Reaching the "Underbanked" Population

 The term underbanked refers to the population group that relies on cash and alternative assets to perform transactions, rather than traditional banking services, such as savings accounts, loans, mortgages, and credit cards. These households do not have access often because they prefer not to, or do not have access to affordable and convenient financial services options. Estimates for the number of underbanked people are hard to pinpoint but the phenomenon is certainly not new. The FDIC in 2017 estimated that 8.4 million households or 6.5% of the overall population falls in this category. CNBC estimates that 1 in 4 Americans are unbanked as of 2019. Generally, this group has sporadic and lower household income, lower levels of education, and little access to credit. This group is as needy of the government stimulus as any, but unfortunately, definitively fall into the bucket of receiving the $1,200 stimulus at a later period from their lack of a direct deposit account. Interestingly, studies show that this group typically has access to digital smartphones, presenting an opportunity to provide a channel to reach this group. There has been a huge boom in awareness around the issue, in large part because of the COVID-19 crisis acting as a catalyst

Speed is critical for the underbanked, and one proposed solution has been to deliver the stimulus checks via mobile payment solutions. Although not as widely adopted in the United States, mobile payment solutions are nothing new. The narrative that Europe has been several steps ahead of the US in terms of payments is nothing new, and China’s widespread usage of WeChat Pay and AliPay has been a game-changer. Mobile wallets are a cheap, low-risk solution for companies to provide digital financial services for hard to reach populations, even enabling digital payments in areas in which internet access is hard to come by. Rural locations employ QR codes to send money, requiring only an internet connection on one side of the transaction to move money around. These similar technologies can be used in partnership between tech giants with payment services such as Samsung or Apple and with the government.

This idea is gaining more traction. Maxine Waters of the House Financial Services Committee Chair and other members of Congress have begun to float the idea, claiming widespread benefits in economic recovery. Digital Assets such as cryptocurrency are another potential option in this case.