No one is ready to say that the U.S. financial crisis is over, but it's time to start looking ahead to what the future may hold for the financial services industry and the implications for the consumers who make up the bottom third of the American economy.

Industry members at next week's fourth annual Underbanked Financial Services Forum, presented by my organization and SourceMedia Inc., the parent company of American Banker, will be grappling with some of key consequences of the crisis and the big questions they raise for serving the underbanked market profitably and responsibly.

The composition of the financial services industry continues to shift. Who will emerge as the provider of choice for underbanked consumers?
A smaller number of megabanks serves an ever greater share of American households, while thousands of community banks and credit unions continue to play a vital role, largely in smaller locales. With a few exceptions, both camps are more risk-averse than ever and less willing to embark on bold new strategies.

Many nonbank providers, meanwhile, see the current climate as ripe for innovation and opportunity. They also see new obstacles, including fewer potential bank partners at a time when the legislative and regulatory environment appears to favor regulated depositories.

Consumers care more about function than form. They will be best served by combinations of providers that can meld their products, capabilities and distribution channels to consumers' needs. The emerging industry landscape presents unprecedented opportunities for innovative collaborations.

The regulatory framework is headed for a redesign. How can new structures be developed with the consumer in mind?
To date, the regulatory reform conversation has been dominated by systemic risk issues and concerns about bringing the shadow banking system into the fold. Consumer protection issues have been considered a different category and largely have been sidetracked for later debate.

Divorcing safety and soundness from consumer protection is a mistake and part of what got us into this mess in the first place. We should be talking about rationalizing the relationships between bank and nonbank financial services providers and building a regulatory framework in which institutional strength and consumer protection are mutually reinforcing principles.

Consumers also would benefit from a more coherent, unified regulatory system than the jumble of state and federal laws and regulatory agencies we have today. However, the design process must go beyond "moving the boxes" on the organizational chart of who regulates whom and contemplate a design that enables consumers to maneuver through the system seamlessly and securely.

The world is more financially interconnected than ever before. Will we apply the right global lessons to improve financial services for America's underserved?
The global financial crisis has focused attention on models of financial regulation in other countries. That's not all we should be borrowing from abroad.

Researchers and philanthropists have been drawn to microfinance and other international models of serving the bottom of the pyramid, but few have attempted to link them to the U.S. underbanked market.

Microfinance may have started as tiny loans to very poor people in developing countries, but today the microfinance industry provides an array of payments, savings, credit and insurance products to underserved consumers around the globe.

Not all international models are relevant. For instance, mobile banking models in developing countries look very different from those emerging in the United States, which makes sense given our differing telecommunications infrastructures.

We have a lot to learn from the rest of the world, as long as we are strategic about what we choose to adopt, and how.

The subprime industry's business model and reputation both have been badly damaged. How do we reinvent this business to ensure a balance between access to financial services and the quality of those services?
There once was a distinction between subprime lending and predatory lending. For many, that distinction disappeared in the wake of the subprime mortgage meltdown.

The negative reputation associated with subprime products and practices has, by extension, tarnished a large and growing category of consumers whose credit scores cannot keep up with tightening underwriting standards.

We need new language to better describe these consumers, who have travelled a variety of paths yet find themselves in similar circumstances. We also need new risk management tools and underwriting practices that can more surgically differentiate between these consumers to determine those who truly can handle credit and those who cannot.

But while new terminology and tools may help relieve some reputational risk for providers and restore some access for consumers, more responsible products and practices are also needed to ensure that access and quality go hand in hand.

As the nation begins the process of remaking the financial services industry to better serve consumers, this balancing act will be critical. Whether or not the worst of the crisis is behind us, we need to envision the future we want if we are to succeed in building it.

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