A real-time payment solution for under-banking problems

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One of the lesser known issues in the modern economy is the prevalence of unbanked and underbanked individuals. The unbanked do not have access to bank accounts while the underbanked have bank accounts but rely on alternative nonbank financial services to meet at least some of their financial needs. There are currently 7 million homes in the United States that are took into consideration unbanked, and lack of access to banking services means these households have to cash their paychecks through check cashing services and pay their bills by money order, for example, both of which can charge exorbitant fees and push unbanked families even more in poverty.

Many of these unbanked or underbanked households could be greatly helped by real-time payments, which To allow for individuals to receive funds instantly, for example, or to allow businesses to temporarily pay or workers together at the end of each shift. These payments reduce the dependence of underbanked populations on operating options such as check cashing services and payday loans.

In June / July Real-time payment monitoring®, PYMNTS explores the latest developments in the world of real-time payments, including the challenges unbanked and underbanked households face in their day-to-day financial lives, how real-time payments can ease their struggles, and the actions that banks can take to improve access to accounts and loan services for these households.

Developments around the world of real-time payments

A positive development in 2020 has been a drop in the share of unbanked adults to just 5 percent, according to a new publication report by the Federal Reserve. This figure was down from 8% in 2015 and 6% in 2019. The Fed further noted that the share of fully banked individuals – those who have bank accounts and do not use non-bank alternatives – is rose to 81% last year.

Many banks are taking steps to further reduce the unbanked and underbanked population through new programs. Wells Fargo recently ad the launch of its banking inclusion initiative, a 10-year plan to improve access for historically underserved demographic groups such as black, Hispanic and Native American families, who currently make up more than half of unbanked households in the United States . those who use high-cost non-banking services and would be better served using traditional banking services.

Other initiatives stem from public-private partnerships, such as the Count on initiative, and even state governments. the California Public Banking Options Act, which would create a government-run banking system with no-fee debit cards that would compete with the private sector, is under consideration in the state assembly. The bill, introduced by Congressman Miguel Santiago (D), aims to help the quarter of Californians who do not have a bank account. Almost 81 percent of the state’s unbanked citizens earn less than $ 15 an hour.

To learn more about these and other real-time payments news, download this month’s Tracker.

How real-time payments reduce the impact of underbanking in America

Millions of underbanked households in the United States face a vicious negative feedback loop as the lack of traditional lending services and other financial tools forces them to opt for high-fee predatory options like lenders on salary, plunging them deeper into poverty. Providing these families with bank accounts is the ideal long-term solution, but real-time payments could go a long way to assuage their day-to-day concerns. In this month’s report, PYMNTS spoke with Aaron Klein, principal researcher in economics at the Brookings Institution, a Washington, DC-based economic think tank on how real-time payments can help underbanked consumers make payments on time and keep them from falling into a hole of late fees and unpaid debts .

Deep dive: How Banks Can Reach Unbanked American Adults

While a majority of Americans have checking, savings, or other bank accounts, 5% of households do not. There are many barriers to how and why these consumers do not open bank accounts, but working to improve the financial inclusion of these groups could be a boon to the economy. This month’s Deep Dive explores what keeps these consumers from finding banks that meet their needs and how financial institutions (FIs) can extend their services to these populations.

About the tracker

the Real-time payment monitoring®, produced in collaboration with The clearing house, is your monthly go-to resource for updates on trends and changes in payments in real time.


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