credit unions financial inclusion

How credit unions can level up on financial inclusion

The last year and a half has proven both the inevitability and acceptance that has come with the digitization of the economy in the United States during and after COVID. 

Since March of 2020 the tide of consumer online purchasing has come in, and we have shown no sign of returning to the pre-pandemic, brick-and-mortar purchasing habits of yore. The challenge for many in this new era is that such consumer advantages remain out of reach for as many as 66 million Americans (or one in five adults) who are underserved or unbanked. (FDIC

Enabling purchases through the online space entails the consumer providing their card’s information. However, that scenario isn’t possible for the seven million households who don’t possess credit cards, debit cards, or even bank accounts. Nor does it help the 33 million consumer households who have bank accounts but lack any long standing credit history.  

Now that the world and its credit unions, particularly community development financial institutions (CDFIs), are gearing up for another bout with the COVID Delta variant, their key concern remains ensuring that consumers, members, and even potential members are not left behind in their economic recovery or financial inclusion goals.

A significant part of that financial journey, however, includes credit union employees offering the products and services available to nurture their members’ money habits back to health. Products like the mobile QCash life event loan platform, afford members the quickly deposited cash required to take care of the unexpected emergencies life can surprise them with when least expected. 

Identifying those members or consumers in need

According to the Federal Deposit Insurance Corporation (FDIC), about 33 percent of all U.S. consumers are either underbanked or unbanked. These numbers, however, vary depending on individuals with different income brackets and education levels. If one examines further, about seven million, or about five percent of the U.S. population, does not have access to either a checking or savings account. 

A common reason underbanked consumers give for being unable to access these banking and payment products and services is they simply don’t have enough money to satisfy financial institutions’ minimum balance requirements. These consumers are therefore limited to using cash or alternative financial products, the majority of which fail to look out for the consumers’ best interests or financial health goals. 

Those consumers leave a lot of opportunities on the table for credit unions to improve financial inclusion, financial health, and an overall healthier consumer economy. According to PYMTS, however, households more often have access to a mobile device, thereby enabling CUSOs like QCash the chance to be the difference between individuals being able to pay an overdue bill or having that unpaid bill further harm their FICO score.

Roughly 1,100 CDFIs take action on their passion throughout the U.S. by incorporating financial inclusion standards on behalf of underserved communities. 
Photo: Ian Schneider | Unsplash
Roughly 1,100 CDFIs take action on their passion throughout the U.S. by incorporating financial inclusion standards on behalf of underserved communities.
Photo: Ian Schneider | Unsplash

How CDFIs are providing members’ financial inclusion needs

CDFIs are providing financial inclusion needs in many areas around the United States. CDFIs’ concrete mission centers on social responsibility, and these specific credit unions often serve more rural, and poorer, communities who need access to financially-inclusive banking accounts and stable loan programs. 

Data from the Opportunity Finance Network found there are roughly 1,100 CDFIs serving the U.S. while managing over $222 billion in assets. While not all are credit unions, they offer the underbanked practical, financial inclusion-focused tools and solutions that can address their needs. Along with the direct services, CDFIs also support financial literacy and inclusion by incorporating fintech to address such challenges.

Incorporating one-on-one relationships with communities is a critical first step. A significant number of walk-in, alternative finance businesses dominate underbanked or unbanked markets throughout the U.S. Even more, these businesses are often more accessible to the community through extended hours. CDFIs remain the perfect instrument that can penetrate these banking deserts and bring true financial inclusion to those underbanked individuals and families.

Let automated fintech enhance your credit union’s financial inclusion goals

Most financial institutions, credit unions included, rely on two fundamental questions: the borrower’s ability to pay back the loan, and whether they’re an acceptable risk from the start. Traditional credit scores have been the primary form of evaluation for many decades, but the power of fintech and automated mobile lending products like QCash are filling existing gaps in credit profiles, thereby offering a more detailed, 360-degree evaluation. By incorporating this proven fintech, credit unions can employ alternative credit scoring and data analytics to responsibly evaluate borrowers with lower credit scores to determine which are actual life event loan risks versus those who are not.

With QCash’s proprietary, relational-decisioning platform, your members receive a lightning-fast application process that includes a six-click application, AI decisioning, and fund deposit into the members’ account, all in the course of around 60 seconds.  If your credit union is looking to expand its mission in the effort to improve the financial inclusion standards and measures in your communities, please connect with us on our website.

In what other ways can credit unions promote financial inclusion measures for underserved communities? Drop a comment below or reply to us on any of our social channels on Facebook, Twitter, Instagram, or LinkedIn.

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