunately, this model hasn’t translated across the industry. We now have at least 60 million financially underserved consumers. Trust between the American people and financial institutions has decreased . In 2012, we are at a crossroads in America as it pertains to financial services, and we need all the help we can get in finding the way forward.
Fortunately, the Center for Financial Services Innovation(CFSI) has developed the Compass Principles—quite literally a compass to help guide the financial services industry in the right direction. (You can check out a schematic overview of the Compass Principles in this infographic.)
Since leaving Wal-Mart, aside from starting my own financial services consulting firm to help bring innovation to financial services, I have also been working with CFSI as a Senior Advisor. This is an organization of smart and dedicated people focused on improving the financial services marketplace to be more inclusive for the underbanked, as well as the general consumer. Over the past two years, CFSI has systematically formulated the Compass Principles—a set of aspirational guidelines for what constitute quality in innovation and execution for basic financial services.
In other words, the Compass Principles outline the qualities and features financial institutions should consider as they create and sell basic financial tools like checking and savings accounts, prepaid cards and small-dollar loans. They are meant to serve as a guide—not a measuring stick—that an organization can use to produce offerings that benefit both the consumer and provider—offerings that are legal, profitable and fair.
If you take time to study these principles--embracing inclusion, building trust, promoting financial success for consumers, and creating opportunity to live a better life--you will begin to understand the depth of meaning of these words as well as some of the more subtle nuances that guide us all to do the right thing, not just what is easy or legal or common practice. If we all take the high road by following these principles, there will still be plenty of room to compete for customers loyalty through innovative features and benefits and pricing that serve customers needs better than competitors.
As part of the development of these Principles, CFSI sought feedback from the best thinkers in the marketplace—from financial institutions, networks, alternative providers and consumer advocates—to weigh in on the Principles, to ensure that they are comprehensive and to ensure they can work within the industry.
The concepts are aspirational, and integrating these Principles into the development of financial products will take time. But, the Principles have the opportunity to inspire the industry to think more creatively about the services they provide to their consumers. All Americans deserve to be treated fairly by their financial institutions. And all financial institutions have a right to increase their bottom line. The Compass Principles help us create a world where both are possible.
It’s time for the financial services industry to come together, to collaborate in order to create a financial services industry that is sustainable, profitable, inclusive—and most fundamentally—fair.
Jane Thompson, CEO/Founder of Jane Thompson Financial Services LLC, is a Senior Advisor to CFSI and provides strategic advice and guidance to the organization. In this capacity, Ms. Thompson advises CFSI on overall and specific initiatives including CFSI's Compass Principles and consulting business. Ms. Thompson has been a recognized as a leader in serving the underserved through innovative financial products, services and formats. She founded Walmart Financial Services at Walmart Stores, Inc. and led the group as its President to become the largest business in America serving underserved financial services customers.