FINTECH FLASHBACK is a series on FinTechtris that takes a look back at topics first discussed over a year ago and provides updates, dialogue, and further developments of what’s going today in the industry.

Over two years ago, I wrote about the FinTech industry opening up banking services for the “unbanked.” Instead of exclusively catering to tech-savvy millenials, many fintech companies globally continue to support those most in need of financial services. This group (who has no banking relationship due to fees or bank requirements) has only grown over the last few years in the US — from 8.4M (in June 2017) to 12M (as of Nov. 2019). Over a 40% increase in over 2 years!

From this pie chart, we can see the rate of underbanked (individuals without basic access to cards, savings, or credit products) is even higher than the unbanked. Both of these groups are required to use the services of check cashers, payday lenders, prepaid cards, and purchase money orders to pay for bills and groceries.

Fortunately, the capabilities of FinTech companies and the ability to serve unbanked and underbanked has also increased. Individuals are no longer limited to check cashing stores or supermarkets to cash out payroll or government checks. In the age of mobile and app-based banking, fintech apps have spread in usage and popularity due to open access for customers declined by banks (due to negative or poor credit history) and a no-fee account structure.

The neobank sector of FinTech specifically focuses on delivering banking relationships virtually to consumers and businesses that don’t qualify with banks. In this sector, Chime Bank is a notable leader in the US as its platform continually adds services for the unbanked and underbanked. Given the current conditions, Chime has even offered to advance up to $1,200 for its customers who have not received their stimulus check.

Despite the heightened awareness and fintech companies becoming more active in the space, the impact of COVID-19 on the economy is hitting the unbanked and underbanked the hardest. Already living paycheck to paycheck, the reduction in income and unemployment has been devastating. This comes at a time when 40% of Americans would struggle to pay $400 in an emergency. There are multiple companies that have stepped up and launched new services providing relief to those most affected — with the hope that the list will grow among fintechs, banks, and government organizations.

In this new decade of 2020, firms of all sizes and industries should continue to come together with fintechs and find paths of sustainability for employees and workers in their local communities. Education and resources should start at the employer level and be supported with benefit programs sponsored by the financial services industry and government organizations. Emergency loan programs, savings incentives perks, and credit builder tools can come from companies to benefit their workforce. The goal would be for more individuals to be financially steady and make progress towards financial milestones such as establishing credit, building savings, home ownership, and retirement.

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