The underbanked are a broad demographic who do not have sufficient access to banking and financial services. There are 17 million Americans who are unbanked, which means they don’t even have bank accounts, while 1 in 5 Americans are underbanked or are credit invisible. Underbanked Americans have little credit history, few options for borrowing money, and even fewer options for investing and growing their savings. Underbanked Americans are either unable to access financial services from traditional banks or they’re not interested.
Underbanked consumers are the biggest opportunity in FinTech right now. With tens of millions of Americans underserved by traditional banks, FinTech has an opportunity to challenge traditional banking dominance. These are some of the ways FinTech companies are doing it:
#1 Mobile Wallets
The U.S. is now trailing much of the world when it comes to mobile wallets. They’re widely used in cash-heavy economies where credit card use is more constrained. Widespread adoption of mobile wallets would provide better financial options to millions of Americans who don’t have access to a credit card. They’re increasingly being used to provide underbanked Americans with short-term loans. Mobile wallets can replace check cashers and pawn shops that currently provide ad hoc financial services for those without bank accounts.
#2 Online Investing Apps
There are millions of Americans who have full access to banking and investing services but who have little financial literacy and little interest in dealing with a stock broker or financial advisor. Millennials and the cohort behind them either don’t have the financial knowledge or the time to invest growing savings. They’ve been turning to online investing apps or robo-advisors instead. These apps were designed for passive portfolios, allowing customers to set their objectives and risk-tolerance and forget about it.
#3 Banking for the Credit Invisible
If you’re “credit invisible,” it means you have no credit history or a very thin credit history. It’s not the same as bad credit, but it can have similar consequences if you try to get a loan. New FinTech startups are trying to build financial histories that go beyond credit histories, giving lenders a clearer picture of the credit invisible. A large number of people who are credit invisible are in fact very financially responsible and low-risk borrowers.
#4 Online Direct Lenders
Online direct lenders may be the best way to get a payday loan in this day and age. Consumers want to handle all of their banking needs online and through mobile apps. That’s left the door open for companies like MoneyKey to simplify the short termloan process. Consumers want borrowing money to be easy and fast. Using a company like MoneyKey, consumers provide their financial information online and receive a short term loan the next business day. Online direct lenders free borrowers from store hours and taking the time to actually go to a physical location.
With underbanking so prevalent across the United States, FinTech has the chance to fill the gaps and provide much-needed financial services to tens of millions of Americans.