When I explain my day-job, quite a few people believe that the way to solve the underbanked “problem” is through financial education.  Many banks think the same way.   They are right, of course.  But it’s not so simple as just teaching “these people” how basic financial services work (never mind that most well banked and well to do can’t explain double cycle billing on a basic credit card, mortgage APR vs interest rate, what a mutual fund actually is or any number of basic and ubiquitous financial concepts).   If we ALL understood the financial products we use better, we’d be better off and would have averted the current global financial crisis.

Today, I sat in a financial education clinic.  Beyond learning some stuff I didn’t know myself (credit unions don’t pay interest, they pay dividends; how the IRS defines a dependent), I was reminded both how important this information is and how relatively pointless the old financial education paradigm is.

In the same way that a child’s rate of learning drops steeply the moment they enter school (read anything by MIT’s Seymour Papert), so too does the actual learning in typical financial education classes.  Consequently, the correlation between information delivered and behavior changed is disappointingly low.  $100s millions spent on well-intended financial literacy has yielded disappointingly little.  Why?  Wrong information at the wrong time.   Who cares about the difference between a credit union and a bank if neither exists where I live?  What use is there to understanding interest when my annual yield cannot buy a candy bar?

My colleagues at CFSI (and other pioneers around the country) are exploring a new paradigm: just in time learning.  Make it relevant, actionable, timely and mutually reinforcing.  Sounds obvious, but it breaks almost all the common rules.

I’m particularly excited about companies integrating this paradigm INTO their products, not OUTSIDE in a classroom or brochure.  What if the third time you cashed your check, the teller would be prompted to explain the benefits of a prepaid card (if that was the demonstrated best time)? KeyBank does this.  What if your mobile phone sent you text reminders to put some money into savings? Yale’s Dean Karlan proved it raises deposits by 6%.  What if a utility explains that paying your bill (or not) adds to your credit score?  Verizon did this with significant improvement in on-time payments.

In all these examples just-in-time learning also represents better business.  Seems like win-win to me and I’m just scratching the surface here.  What have you seen?