Nearly one in three Americans is “unbanked” or “underbanked.” Despite significant efforts by regulators, consumer advocates, and leading financial institutions, this figure has remained largely unchanged since 2009. So what needs to change to crack the code on financial inclusion? Why hasn’t there been more progress in low- and middle-income (LMI) Americans’ financial health, and what would a solution look like that could meet both consumer needs and provider bottom lines?

Reimagining Financial Inclusion, the white paper we published with global management consultancy Oliver Wyman, aims to tackle exactly this dilemma. The surprising conclusion of this work is a revolutionary solution that could improve financial stability for millions of Americans while also providing sustainable profits for banks.

Instead of trying to squeeze lower income consumers into existing financial products, we propose a solution that integrates deposits and credit to meet their cash management needs as well as the needs of financial providers. People living paycheck-to-paycheck need banking solutions designed specifically to help them manage the reality of volatile income and expenses. Because this reality includes unpredictable spikes and dips, reaching financial stability requires a product that will intervene in good times as well as in bad.

Our new solution includes three major features: automating budgeting and saving; offering affordable credit; and integrating spending, savings, and credit for the consumer. Along with behavioral enhancements like smart reminders and a fee structure that is both transparent and fair, the solution set could save the average unbanked consumer $500 per year on financial services fees and generate lifetime profit potential of over $1 billion for a large bank.

The white paper also blows up three pernicious myths about LMI consumers and personal finance:

• These Americans don’t want to save (they do)
• They don’t have money to pay for financial services (they actually pay more than the average consumer)
• They are bad at managing their finances (in reality they are more aware of their personal finances than higher-income individuals)

We are grateful to the Ford Foundation and Oliver Wyman for their support of this important work. Click here for the full text of the white paper.

Interested in learning more about this work applying behavioral science to financial health? Reach out to us at katy@ideas42.org or tweet at @ideas42 to join the conversation.