According to the latest census data, roughly 20 percent of Americans are underbanked. Also known as the underserved, this growing population doesn’t have access to a full range of financial services offered by traditional retail banks. Deprived of critical financial help, these consumers represent a huge opportunity for fintech companies. The fintech industry is well-equipped to challenge traditional bank services as an alternative to the old system. By mixing the latest technological advances to promote fast and convenient financial services, fintech is expanding the underserved’s ability to participate in a variety of services like digital payments and financial assistance.
Fintech startups outside of the banking elite are helping the underbanked by offering them convenient, online ways to:
- Use digital payments without banks interfering
Though the US isn’t leading the developed world in adopting a cashless economy, it isn’t untouched by the growing push towards cash-free transactions. Normally, the underserved can have difficulties creating a mobile wallet capable of these digital payments, and they often rely on cash to make their purchases. This system works until retailers begin to implement cash-free stores, discriminating against those who use cash as their primary way to pay for bills and other necessities.
Fintech makes it easier for the underbanked to participate in cash-free environments by simplifying the process of getting a mobile wallet. Some companies are giants within the industry, like Amazon and Walmart. Both have made it possible for customers to cash checks at their stores (or in Amazon’s case, participating retailers’ locations) and use the POS to transfer these bills onto an online account like Amazon Cash or Walmart Cash.
- Access additional financial services online
The appeal of fintech includes helping the underbanked find loans online that are easier and more convenient to secure. An app platform has made it possible for companies like MoneyKey to streamline the borrowing experience. Consumers can download the app to apply for online payday loans faster than ever before. These cash advance lenders rely on an automated system to help them respond faster as well, and in some cases, approved applicants can receive their cash via direct deposit by the next business day.
As their online reach grows, companies like MoneyKey can help an increasing number of people typically hindered by location or schedule from applying with traditional services. There’s no need to wait for specific branch hours or waste time in a lengthy in-person interview. There’s an app for that instead.
- Avoid expensive banking fees
Many of the US’ top banks have strict criteria for even the most basic banking services, placing a minimum balance on most checking and savings accounts. If consumers can’t meet these minimums, they face expensive monthly fees and other charges to do business with these organizations. A recent Nerd Wallet study reveals these checking fees average roughly $1,000 over ten years.
Often it’s the underbanked who are penalized for missing the minimum balance, as a large number of this demographic is low-income individuals. Living sensibly, but with little excess cash leftover from each paycheck, they rarely can keep the preferred amount of money in their accounts.
Fintech startups are offering a no-fee alternative with mobile banks. Unlike the biggest banks in the country, they don’t have a physical location. They can pass on what they save in overhead fees to their customers by eliminating minimum balances requirements, monthly fees, and overdraft charges. Available on an app or through their website, mobile banks like Simple make it easier and cheaper to manage funds.
The bottom line
Traditional financial services are underserving a growing number of individuals across the US. Fintech startups and other online alternatives to conventional services can help bridge the gap between the industry and this demographic.