Though you may not have heard much about the underserved, they represent a massive demographic in the US.They are unable to access a full portfolio of financial services from the country’s biggest banks. The FDIC considers some 24.5 million Americans underbanked—countingthose wholook beyond the traditional banking system for solutions to their financial problems. They’re joined by 45 million people whose credit histories preclude them from borrowing money through traditional methods.
This community has a chance at financial normalcy through an emerging group of FinTech companies. By providing an alternative to these traditional services, FinTech could help connect the underserved with loans and other products they need, and here’s how they’re doing it.
- Mobile banking
As the developed world hurtles towards a cash-free future, only those with online bank accounts will be able to participate in this new economy. Those platforms that facilitate digital payments through traditional accountsput the underserved at a disadvantage. Some of this community doesn’t have the checking account necessary to make digital payments. Often the working poor, these individuals can’t keep the minimum balance or pay the monthly fees that come with the average checking account. As a result, they don’t have anything that will sync with Apple Pay or Google Pay.
FinTech is helping the underserved tap into digital payments in two ways — pun intended!
Through services that digitize cash: Amazon is among several e-commerce and retail giants that allow customers to add cash from their wallet to their online accounts. Amazon, PayPal, and Walmart eliminate the need for a bank account at all, giving those without them or credit cards a way to shop online or at cash-free locations.
Through no-fee mobile banks: A mobile app like Chime offers its customers basic checking and savings accounts with no minimum balance requirements or monthly fees. Though these accounts are no-frills, they operate entirely online.
This empowers those who can’t afford the average checking account with the top retail banks, so they no longer have tocash checks at currency exchanges, pawn shops, and other unregulated locations. It also benefits those who can’t consistently visit a branch due to mobility issues. Instead, they can deposit or withdraw wherever and whenever they can get online.
- Online lending
Around 26 million Americans are “credit invisible” — meaning they have absolutely no credit on file. They’re joined by another 19 million people who have a thin file — meaning they don’t have enough history to generate a credit score. This doesn’t automatically suggest they’re irresponsible when borrowing money. However, they have just as much success securing a cash loan as those with poor credit.
These people represent a broad spectrum of individuals. People who have yet to develop a robust financial record like young people and recent immigrants new to the country. People who, after bankruptcy, have been forced to rely on cash entirely for years. While the biggest banks deny their applications, FinTech gives them an opportunity through options like MoneyKey. They’ve simplified the payday advance process by embracing FinTech’s digital platform. Customers can go online to their website or download the app to apply and receive a payday advance online the next business day.
Though denied help from traditional financial institutions, the underserved could have their needs met by emerging FinTech services. They only need to be quick to adopt these alternatives, so they can benefit from this new era of finances.