“Fintech innovations are on the rise across the globe and can serve as catalysts for financial inclusion.”- World Bank
“Financial inclusion” refers to providing products and services to everyone in society, regardless of income, savings, or assets. And the gap is wider than you might think.
Though most adults in developed countries do have some sort of bank account, access to credit products and other services is actually going down. Worldwide, there are millions of either unbanked or underbanked people looking for ways to save, manage, and grow their money.
Most banks require a permanent address for someone opening a bank account. Most lenders require a regular income.
What happens to people who have lost their job, their home, a loved one? What about those just starting out or trying to start over?
Who are the Underbanked?
Let’s start with a couple of definitions. These terms sometimes get used interchangeably but they are distinct (though connected) groups with very different market needs.
- The Unbanked- These are people who do not use the services of any banking institution. They tend to buy goods in cash and store any assets physically.
- The Underbanked- Sometimes called the “underserved”, these are people with insufficient access to financial services. They usually have a checking or savings account with a mainstream or neobank, but they tend to use alternative credit products like payday loans or money transfer services.
There are an estimated 1.4 billion underbanked people across the world, and 143 million in Europe alone.
In the UK, that figure is 20.2 million, roughly 1 in 3 adults.
There are also the financially vulnerable- the 16m UK adults who can’t afford an unexpected payment of £300.
This puts them in the precarious position of having to rely on unregulated or high cost credit, including:
- Payday loans
- Buy Now Pay Later
- Friends and Family Loans
- Loan Sharks
These options are not only expensive, but in some cases can put their relationships or safety in jeopardy.
Why are people underbanked?
There are a number of reasons why people are underbanked, but there are three that consistently come up in surveys.
1. Lack of access
Some people literally cannot open a bank account.
Financial Institutions have a number of safeguards in place to prevent fraud, money laundering or identity theft. However, these “safeguards” can also be cycle-perpetuating obstacles for society’s vulnerable.
For example:
1. Proof of address
Most bank require a physical address and proof of residency to open an account.
This effectively cuts off unhoused people or those with inconsistent accommodation.
Additionally, “proof of address” is usually a document that displays the customer’s name at the address for 3+ months. But a person may not have a utility bill or payslip because:
- They do not have a fixed source of income
- They are not the primary billpayer
- Shared bills are addressed to a housemate/partner
- Their name is not on the rental contract
2. Financial risk and past circumstances
Banks may refuse customers an account based on their previous circumstances, for example:
- Having previously been made bankrupt
- Having been incarcerated
- Having recently emigrated
- Having a low credit score
- Having poor history with bank accounts
- Not meeting a deposit threshold
These factors can make a potential customer seem like a risk.
3. Accessibility and contact options
Many people don’t have transport access to visit a bank branch or they may live in an area without one.
Others may struggle to make a phone call or write an email due to vulnerability.
Meanwhile, mobile or online banking assumes access to a phone or computer and access to the internet, which are not guaranteed.
2. Low or inconsistent incomes
The UK underbanked tend to be younger with lower incomes. This is partially to do with “generation rent” and a thin credit file, but it also reflects larger economic trends on stagnating wages over the last fifteen years.
4 million adults in the UK are in alternative employment, such as zero hours or gig contracts. 58% of this segment are underbanked.
Some people worry about banking fees eating into their limited incomes so choose not to bank at all.
3. Distrust of financial institutions
Financial institutions and mainstream banks are generally viewed as untrustworthy. Fee structures can be confusing, people worry about the privacy of their data, and there have been a variety of financial scandals over the years. Consumers worry about funds being misappropriated or used to fund projects they don’t agree with.
Approximately 11m adults in the UK do not have or want a credit card. 32% of these are between 18-34 years old, which means the demographic is set to grow.
This in turn leads to a lack of credit history which limits the ability to access financial products.
How does Bansk help the Underbanked?
Unbanked and underbanked people alike need access to basic banking services like easily making deposits and payments. But they also need access to credit products that help them live their lives, take care of their families, and build towards their future.
That means:
- Personal loans
- Savings accounts
- International money transfers
- Tools to track bills
- Budgeting tips
- Rewards and cashback opportunities
- Quick and easy payments
Unlike most mainstream banks, Bansk instantly underwrites applications and validates identities without requiring extensive paperwork or prolonged processes.
We use Open Banking to validate income and expenditure, and communicate with credit reference agencies to understand credit history and validate risk.
Because Bansk is a young UK based company, it is fully regulated and compliant. It also benefits from brand new technology that is unhindered by legacy systems and processes.
This means brands who integrate Bansk get to offer their customers the quickest, securest, and most personalised banking services on the market.
Bansk gives business the platform to help millions of underbanked consumers reach their financial goals.
