Around two billion adults in the world do not have bank accounts, according to data from the World Bank’s Global Financial Inclusion database. There are 51.1 million adult unbanked people in the United States alone. According to 2015 FDIC National Survey of Unbanked and Underbanked Households, 7% of households in the United States were unbanked, and 19.9 % of U.S. households were underbanked.
This large group represents an important, growing demographic that was largely ignored by financial service providers until recently. As mobile and digital payments continue to expand, financial service providers are paying attention to the needs of the unbanked and the underbanked in the United States and internationally.
Innovative methods to serve the financial needs of the unbanked and underbanked are constantly evolving. Reloadable debit cards, smartphones, and digital wallets have formed a winning financial transaction “trifecta”, for those who do not have a bank account or who prefer to use their bank account sparingly.
In 2016, multiple Federal Reserve Banks surveyed financial institutions about their mobile banking practices and plans. The survey’s key findings show increased interest and adoption of mobile payments. According to the survey, financial institutions feel competitive pressure to
implement additional mobile payment services. Further, two-thirds of surveyed financial institutions already partner or plan to partner with third-party payment processors and digital wallet providers to increase mobile payment capabilities.
The underbanked population the in the US is quilting together their own package of emerging technologies and payment methods to remain “underbanked”. They are using an effective trifecta of reloadable debit cards, smartphones and mobile wallets, enabling them to transact their financial business without relying upon traditional financial institutions or traditional payment methods.
Prepaid Debit Cards – The Cards of the Future
Prepaid cards aren’t just gift cards anymore. They allow consumers to repeatedly load funds onto their prepaid card and use that card wherever the network brand (Visa, MasterCard, American Express) is accepted, either in person or online. Underbanked consumers, primarily composed of low-income earners and millennials, are rapidly turning to reloadable prepaid debit cards, which they “slide” into their digital wallet on their smartphones. They then possess an excellent alternative to using credit cards, checking accounts, money orders and check cashing companies.
Digital wallets now included in most smartphones
The launch of Apple Pay, Android Pay and other mobile wallets, along with the media attention that followed them, have taken digital wallets mainstream, making them appealing to a growing number of users.
According to Pew Research Center, the vast majority of Americans, 95%, own a cellphone of some kind. 77% own smartphones. 67% of those earning less than $30,000 a year own a smartphone.
Digital wallets enable users to safely store their debit card balances for use “inside” their smartphones. Key reasons cited by those turning to digital wallets are security, convenience, and speed. Digital wallets are built with a high level of data security across online, in-app, and in-store transactions, safely consolidating and streamlining multiple payment functions.
Who needs a checking account, credit card or a PC to be financially independent?
The saturation of smartphone owners is resulting in their increased reliance on mobile technology, which translates into the accelerating use of mobile digital wallets. Many are embracing prepaid debit cards loaded into digital wallets on their mobile device. Personal computers, checking accounts and credit cards are not needed to make payments, purchases, transfer money or obtain cash by anyone taking advantage of the combined transactional functionality of reloadable prepaid debit cards, digital wallets, and smartphones.
Contact David Graham at 904.312.3303 or firstname.lastname@example.org about meeting the payment needs of your underbanked customers.