In This Newsletter
FinTech for Lifetime Financial Security
FinTech for America’s Banking Deserts
New MI Finance Small Business Initiative
FinTech for Lifetime Financial Security
This January, the MI Finance Lifetime Financial Security Program, led by Cheryl Evans, director, MI Finance, co-organized a symposium on retirement with the Employee Benefit Research Institute (EBRI). The EBRI–Milken Institute 2024 Retirement Symposium featured several sessions that highlighted how advances in financial technology (FinTech) enhance employee benefits and federal retirement policy.
Sri Krishnamurthy, CEO, QuantUniversity, opened the symposium with a breakdown of how artificial intelligence is reshaping the financial sector at large in the session Generative AI and Large Language Models: Opportunities, Risks, and its Use in Finance. Eric Stevenson, president, Nationwide Retirement, moderated the session Innovations and FinTech Developments That Can Enhance Financial Security, Retirement Planning, and Spending Down Assets, which featured panelists Tyler End, CEO, Retirable; Kevin Nazemi, founder and CEO, Charlie; Yon Perullo, CEO, RiXtrema, Inc.; and Laurel Taylor, founder and CEO, Candidly.
The Street reports that the FinTech speakers represented at the conference were leveraging advances in AI and large language models to enhance anti-fraud protections, explain benefits, assist in portfolio optimization, and derive deeper insights from health data. According to Plansponsor, panelists also discussed how AI and big data are enhancing the modeling of plan funds deaccumulation and modeling of how other financial obligations like student loans affect retirement savings.
Evans presented the findings of her program’s recent white paper, Shifting the Retirement Paradigm: Moving toward Lifetime Financial Security. The report highlights and analyzes developments, such as state-facilitated retirement plans, the SECURE 2.0 Act, and FinTech solutions that make long-term saving easier and more accessible.
The symposium concluded with remarks from John Hope Bryant on Financial Fluency and Equity in Saving for All, who grounded the need for lifelong savings solutions in his personal experiences. He also discussed Operation Hope’s efforts to open savings accounts for elementary school students and his advocacy work to push for emergency savings accounts as an employee benefit. Hope Bryant spoke as a panelist at the 2023 Global Conference Session, FinTech Movement: Social Economic Mobility Strategies, where he shared his perspective on financial literacy, inclusion, and access as a civil rights issue.
View the symposium’s full agenda, speakers, and sessions.
FinTech for America’s Banking Deserts
An enduring mantra of the FinTech industry is its focus on bringing underserved and underbanked individuals into financial markets. While the mass adoption of mobile and online banking in the US has reduced the number of the unbanked in the United States to all-time lows according to the, the digital shift is leaving behind some communities that have historically lacked bank branches and internet infrastructure. These communities are America's banking deserts.
According to the Federal Reserve’s Fed Communities initiative, a banking desert is a census tract without a physical bank branch within a certain geographic radius from its population center. In 2023, 4 percent of census tracts in the United States were banking deserts, and 4 percent could become a desert if a branch closes. Observed banking deserts are 14 percent rural, 66 percent suburban, and 20 percent urban, and 39 percent also have limited access to broadband. Residents of these deserts are majority Black, majority Hispanic, or majority Indigenous in 15 percent of banking deserts and in 17 percent of potential banking deserts.
Speaking to the policy challenges posed by banking deserts, in a recent article by the FinTech Times: Concerns Over Financial Inclusion Gap in Rural Areas Amid More Bank Closures, Nicole Valentine stressed the urgent need for collective attention to bridge financial disparities in underserved communities and promote accessibility through technology. Valentine told the Times, “Unfortunately, in 2024, with the many financial services pathways that households and entrepreneurs have, banking deserts still exist. Communities that have little to no access to banking and financial services need our collective attention and focus.” She continued, “Where technology is an enabler for those with access to digital and mobile banking, there are communities that have less connectivity when there’s a tech only platform. As a society, we need to invest in and stay committed to closing the disparities across our financial system that affect rural and other underserved communities. That starts with a definition of financial inclusion that enables economic agency over one’s financial activities in a way that is affordable, accessible, and impactful.”
New MI Finance Small Business Initiative
This year, Kristen Fanarakis, associate director, MI Finance, is leading the launch of the Small Business Policy and Innovation initiative.
Small businesses and start-ups comprise about half of all private-sector employees, about 44 percent of US GDP, and are roughly 13 times more innovative than their larger counterparts, according to the National Bureau of Economic Research. Around 80 percent of these small businesses have 20 employees or fewer. erasing the last two decades of stagnation in entrepreneurship. Tech facilitated this surge in many ways, lowering barriers to entry across industries. The Milken Institute's new Small Business Policy and Innovation initiative seeks to understand what's helping and hurting small businesses and start-ups and how we can foster better ecosystems to ensure they survive and thrive.
According to the American Independent Business Alliance, locally owned businesses recirculate 48 percent of their revenue back into their local communities compared to just 14 percent at chain store equivalents. Entrepreneurship can provide a path to independence for marginalized groups, such as minorities and immigrants. A 2012 study by Global Entrepreneurship Monitor found that immigrants are more likely to launch new businesses than their native counterparts. Venture Forward/Go Daddy found that Black women are one of the fastest-growing groups starting small businesses, as reported by WorkLife.
Twenty-five years ago, launching a clothing business meant opening a storefront or selling to a brick-and-mortar department store or boutique to reach potential customers. Marketing meant taking out print ads or relying on print media coverage from magazines and newspapers. Today, entrepreneurs can crowd-fund their seed capital, open a Shopify store, and market directly to potential customers on social media ostensibly to reach customers anywhere in the world.
Tech is the engine that drives the modern economy, and data is the oil. However, we need timely, detailed, aggregate data on this vitally important segment of the economy and entrepreneurial community.
Small businesses represent a disproportionate share of overall economic activity and operate at a distinct disadvantage to their larger counterparts and without accurate or sufficient representation with local and national policymakers because of their small size, according to the Bureau of Economic Analysis. How many of these pandemic-era start-ups will survive? We don't yet know, but we at the Milken Institute understand that crafting policies to support small businesses and start-ups starts with data. We seek to better understand the dynamics driving this vital segment of the economy and elevate their collective impact. If you or your company is interested in working with us on this endeavor, please get in touch with Kristen Fanarakis ([email protected]).