Hyper-Segmentation and Exclusion in Financial Services in the U.S.

Abstract The last twenty years has been a period of major structural change for the financial services sector in the United States. Some of this restructuring has been prompted by technological change, but public policy has actively facilitated the increased mobility of capital to places where it brings the highest short-term private return but not necessarily the greatest long-term social return. While deregulation and technology have combined to provide a wider choice of services and increased price pressure in the lucrative segments of different financial markets, the pursuit of affluent customers has left lower-income consumers and very small firms at a disadvantage. The sector overall has moved toward a hyper-segmentation of customer bases by income and race, leaving many communities served primarily by higher-cost and sometimes abusive financial services firms.