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Washington, D.C. - The Cato Institute's Center for Monetary and Financial Alternatives is launching a new initiative to help educate policymakers and the public on how innovation can expand access to financial services and bolster consumer protections.
The Initiative for Financial Inclusion will also promote regulatory modernization — identifying financial regulations that prevent some communities from fully participating in the economy.
"Consumer finance is at a crossroads," said Todd Zywicki, a senior fellow at Cato. "Technology is changing how households save, borrow, invest, and pay for everyday needs. But not everyone is able to take advantage of these expanded financial choices, thanks to ill-advised regulations and government intervention."
Zywicki, also a distinguished law professor at George Mason University, will lead the Initiative with Cato policy analyst Diego Zuluaga to deliver robust legal and economic policy research on topics ranging from student loans and small-dollar credit to faster payment methods, increased savings opportunities, cryptocurrencies, and regulatory sandboxes.
Zywicki and Zuluaga's efforts will be enhanced by a network of leading scholars including Dan Quan, who will serve as adjunct scholar for CMFA. Quan, managing partner of Banks Street Advisors and senior adviser for McKinsey's banking practice, is a nationally recognized expert who has advised policymakers and CEOs at successful fintech firms. Quan previously served as senior adviser to the Director of the Consumer Financial Protection Bureau, where he led its fintech office, Project Catalyst.
As part of the initiative, Cato scholars will explore problems of the "unbanked" — the 8.4 million families and 20 million individuals in the United States with little access to banking, credit, and payments services.
"Reducing regulations that eliminate credit options for those who already have few of them is a moral imperative," said Zywicki. "It is our hope that this project will encourage new financial technologies, such as nontraditional credit scoring and underwriting models, that would benefit consumers who don't have access to mainstream banking."
Over the long-term, Zuluaga notes, "greater financial inclusion can also boost income mobility for historically disadvantaged groups and allow more people to contribute to the economy. Yet that outcome depends not only on the ingenuity of entrepreneurs but also on the willingness of regulators to let them innovate."
This vision, in which innovation and competition expand access to financial services, is one that Cato believes progressives and conservatives both can support — to the advantage of the American people.
"Progressives worry that millions of Americans might be held back if they lack a bank account," Zuluaga wrote in a recent op-ed. "Conservatives who support free enterprise should be concerned that government over-regulation has raised the cost to banks of managing accounts, pricing out lower-income people. This can and should be a very bipartisan cause."
The first Initiative event, "Financial Inclusion: The Cato Summit on Financial Regulation," will be held on June 12 in Washington, D.C. The Summit will feature innovators, policy experts, and regulators, including keynote speeches by FDIC Chairman Jelena McWilliams and CFPB Deputy Director Brian Johnson.