In this crisis, give everyone basic financial tools

Jin Huang, research associate professor at the Brown School; Margaret Sherraden, research professor at the Brown School; and Michael Sherraden, George Warren Brown Distinguished University Professor


The COVID-19 pandemic has again exposed the financial system’s deep flaws and harmful effects on the poorest US families. But the pandemic also creates opportunities for remedies.

As CARES Act checks and unemployment benefits begin to arrive, a quarter of US households have limited access to bank accounts. Because of this, many will wait months for federal help. When it comes, they will turn to alternative financial services, which are costly, inefficient, and sometimes predatory, pilfering dollars from those hit hardest by the pandemic at a time when they can least afford the leakage.

Access to modern financial tools is more important than ever as American families struggle for financial security in a time of economic upheaval. To navigate this national crisis, families require the ability to cash checks, pay bills, build savings, and access credit.

Just as we have a system for distributing clean water to every home, we can have a financial system that delivers safe, efficient, and integrated finance to all households.

We propose the creation of an online Financial Gateway through which every American could manage their finances. Through the platform, individuals could receive paychecks and public benefits, manage employment benefits and investments, apply for credit, file taxes, purchase insurance, and make payments of every kind. Biomarkers would ensure security.

The development of “fintech” (financial technology) has made all of this feasible on a small mobile device. Financial technology should move beyond the private sector to achieve financial inclusion. For example, the governments of some nations have proposed and are testing a digital currency system for such purposes.

Each American also would have an asset-building account through the platform. Paradigms can be found in several statewide Child Development Account (CDA) policies, which provide such accounts at birth for every newborn resident in those states. Rigorous research on these accounts documents the positive financial and psychological impacts for families, even during the last financial recession. Asset holding creates a more hopeful outlook, and families have improved parental engagement and child development even before CDA funds are spent.

Seven states have adopted a universal CDA policy structure. Pennsylvania, Nebraska, Illinois, and California have done so since 2018. Each year nearly one million infants and their families will be automatically included in a CDA program with financial tools for asset building.

Also, the nation should adopt the “digital dollar” and digital payment system proposed in early Congressional versions of the coronavirus relief bill.

These core innovations would simplify finance, ensure access to the financial system, increase family stability, and facilitate effective delivery of emergency support.

The reforms would help to strengthen our economy by reforming a costly and exclusionary financial system, which is freighted with leftovers from the Industrial Age: inadequate technologies, clumsy (and dirty) currency, needless rules, excessive paperwork, large vaults, and armed guards.

Now is the time for a prudent national investment to deliver full financial inclusion for all Americans. The reforms proposed here would leverage technology to provide basic financial services for everyone. The U.S. economy will recover more fully and grow stronger over time as a result.