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According to the Federal Reserve, approximately 63 million Americans are either underbanked or unbanked. For the underbanked, specifically, even if they are a customer or credit union member they rarely if ever do business with their chosen institution.

Historically speaking, the definition of the underbanked consumer was a less nuanced, more basic concept. Consumers and members did not have basic deposit or checking accounts within a mainstream financial institution like a credit union. However, the contemporary definition now details those individuals and families who have an account or accounts but rely upon alternative – often financially unstable – services like check-cashing outfits, pre-paid debit cards, or predatory payday lenders. 

As PYMTS succinctly put it recently, “The paycheck-to-paycheck economy is changing what it means to be underbanked.”

The facts as they stand right now support that many consumers are not getting what they need from their greater financial institutions, and as a partial result the underbanked population is larger than many institutions realize or understand. That’s because many consumers, in part, are discouraged from opening or accessing their accounts due to real or perceived high fees. 

Others simply distrust the mainstream financial system in totality. Unfortunately for them, being outside of the system leaves them vulnerable while actually limiting or even regressing their financial objectives, especially when so many retailers and businesses switched to cashless transactions during the last two-plus years. 

So as it stands today, many of the underbanked in the U.S. still haven’t found a consistent, daily routine to establish their financial health and well-being, especially if their main financial accounts are only accessed through digital banking alternatives, to which they may not have access. Therefore, with entire segments of consumers going without the contemporary tools necessary to achieve and maintain financial inclusion, there is undoubtedly more demand in the marketplace that require alternatives to the traditional financial services framework that America has leaned on for far too long. Digital banking tools can help to bring in more underbanked individuals and families that are out there working far too hard for the financial stress they are experiencing. 

Photo: SB Vonlanthen | Unsplash

Identifying the underbanked, and how credit unions can include them

According to the Federal Reserve, 22 million U.S. adults are either underbanked or unbanked. About 7 million households don’t own credit cards, debit cards, or other similar financial assets. In addition, while roughly 33 million U.S. households have bank accounts, they don’t have credit histories. So it shouldn’t be a surprise when those living paycheck-to-paycheck must be included in order to have an honest account of the underbanked population in America. 

Following identification of those consumers, they still need the real-world financial tools to help them navigate life’s financially unstable moments and situations. And as a credit union, the right financial technology can assist your cooperative in connecting with members, including those who remained inconsistent with their financial habits when it comes to their financial assets. Fintech like our QCash Life Event Lending platform fulfills this objective by building on the economic foundations of your cooperative, and allowing you to invest in member growth while also offering the singular opportunity to reach potential or even dormant members. 

For the underbanked, the dearth of credit union locations in banking deserts or inaccessible location hours were often reasons for the lack of healthy engagement or activity. Now what if these same members could engage with their financial assets and accounts economically and painlessly by way of their mobile devices without having to travel to the nearest branch? 

Ultimately, physical and digital channels can complement one another, but the ability to manage your credit union account and assets digitally is a comparatively affordable and cost-effective way to reach new and potential members. And its effects don’t stop there. Investing in digital can even change the cost structure of your cooperative due to the operational boosts provided by improved automation and effective fraud security. Because of improved efficiency, your credit union may offer a better incentive to waive fees, offer competitive rates, invest in the financial literacy in your community, and coordinate with marketing to target the underbanked segments to communicate financial inclusion. 

Here are some other benefits alternative banking, like QCash, can do for both your credit union and your members:

  • Remote banking wherever members are
  • Broaden credit union services to rural or more remote areas
  • Access 24 hours a day, seven days a week
  • Enables paperless banking with your credit union
  • Rapid approval, function through forward-thinking artificial intelligence decisioning
  • Access through most any digital communication device

With digital banking alternatives, credit unions large and small can make a substantial difference by creating opportunities for more people in the communities they live, cultivating financial inclusion for underserved populations, and innovating within a “people helping people” system that can work for everyone. To inquire further on ways QCash Life Event Lending platform can improve your credit union community, we invite you to click on our Request a Demo page today!