R -- REQUEST FOR INFORMATION ON THE IMPLEMENTATION OF PILOT PROJECTS TO EXPAND ACCESS TO LOW-COST FINANCIAL SERVICES FOR LOWER-INCOME FAMILIES

Notice Date

November 13, 2000

Contracting Office

Department of the Treasury, Departmental Offices/Procurement Services Division (DO/PSD), Procurement Services Division (PSD), 1310 G Street, N.W., Suite 400 East, Washington, DC, 20220

ZIP Code

20220

E-Mail Address

Harry Shank (harry.shank@do.treas.gov)

Description

INTRODUCTION: Appropriations for FY 2001 enacted to date include $8 million for the Treasury Department to fund pilot programs to expand access to financial services for lower-income populations. Under the First Accounts initiative, the Treasury Department (_Treasury_) intends to work with financial institutions, financial services electronic networks, and community and Native American organizations and to establish pilot projects to increase the availability of low-cost bank accounts, ATMs and other electronic access points, and financial literacy education for low- and moderate-income individuals. Treasury is soliciting from potential pilot project vendors information and comments concerning the implementation and operation of the First Accounts initiative. Treasury anticipates that the $8 million initiative will support pilot projects in a rural Native American location and in one or more urban areas that lack access to mainstream financial services. Treasury further anticipates that through these pilot projects, services may be delivered by a combination of depository institutions, financial services electronic networks and community partners (including tribal governments). Organizations that are interested in operating a First Accounts pilot should review the _Outline of Pilot Project Elements_ below and provide responses, where appropriate, to the questions in the _Key Areas of Interest to Treasury_ section. Respondents may wish to prepare feedback jointly; a financial institution, for instance, might work with a community organization to offer responses that describe how the two organizations could partner to operate a pilot project. After reviewing these responses, Treasury will meet with interested organizations to discuss potential pilots, and will solicit formal proposals for pilot projects. The initiative will fund contracts with project partners in which partners are reimbursed on a performance basis for a portion of the costs associated with enrolling the _unbanked_ in accounts, expanding banking access in underserved communities, and delivering financial education to lower-income consumers. OUTLINE OF PILOT PROJECT ELEMENTS: First Accounts pilot projects will be designed to support the provision of mainstream financial services that meet the needs of lower-income populations who lack access to such services. Treasury envisions that the pilot projects will each include three components: I. LOW-COST ELECTRONICALLY-BASED ACCOUNTS _ The most recent Federal Reserve Survey of Consumer Finances indicates that approximately 10 million American families lack any sort of transaction account at a depository institution. About 85 percent of these families have incomes less than $25,000 annually. Some members of this population receive federal payments, such as Social Security or Supplemental Security Income, that make them eligible to open an Electronic Transfer Account (ETA). The ETA is a Treasury-designed account, available at participating federally-insured depository institutions nationwide, that offers Direct Deposit of federal benefits and at least four cash withdrawals per month for a monthly fee of not more than $3. Treasury offers participating financial institutions $12.60 for each ETA opened to offset the set-up costs for these accounts. Treasury estimates, however, that at least half of all unbanked families are not eligible for the ETA because they do not receive federal benefits. These families may not have transaction accounts for a number of reasons. They may be unable to qualify for conventional accounts, they may not have access to low-cost account products that they find useful, or they may not understand the benefits of account ownership. The First Accounts initiative would make funding available to pilot project vendors to offset their costs for setting up and marketing low-cost accounts. Because the target population for First Accounts does not receive federal benefits, the designs of these accounts may differ from that of the ETA. The pilot initiative will encourage potential vendors to experiment with different product designs to inform the marketplace as to which types of accounts work best for the unbanked. Additionally, the initiative will fund research on the banking needs and preferences of low- and moderate-income unbanked individuals. This research, which the Department anticipates would be conducted by research organizations with expertise in financial services, would assist depository institutions in designing accounts that appeal to this population and are economically viable for institutions to offer. Treasury has already sponsored a substantial body of research for EFT _99 that investigated the demographics of unbanked federal benefit recipients, their banking needs and preferences, and the revenues and costs for financial institutions associated with offering a low-cost transaction account. Research conducted for First Accounts would help vendors to design and market products to unbanked individuals who are not recipients of federal payments. The initiative may also fund research to evaluate outcomes for families that open new accounts as part of these pilot projects. II. NEW ELECTRONIC ACCESS POINTS _ Many low- and moderate-income families may lack access to electronic banking services where they live. For example, Treasury research indicates that families in lower-income zip codes in Los Angeles and New York have access to only half as many ATMs as families in middle-income zip codes. Access to point-of-sale terminals at merchants in lower-income neighborhoods may also be limited. The First Accounts initiative would offer financial incentives