Despite growth of online financial services, the number of households with little or no access to bank accounts has remained stubbornly steady since 2009.
According to the Federal Deposit Insurance Corp. (FDIC) 2015 report; America’s unbanked and underbanked is not confined to urban neighborhoods; unfortunately, 27% of U.S. households (90.6 million people) do not have regular access to banks and other mainstream financial services.
In terms of time and money, this group of financially marginalized people rely on alternate financial services who penalize them with high service fees for transactions normally free to customers with bank accounts.
The report shined the light on this financial exclusion phenomenon revealing the primary reason for not having a bank account was “not having enough money to open an account and keep it going”.
Unfortunately, in undeserved communities; the unbanked (7%) and under-banked (20%) tend to be young, poor and uneducated - mainly Black and Latino Americans who heavily rely on payday lenders, check-cashing stores and prepaid debit cards to manage their money.
Results also show the banking system further perpetuate socioeconomic disenfranchisement; in fact, being unbanked adds costs to families - anywhere from hundreds and thousands of dollars a year in transaction fees. According to the Center for Financial Services Innovation (CFSI); Americans shell out $8 billion annually in fees for check-cashing services and payday loans in what is essentially a surcharge for being poor.
Reliance on AFS not only heightens the risk of disappearing savings through theft or loss, it leads to missed opportunities to spend, save and invest in a world quickly moving away from cash.
Worldwide statistics provide more staggering results; according to the Global Financial Inclusion 2014 Global Findex database, 2 billion people worldwide do not have a bank account or access to a financial institution via a mobile phone or any other device.