How Deep is the Financial Inclusion Problem in the US?

meet-the-working-poorMany people assume that financial inclusion is a reality for everyone in the United States, and that access to financial services isn’t an issue for most people. As pointed out in the recently released movie Spent, the truth is quite different from that rosy picture. The everyday reality is that roughly 10 million American households do not have even a basic checking or savings account. If that’s not concerning enough, another 21 million households have savings accounts, but are heavily dependent on alternative and costly financial services such as payday loans and check-cashing services. Last year in the US the underbanked spent $89 Billion on bank fees and interest according to the CFSI. Sadly many of these American households spend as much on financial services as they do on food for their family.

While these numbers paint a grim picture on the financial health of many American households, there are some solutions that can be implemented to alleviate the problem and help strengthen the American economy. One worth noting is from the Ford Foundation. At present, the foundation is working with financial institutions around the world to develop what they have deemed Social Performance Management systems. These are designed to help identify ways to reach poorer households, and develop systems that make access to savings easier and cost-effective.

Two solutions that are gaining traction and growing by leaps and bounds are mobile and online banking. There are a couple of important reasons for this. First, many banks are decreasing the number of branches they operate to reduce costs, and some banks such as Ally maintain only an online presence. This makes it easy for customers to access their money around the clock, and since many underbanked customers work odd hours, this makes it easier for them to bank on their own schedule.

Additionally, the increasing usage of Smartphones and the prevalence of WiFi has made it possible for anyone with a phone in their pocket to access their accounts from virtually anywhere. However, it doesn’t solve all the problems, namely the need for sending/receiving cash, depositing checks, etc. This is something that the ATM Industry Association is taking note of and is why they have recently created the US Underbanked Forum with the goal of coupling the convenience of mobile solutions with the already widely accepted use of ATMs. The theory they’re banking on? That ATMs can become ad hoc banking institutions that are easier to use, more affordable, and easily accepted by those who are currently underserved. This could be a solid theory that will increase financial inclusion for people throughout America.

No one should be without access to basic banking and financial services and in my upcoming book, Financial Inclusion at the Bottom of the Pyramid, I’ll take a look at some of the solutions that have given people around the world access to the financial service they need. Like my book on Facebook to receive information about pre-sale and release dates.


About Carol Realini

Serial Entrepreneur, Mobile Payments and Banking Pioneer, Author, Board Member Carol Realini is a successful Silicon Valley executive and expert in financial service innovation. She has worked with leading financial institutions including MasterCard and Citi, as well as numerous multinational and regional banks, to change the way banking is conducted. In 2011, as a Technology Pioneer attending the World Economic Forum, she led discussions on alternative banking at their meeting in Davos. A serial entrepreneur, she has been recognized as one of the 50 Top Women in Technology by Corporate Board Member magazine. Carol is a huge believer in the potential of mobile banking and payments to create financial inclusion - where everyone with a mobile phone has access to affordable financial services that empower their life and work. To understand Carol's vision please watch the WEF video (click on the link below). Carol also mentors entrepreneurs providing wisdom and lessons learned from her four successful startup experiences.
This entry was posted in Financial Inclusion and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s