Financial inclusion is one of the most ambitious goals that countries, leaders, businesses, communities and individuals around the world are trying to achieve. Little by little, financial inclusiveness advances pockets and makes a difference. And it’s all backed by a mix of ingenuity, technology, and disruption.
This problem also cannot be solved too soon. For example, look at the high number of people who would be considered unbanked. About 25% of Americans are either unbanked or underbanked, meaning they have little or no access to traditional financial systems. While a quarter of the population is still too high, it is a lower percentage than ten years ago. Between 2017 and 2019 alone, the number of underbanked people fell by 1.3 million.
Being unbanked, underbanked or unable to access traditional finance is not just a theoretical shame. This creates a multi-faceted ripple effect that undermines society in many ways. For example, adults without financial accounts have no credit score, which prevents them from buying cars or starting businesses. Additionally, without the ability to work with financial teams, households may struggle to grow wealth or set aside emergency or retirement funds.
The good news is that financial inclusion is on the global radar, which means it’s finally getting its fair share of conversation. Yes, we are still a long way from achieving a sense of financial fairness and inclusiveness for all demographic groups. Yet we are getting closer and closer to the possibility of truly equitable access to all things finance. A few important initiatives are helping us move forward, as listed below.
Offer attractive incentives to new entrepreneurs without CEO experience
The dream of owning a business can seem overwhelming, especially to those who don’t have the money to start a business. Nearside banking platform supports new founders by offering loans up to $10,000 with no credit check application. This allows almost anyone to apply for a Nearside debit card with an unlimited cashback rate of 2.2% on eligible purchases in 2022. Entrepreneurs like color perfumer Chavalia and Gen Z baker Morgan Davis thank Nearside for helping them achieve their vision of business creation. .
Innovative card products have only started to appear in recent years. Not only do they lower the barriers to entry for dreamers, but they also help them manage their resources. At the same time, they allow them to establish a positive credit history when embarking on business ventures.
Using AI to go beyond the need for traditional credit scores
Historically, many people have never been able to get approved for loans because financial institutions viewed their credit scores as subprime. Usually, a score of 670 or less indicates that a potential borrower falls into the subprime category. However, credit scores only tell part of the story. AI-powered fintech solutions can paint a more holistic picture of someone applying for funding.
Far from resisting this change, many companies welcome the opportunity to work with underserved consumers. In fact, financial institutions and lenders are increasingly interested in assessing borrowers through non-traditional data points. Consider a possible borrower’s rent payment history. A record of paying rent on time can be a significant indicator that the payer might be a decent credit risk.
The government has even started to integrate different types of verification and evaluation into its lending processes. Fannie Mae has incorporated rental history into its underwriting. As Acting FHFA Director Sandra L. Thompson said, “There is absolutely no reason why timely payment of monthly housing charges should not be included in underwriting calculations.”
Open the door to digital currency
Many experts believe that the future of money could be paperless and digital. The rise and interest in cryptocurrency is driving this feeling that crypto like Bitcoin and Ethereum could become more mainstream within the next generation. One thing is certain now: many professionals in the financial sector present digital currency as more inclusive than paper-based monetary systems.
What makes cryptocurrency more inclusive? On the one hand, investors can come from all walks of life. As BlockFi’s Flori Marquez mentioned, many crypto investors are new to the world of investing. Crypto is the first financial asset they decided to own, perhaps because it is so easy to buy and trade online. Even banks are getting into the crypto act, albeit in smaller numbers. They are trying to bring crypto services in-house to attract new consumers.
Admittedly, cryptocurrency is still in its infancy. Nonetheless, it could provide another means of mitigating the ever-widening wealth gap. Over time, crypto could have an equalizing effect that lifts people out of low-income situations.
Strong focus on accessible financial education
As with any subject, finance can seem complicated to those with limited experience in managing money. Education is the easiest way to unravel the complexities of finance. And social media is not just a way to provide education, but maybe even a way to make money for anyone.
For example, take the videos of PJ Uscreen founder, PJ Taei. During the pandemic, Taei has been keen to help entrepreneurs find ways to monetize live streaming. He shares tips and advice designed to give all budding creators the information they need to grow their followers, grow their brands, and impress on any budget.
Wells Fargo has announced that some of its banking locations in major metropolitan areas will house HOPE Inside centers. Each HOPE Inside space will offer free financial coaching and resources aimed specifically at the unbanked. Darlene Goins, head of Wells Fargo’s Banking Inclusion Initiative, has publicly stated that “financial education and orientation, as well as an individual’s sense of inclusion and confidence, are all important factors. to bring more unbanked people into the formal banking system.”
Introducing inclusiveness in the financial services sector
A final – and essential – way to achieve financial inclusiveness is the movement to hire a more diverse workforce in financial services. The reasoning is that the more people of color and minority people get into finance, the more welcoming finance will be for everyone.
Employees from marginalized families may also be able to introduce new concepts, especially if they work with people unfamiliar with financial inclusion issues. Consider the recent adoption of personalized money transfer platforms like Zelle. Providers like Zelle have made fast transfers via smartphones an integral part of modern life. They allowed people to exchange wealth virtually instantly, removing barriers to quick access to money, such as the ability to access a physical ATM.
To date, the initiative to mainstream representation in finance has worked, at least at an entry level. More than half of entry-level financial employees are women. Nonetheless, the positive rep tends to drop later. On the C-Suite corporate ladder, the number of women of color drops by 80%. But many people are hoping that despite the fact that 77% of certified financial planners are men, the tide is turning.
Financial inclusiveness is not an experience of “overnight success”. However, it is becoming more of a reality with each passing day. Every year, new innovations begin to take hold in the global financial community. It’s only a matter of time before all of this disruption culminates in an astonishing reckoning: access to financial services – and perhaps even freedom – as a human right.
The post Financial Trends Closing the Wealth Gap and Bringing Inclusiveness appeared first on Due.