The FDIC or Federal Deposit Insurance Corporation had sponsored a national survey of unbanked and underbanked households in order to collect data on the number of such households, their demographic characteristics, the reasons for being unbanked or underbanked and other insights as well.
Some prominent insights that came forth are:
- 7% of households in U.S. were unbanked in 2013. In numbers, this represents approximately 9.6 million households.
- 20% of U.S. households were underbanked in 2013. Such households do possess a bank account but also use alternative financial services outside the banking system.
- Around 7.9% of all households used prepaid cards in the past 1 year. Considering the breakup, 22.3% of unbanked households and 13.1% of underbanked households used prepaid cards in the past 1 year. Around 55% of prepaid card users were either unbanked or underbanked.
- Underbanked households have been less likely to use online banking as their main banking method. Around 26.6% of them use online banking primarily.
- Considering mobile banking activity, 51.5% of underbanked households primarily use mobile text alerts to monitor account activity.
Other qualitative insights that came out of the survey include:
- Changes in employment and income conditions majorly affect the association with the banking system. Those having higher level of education, employment and income are more likely to have a bank account.
- Unbanked households are looking towards reloadable prepaid cards as a viable option for financial transaction needs. It is to be noted that they are generally obtaining them at non-bank locations.
On the bright side, the survey revealed that the number of unbanked households has gone down from 8.2% in 2011 to 7.7% in 2013. Mobile banking is slowly becoming an effective tool to encourage economic inclusion. Considering prepaid card products, they can offer the opportunity to draw the unbanked households into the banking system.
There are 2 important factors for the success of financial inclusion in a country. The core technology being implemented acts as a crucial factor. But the way the overall planning for implementation is done plays a greater role itself. Historically, banks and other financial institutions have found it difficult to capture the unbanked and underbanked segment due to constraints in resources and in-House capabilities. With the rise in technology and mutual collaboration among players from different industries, we are now finding newer ways to approach the problem of financial inclusion.
In conclusion, the optimum solution would be a combination of numerous local provider ecosystems that eventually reach all citizens of a country and will comprise a large number of front-end entities trusted by the community such as banking agents, cash-in/cash-out outlets or microfinance institutions; a payment infrastructure that links these institutions to the broader financial system; and a smaller number of well-capitalized and regulated entities that hold and manage the financial risks that the more inclusive system has originated.