Unbanked: the billions of people who remain outside of modern finance

5 min readDec 2, 2019


Living in developed countries, where we can easily tap in and out of banks and financial services, it is hard to imagine our lives without them. However, the truth is that a huge portion of the living adult population can be considered unbanked or underbanked keeping them on the verge of poverty. According to the World Bank, 1.7 billion adults in 2017 remained without a bank account. This massive population, often from low-income nations, misses out on the myriad of opportunities modern finances can offer.

Unbanked vs. underbanked

Before we dive into the nitty-gritty of access to financial services, it is important to differentiate between the two, often misused, expressions of unbanked and underbanked.

The term unbanked means the population without a bank account. They do not use any modern financial services, nor from traditional banks or alternative providers.

Underbanked are the people who are excluded from the majority of modern financial services. This means that whereas they do have a bank account, they are not eligible for loans, mortgages or investments. These people are often reliant on alternative providers, such as payday loans, pawnshop loans or rent-to-own agreements, with terms that are far from fair.

The cost of exclusion

Modern day finances may not be perfect. There are still plenty of complexities, hidden small costs and tricky fineprints. These are the aspects we are actively refusing at Fairlo.

However, living without them strips people of many possibilities to better their lives and finances. Without a bank account people are forced to rely on cash, which makes them a target for theft and difficult to build wealth.

Any remaining financial services for these populations often come at a high price and complexity. Let’s consider remittances: people who send money to their home country to support their family. According to the World Bank, about 232 million migrant workers send $429 billion dollars to developing countries yearly at a high price. Even a five percentage point reduction compared to the value spend could mean an $16 billion dollar increase in how much money developing countries receive now.

Another horrific example is payday loans: while many of the underbanked population relies on them, they charge on average a 391% interest rate according to InCharge. This means that the people who need this money are burdened with almost 4 times the original amount.

Financial exclusion does not just affect billions of lives but slows down the economy as people are less prone to spend and grow. People find it hard to escape the circle of poverty, living day to day, without the possibility to grow or think of long term objectives.

Not just personal

Underbanked societies do not just affect personal lives but business growth as well. According to the International Finance Corporation, over 160 small and microbusinesses lack access to finance, while another 160 million are underbanked. This makes it increasingly difficult to access funds which can help the growth of the business and create a bigger contribution to the economy.

Tools for change

For a long time traditional banks have disregarded the billions of unbanked people around the world, claiming that they did not see them as a feasible business opportunity. These populations are considered low-income, high-risk or inaccessible and do not hit the profitability rate of the corporate world.

However, there are several factors today which can help to turn the tide:

  1. Mobile culture: a growing number of people have access to a mobile phone and internet today, with the fastest growth in developing countries. In 2019 there were over 5 billion unique mobile users, which is 67% of the total population according to Hootsuite and WeAreSocial. The internet and easy mobile connectivity help to build a direct connection to the financial world.

2. Technology: traditional finance is shaken up by new developments in fintech. New technologies, automation and easy access to software make financial systems much cheaper, accessible and functional.

3. Push from governments and NGOs: there is a growing support from international and government organizations to end financial exclusion. These institutions can support financial services to gain traction and educate the public for higher financial literacy. For example, in Finland the immigration services have partnered with Moni, a Helsinki-based startup, to provide current accounts and Mastercards to asylum seekers, who were unable to get a bank account on their own. With this card people were able to receive salaries, pay bills and buy things. Meanwhile, immigration services could keep track of people and their spending through a public ledger.

How to build inclusive finance

With modern technology we have the tools to change billions of lives through financial inclusion. However, it is not just about technology, mobile access or how many debit cards we can hand out. Inclusive finance needs to consider the unique culture, nature and habits of the people in developing countries.

We need to build financial literacy, and help people understand why having a flashing sum on their phone is better than a stack of bills. It is not just about addressing current wishes, but building up dormant needs so people will want to participate in modern finance.

People also interact with their money and their devices. Much of the unbanked population is mobile-first users, and likely has not seen an online banking screen, or even the inside of a bank.

We also need to rethink how the current structure savings, loans and investments could be adapted to new economies, lives and cultures. For example, some entrepreneurs may find it easier to pay back a loan when business volumes in their region are high and pay less during monsoon season.

Support financial inclusion

There are many important pieces of the puzzle in helping the unbanked and underbanked to modern finance. It needs to involve people, regulators, and financial institutions equally. This is why the work of many nonprofit and governmental organizations working on research or small-scale pilot programs is invaluable. Their insights help shape a sustainable, profitable and fair future for billions in need.

Many organizations are taking groundbreaking steps to build a financially inclusive world. There are research institutions, such as the Centre for Financial Inclusion, business microloans at Lend With Care and overall support with the UN Capital Development Fund. Their contribution in knowledge, funds and possibilities is invaluable to making a fair world. Support them today.




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