for depository institutions and financial services electronic networks to provide increased access to low-cost financial services in lower-income communities through ATMs, point-of-sale networks, and internet technologies. Treasury is currently running a small pilot project with the US Postal Service to research the costs and benefits of providing access to ATMs in post office lobbies in underserved urban and rural communities. Strategies to improve access for Native American populations in rural areas may differ significantly from urban strategies, and may involve mobile banking units and other remote access technologies. III. FINANCIAL LITERACY EDUCATION _ Families without a formal attachment to the banking system may have difficulty managing household finances, and may not understand the mechanics of account ownership, how to use electronic access devices like ATMs, or how to budget and save for the future. The First Accounts initiative would help to sponsor financial literacy education for families in low- and moderate-income communities, especially for those families without an account at a depository institution. This component of the First Accounts initiative would build on Treasury_s extensive EFT _99/ETA public education efforts by delivering targeted financial literacy education to individuals and families who may not receive federal payments. Treasury envisions that providers of low-cost accounts would work together with community-based organizations to deliver financial literacy education as part of First Accounts pilot projects. These partnerships could be useful vehicles for promoting the use of new low-cost account products and access points provided as part of these pilot projects. First Accounts funding could support the design of new financial literacy curricula and/or help to offset the costs of delivering an existing curriculum to lower-income consumers. KEY AREAS OF INTEREST TO TREASURY: Treasury expects potential vendors to provide information and comments based on this RFI. In particular, Treasury is interested in how potential vendors _ financial institutions, community organizations, tribal governments, and financial services electronic networks, as well as combinations of these entities _ might propose to implement the various components of the First Accounts initiative. In describing potential implementation approaches, respondents to this RFI may wish to consider addressing some or all of the following questions: A) What commercially available account products, including ETAs, do depository institutions currently offer that meet, or could be tailored to meet, the needs of lower-income, unbanked families? What are the important features of these products? Would depositories already offering the ETA be more inclined to offer First Accounts? B) What features might depository institutions build into these accounts to minimize the risk of overdraft or misuse? What other lessons have potential vendors learned from products that they may have targeted to this population in the past? C) Are there particular _intermediate_ products (e.g., secured debit or credit cards, passbook savings accounts) that may be appropriate for unbanked families before they establish a transaction account relationship? D) Are there particular segments of the _unbanked_ population that potential vendors anticipate would be easier (or more difficult) to encourage to establish a banking relationship? What volume of activity would potential vendors expect in the areas in which they would operate? E) What innovative technologies might vendors employ to provide increased electronic access to accounts in low-income neighborhoods? In rural Native American areas? How might financial literacy education be employed to familiarize the target population with these technologies? What are the costs of these strategies? F) What strategies would vendors use to market transaction accounts to lower-income families without a banking relationship? How would the vendor couple these strategies with efforts to provide financial literacy education to this population? What are the costs of these strategies? G) How could financial literacy education be implemented in order to influence the population_s demand for financial services? What financial literacy materials exist that may be appropriate for this population? How would vendors address differences in English literacy among the unbanked in delivering such education? H) Treasury plans to use a portion of First Accounts funding to support a pilot project in Indian Country. How would vendors address the special challenge of providing banking access on Native American reservations? What types of products would be most useful to Native American populations? I) What particular products and services would vendors make available to lower-income urban populations? What are the unique challenges in helping the inner-city unbanked to access the financial services mainstream? How would vendors select specific communities in which to locate new electronic access points? J) Respondents should also provide a summary of their experience in providing financial services and financial literacy education to the target population (lower-income, unbanked families), including the outcomes of those efforts. Organizations wishing to respond to this RFI should submit a written response to Department of the Treasury, Procurement Services Division, ATTN: Ms. Kelly Curtin, 1500 Pennsylvania Avenue, NW, 1310 G St., Suite 400E, Washington, DC 20220. Phone (202) 622-1119. Responses are due not later than 5:00 PM Eastern Standard Time on Wednesday, December 13, 2000. Collect calls will not be accepted. Treasury may schedule oral presentations with respondents whose written submissions demonstrate experience relevant to the First Accounts initiative. This Request for Information is for information and planning purposes only, does not constitute a solicitation, and shall not be construed as a commitment by the Government.

Web Link

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Record

Loren Data Corp. 20001115/SPMSC001.HTM (D-318 SN5065B8)