Using FinTech to Level the Financial Playing Field

by EEI1 Team1

To most, a bank account is not considered a luxury. Direct deposit, writing checks and transferring money are a staple in the average consumer’s life, as natural as the air we breathe, but to over 8 million households in the United States, a bank account symbolizes unattainable wealth and a particularly large life hurdle to overcome.  Individuals without bank accounts, or the “unbanked” as they’ve been unceremoniously dubbed, account for 7% of all Americans. Without a bank account, they are disconnected from the financial ecosystem, making it hard to become financially stable, save, build credit history, safely transfer money, take out a loan or seek financial advice. Dangerous stereotypes lead us to believe that the unbanked are poor, uneducated and trapped in a cycle of living paycheck to paycheck. The truth is, this overlooked demographic remains unbanked for practical reasons: 1.  It’s Expensive to Maintain a Bank Account According to the FDIC, the number one reason households stay unbanked is because they simply cannot afford to keep a bank account. Average fees to maintain a checking account have tripled in the last four years. Today, most banks require a minimum balance or direct deposit to keep an account open or these fees from being waived. Without enough money to warrant a bank account, the expense to maintain an account and the high penalties for cashing checks can easily discourage an already skeptical consumer.  2. Lack of Trust in Banks Straight forward pricing is important to a consumer, but banks lack transparency and uniformity, especially when it comes to fees. The lengthy documents required to open a bank account, which are already intimidating and foreign to those not familiar with banking, make it easy for a bank to mask fees and incidents that trigger fees to hit. This can be detrimental to someone’s finances if their account consistently has limited funds in it.  3.  Check Cashing Services = Convenient & Easy Check cashing services are convenient with more locations and longer hours than most banks, especially in low-income neighborhoods where bank branches are limited. These businesses offer quick access to money without waiting for the check to clear. While they do charge a service fee at a high rate, the fees are clearly listed and visible for the consumer to see. This builds the trust and familiarity with consumers that has proven difficult for banks to achieve. 4.  They Just Don’t Want a Bank Account Enough said. Why FinTech Matters A 2015 study conducted by the Federal Reserve System found that 40% of unbanked Americans have access to a smartphone. This high rate of mobile penetration presents a huge opportunity for FinTech to revolutionize the position of the unbanked in the financial ecosystem.  FinTech applications are diverse and serve a wide array of individuals through accessibility and ease of us. With services ranging from peer-to-peer lending, investment management, credit scoring advice, money transfers and payments (just to name a few) they can be instrumental in providing basic financial services.  While Financial Institutions turn their backs on consumers if there is no profit to be made, FinTech has a social side. We are now at a point where people can better their position within society and grow their economy in a short period of time due to new technology that is more capable and less expensive. As FinTech applications progress, individuals without access to a bank account can enter the financial ecosystem regardless of wealth, occupation, race or geography – a truly incredible development in financial services. This is part of my FunTech blog series; FinTech through the eyes of a Millennial.    Contact: Jaimie Anzelone 115 Broadway Suite 1705 New York, NY 10006 janzelone@joineei.com | 212-344-2000

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