medium risk payment solutions

SERVING THE UNDERSERVED-medium risk

JACQUELINE CREMOS
Why Mobile is the Key to Financial Inclusion
Every day, our industry is finding new ways to use technology to create economic opportunities and empower the least advantaged among us. The Federal Reserve just released a study on the growing consumer usage of mobile financial services like mobile banking and mobile payments. This new data suggests that unbanked and underbanked consumers, who lack access to traditional financial services altogether or heavily rely on alternative — and often costly — financial programs, can reap some of the benefits of the financial sector through mobile applications. ETA has released a whitepaper examining the ways in which payments companies are serving the financially underserved.

Although it may seem like everyone has a bank account, in reality unbanked and underbanked consumers are a large (if often overlooked) demographic in the United States. A 2013 survey from the Federal Deposit Insurance Corporation (FDIC) found that 7.7 percent of U.S. households were unbanked (i.e., had no bank account), and 20 percent were underbanked, meaning that they had a bank account but also used an additional financial service (e.g., a money order, check-cashing service, tax refund anticipation loan, pawn shop loan, payday loan, auto title loan, or a paycheck advance / deposit advance). Together, unbanked and underbanked households represent 34.4 million U.S. households, or nearly a third of the population. Globally, about 2.5 billion adults lack any kind of access to financial services provided by regulated institutions.

Consider all the activities that depend on a bank account: saving up for short-term emergencies or long-term milestones (e.g., college or retirement), obtaining a credit card, paying bills online, taking out a mortgage, or obtaining a loan to start a small business. These all become exponentially more difficult — even impossible — without reliable access to banking.