Access to financial services is a constant struggle for millions of Americans, with over 6% of American households unbanked and nearly 19% considered underbanked. Low-income households are particularly likely not to have access to bank accounts, with 19% of families earning less than $ 30,000 in annual income apparently not being banked, compared with just over 2% of those with income. higher.
Providing debit solutions, such as prepaid cards, is a key approach that can help financial institutions (FIs) attract unbanked and underbanked consumers. These low-cost cards avoid problems that keep many customers away from traditional credit, such as excessive fees or overdraft fees. Analyzing next-generation debit solutions and how they can benefit unbanked and underbanked consumers should be a priority for banks and merchants going forward.
In July Next Generation Debit TrackerÂ®, PYMNTS explores the latest developments in the world of debit, including the plight of unbanked and underbanked individuals across the country, the challenges they face due to their lack of access, and how debit solutions new generation can help in these struggles.
Developments in the world of next-generation debit
Some of the country’s underbanked populations are also the most vulnerable, notably immigrants, of whom 13% are part of unbanked households and 26% are considered underbanked. Remittance provider Remitly is among those using debit as a potential solution, adding new features to its mobile app, Passbook, to expand immigrant access to low-cost debit options. Features include new peer-to-peer payment features as well as advance payday services. It will also allow users to access virtual debit cards while they wait for the physical cards to arrive in the mail. The offer makes it easy for consumers to buy goods while reducing their reliance on payday loans and other predatory lending services.
Some states in the United States are also exploring options to improve financial access to the underbanked. California Assembly Member Miguel Santiago (D) recently introduced the California Public Banking Option Act, a regulation that would grant residents of the state access to a free debit card from BankCal, a ” public bank âmanaged by the State. The goal of the program is to open access to financial services to unbanked or low-income people, as those earning less than $ 15 an hour make up the majority of unbanked consumers in the state. The proposal has attracted limited support from California banks, credit unions and other FIs, in part because the BankCal program will be state-backed. The law is currently under review by the California Credit Committee.
IF and merchants could also benefit greatly from better banking access. Recent research has revealed that direct debit – also known as Automated Clearing House (ACH) debit – is the most widely used type of payment in Australia, France, Germany, New Zealand, and the United States. UK. North American consumers preferred debit cards, with Millennials and Gen Zers being the most likely users. Research also found that consumers are almost twice as likely to have access to debit cards, bank-to-bank payments, or bank accounts than paper checks.
To learn more about this and more next-gen bitrate news, download this month’s Tracker.
How awareness and financial tools like prepaid debit can keep unbanked consumers in the financial loop
The number of unbanked consumers in the United States hit a low of 5.4% in 2019, the most recent year for which data is available. There were 7 million unbanked Americans, however, and that number has increased due to job losses linked to the pandemic. In this month’s report, PYMNTS spoke to Sidney King, CEO of the Commonwealth National Bank, about why tools like prepaid debit cards can help individuals build relationships with banks.
Deep Dive: How Alternative Data Can Help Extend Financial Inclusion to the Unbanked
The 7 million American households that do not have access to bank accounts often find thshopping for services in today’s digital economy can be a challenge. Even households that have accounts but do not have a credit history can find themselves struggling in the modern financial environment, but allowing access to low-cost debit options could go a long way in improving their financial health. . This month’s Deep Dive takes a closer look at how using low-cost debit solutions and alternative data can help community banks and credit unions increase financial inclusion among unbanked and under-bank consumers. banked.
About the tracker
The New generation TrackerÂ® flow, a collaboration between PYMNTS and IMPULSE, a Discover company, examines the evolution of consumers’ payment behaviors as well as innovations that are reshaping their use of debit.