5 Ways Fintech is Helping the Unbanked and Underbanked Population in 2018
For many people, using an ATM or even stepping into a local bank branch to perform a transaction with a teller is second nature; it’s not something we even think about. For many others, especially those in very rural areas, access to banking services is a real problem though. Financial technology, known as fintech, is bridging the gap and helping more consumers gain access.
by Andy Kearns, LendEDU
How Did It Get This Bad?
During the Great Recession — the period of global economic downturn during the 2000s — major banks in the United States started closing branches in rural America. Bank of America has closed almost 1,600 locations, and Darrin Williams, head of Southern Bancorp, says that 40% of his markets alone are located in ZIP codes with less than two bank branches.
With that decrease in bank branches, residents in rural areas are finding themselves in “dead zones,” or areas without access to banking services. Even using an ATM could require an hour or more drive, and instead of direct deposit, rural residents are having to lean on less reputable businesses to cash their paychecks, such as payday loan companies and check cashing kiosk-type businesses that charge exorbitant fees.
Fintech is able to bring that access back to rural areas and help those disenfranchised banking customers to reach much-needed services with a variety of offerings. That translates to less fees paid to disreputable companies, and more money in the pockets of the consumer — always a plus.
There might be a shortage of banks in rural America, but even the more remote areas can usually reach some kind of internet service. While living in the desert, at the top of a mountain, or deep in the forest might preclude residents from enjoying city-style broadband internet, satellite services are on the rise, and can offer fairly comparable speeds in some areas. With that internet access comes the ability to apply for loans online.
Online lenders are on the rise, and with that blooming industry, the need to drive to a local branch and sit down with a banker to apply for a loan is fairly obsolete. Instead, rural residents can apply for loans from their recliner, or even from their smartphone wherever they are. Many traditional banks allow online applications, and online-only lenders have mastered the process of online lending.
Products for Thin or Invisible Credit
Another side effect of living too far from banking services is that you may have a lack of credit history. If you’ve never had a loan or other credit product, chances are you’ll have a difficult time proving that you can make payments on a future loan.
Fintech, however, makes loans available to you anyway through lenders’ ability to look at other factors in the lending application process. Rather than merely pull a credit report, they can verify other facets of your creditworthiness, such as your income, employer stability, bank account history, or length of residence.
No matter how rural you are, if you have access to the internet than you can perform banking functions online. Being able to bank digitally — or through a mobile app — is one of the biggest features that many consumers look for in a bank. Whether you’re checking your balance, downloading statements, or even reporting a fraud on your debit card, the ability to do so from anywhere has become a must-have benefit. Even depositing checks is as simple as taking a photo of them from a smartphone.
Being rural, a full-service online banking interface can mean the difference between having access to banking services or being stuck without them.
Access to Online Consumer Space
Along with that full-service online banking experience is the need for an online consumer space. Banking customers don’t want to just check their balance; if they’re too remote to visit a bank branch for the routine things, then they’re also too remote for the big things as well. Many banks now offer the ability to order checks, replace a debit card, change their PIN, or request other services that typically would have required a trip to the bank.
Business Banking Integration
Many rural residents own farms, ranches, and home-based businesses, and so banking access is more than just depositing a paycheck or needing a debit card. Customers with business-based banking needs can also, through fintech, integrate their business banking into those same apps and online access. Accounting software can link bank accounts and accountants as well, offering even more of a streamlined experience. Additionally, these people can now easily apply for small business loans without having to travel to a bank or lender — making it much easier to access capital when necessary.
Fintech is a critical part of the banking infrastructure now, but it’s also making it possible for people all over to access banking services — even if they’re nowhere near a bank.
Andy Kearns is a Content Analyst for LendEDU and works to produce personal finance content to help educate consumers across the globe. When he’s not writing, you can find Andy cheering on the sub-par Lakers, or somewhere on a beach.