How Technology and Data Leaders Can Redefine Financial Inclusion

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Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit, and insurance – delivered in a responsible and sustainable way. The World Bank has defined financial inclusion as the share of households and firms that use financial services. Understanding how this metric contributes to the overall success of a community, country, and the world is paramount.

The benefits of financial inclusion are somewhat limitless. Financial inclusion improves personal and household incomes, income, and gender equality, quality of life, shelter, health, education levels, productivity, crime reduction, and national security, to name just a few. The benefits are both quantitative and qualitative in nature. 

Here in the U.S., while financial inclusion has improved slightly over the past decade, ethnic disparities continue. In 1989, 14 percent of U.S. households lacked a bank account. Today, roughly 5 percent of American households lack access to the same, while approximately 20 percent have a bank account but also use financial services associated with the financially excluded, like payday loans, according to a 2017 FDIC National Survey

To no one’s surprise, it’s quite clear that discriminatory practices have made financial access elusive to minorities and perpetuated a racial wealth gap. Today, it’s estimated that 5 percent of U.S. households remain unbanked, while recent declines have been particularly sharp for Black and Hispanic households. According to a 2019 FDIC National Survey, 13.8 percent of Black households and 12.2 percent of Hispanic households are unbanked. Despite improvements for White households, unbanked rates for Black and Hispanic households remain substantially higher. 

How data and technology can drive inclusion

Evolution in data and technology can actually drive inclusion by innovating traditional practices and processes and facilitating engagement between financial institutions and their customers.

For example, due to improvements in machine learning and artificial intelligence, verifying credit scores is not as necessary as in the past. Creditworthiness can be evaluated with proxy data which fintech alternative lenders already use via advanced underwriting algorithms. 

Furthermore, mobile technology and applications have positively impacted financial industries.

In the U.S. nearly 95 percent of adults have a mobile phone and 80 percent of those are smartphones. Un(der)banked consumers are not ‘under-phoned.’ In fact, un(der) banked consumers tend to over-index on smartphone penetration which they also leverage as an access point to the ether. Furthermore, since they are not tied to traditional banking norms (branches, ATMs), and are somewhat intimidated by bank lobbies, they are more likely to adopt mobile banking. Mobile accounts, servicing, deposit check capture, etc. are very efficient ways to expand, support, and empower underserved consumer cohorts. 

Unbanked and under-banked consumers are a profitable business opportunity for banks. Because of their mobile access and behaviors, mobile technology allows banks to cater to them while minimizing the costs tied to traditional brick and mortar locations, and mobile banking offers financial institutions real-time access to consumers, engendering a positive brand experience for users.

Again, underwriting without credit scores and eliminating overdraft fees are necessary for reigning banks to just ‘stay in the game’. But this is not sufficient to address the underserved; banks also need to be more welcoming and flexible in their engagement with the newly banked populations via better and more digital/mobile communications channels and more financial education for these consumers to build trust.

It is up to technology and data leaders to lay the foundation for the present and the future and to apply these actionable insights to better serve under-served communities. By empowering these consumers, we create a stronger country, a better economy, poverty reduction, and limitless benefits to the population at large.

The ripple effects of financial exclusion 

As we know all too well, financial exclusion negatively impacts every area of someone’s life as it denies access to other essential services like insurance, healthcare, and education. All of these are dependent on successful transactions to and from bank accounts. Indeed, in most cases, financial exclusion turns into societal ostracism.

It is paramount that technology and data leaders discern the need for financial inclusion intimately and understand that it’s critical for societal inclusion. 

Serving the underserved yields returns for all

At Welcome Tech, we’re deploying a banking service that addresses the multi-generational Hispanic community. All of our communications are both in Spanish and English to support all members of the household. We’ve also made it easier for communities with a variety of IDs to enroll, diversifying enrollment options to better serve the consumer. We don’t charge monthly fees and don’t require minimum balances. And our ATM fees are gratis as well. 

In addition, we offer our customers financial education articles and content as well as budgeting tools, to spur both financial literacy and monetary management. We mention this only as an example to what the future could hold across the board if financial inclusion is looked at as a crucial component of our economic puzzle. 

At the end of the day, financial inclusion is both quantitative and qualitative. It’s about employing the latest data and technology to super-serve an under-served consumer populace while ensuring that all customers continue to be at the core of a brand. It’s important that we remain linguistically and culturally relevant at every step of the financial journey. 


Amir Hemmat, Co-Founder, President and CEO of Welcome Technologies

Amir Hemmat is Co-Founder and CEO of Welcome Technologies (Welcome), the “digital Ellis Island ” and future operating system for immigration. Welcome is a venture-funded technology platform that is building innovative financial solutions for this cohort, including a digital wallet, to ensure access to previously elusive opportunities and to propel this consumer sector, and our society, forward.