Financial inclusion is one of the most ambitious goals that countries, leaders, businesses, communities, and individuals around the world are trying to achieve. Gradually, financial inclusion is making progress in your pockets and making a difference. And everything is backed by a mix of ingenuity, technology and interruption.
This issue cannot be resolved too soon. For example, look at the large number of people who would be considered non-bankers. About 25% of Americans are non-bank or non-bank, meaning they do not have limited access to traditional financial systems. Although a quarter of the population is still too high, it is a smaller percentage than a decade ago. Between 2017 and 2019 alone, the number of sub-bankers fell by 1.3 million.
Being without banking, not banking or not being able to access traditional financing is not just a theoretical shame. It creates a multifaceted domino effect that undermines society in many ways. For example, adults without financial accounts do not have credit scores, which makes it difficult for them to buy cars or start a business. In addition, without the ability to work with financial teams, households may struggle to increase wealth or set aside emergency or retirement funds.
The good news is that financial inclusion is on the global radar, which means it finally has its fair share of conversation. Yes, we are still far from achieving a sense of financial fairness and inclusion in all demographic groups. However, we are getting closer and closer to the possibility of really fair access to everything related to finance. Some important initiatives are helping us to move forward, as shown below.
Offering attractive incentives for first time entrepreneurs with no CEO experience
The dream of owning a business can be overwhelming, especially for those who do not have the money to start a business. The Nearside banking platform supports founders for the first time by offering loans of up to $ 10,000 without a credit check of the app. This allows almost everyone to apply for a Nearside debit card with an unlimited return rate of 2.2% on eligible purchases in 2022. Entrepreneurs such as color perfumer Chavalia and Generation Z baker Morgan Davis accredit in Nearside to help them realize their vision of starting a business. .
Innovative card products have only just begun to appear in recent years. Not only do they reduce dreamers’ barriers to entry, but they also help them manage their resources. At the same time, they allow them to build positive credit histories while embarking on entrepreneurial ventures.
Use AI to overcome the need for classic credit scores
From a historical perspective, many people have never been able to get approval for loans because financial institutions considered their credit scores to be subprime. Typically, a score of 670 or less indicates that a potential borrower falls into the subprime category. However, credit scores tell only part of the story. AI-driven fintech solutions can draw 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 evaluating borrowers using non-traditional data points. Consider the rental payment history of a potential borrower. A timely rental payment record can be a significant indicator that the payer could have a decent credit risk.
The government has even begun to incorporate different types of verification and evaluation into its lending processes. Fannie Mae has incorporated the rental history into her subscription. As FHFA Acting Director Sandra L. Thompson said, “there is no reason why timely payment of monthly housing expenses should not be included in subscription calculations.”
Opening the door to digital currency
Many experts believe that the future of money can be digital and paperless. The rise and interest in cryptocurrency is stimulating this feeling that cryptocurrencies like Bitcoin and Ethereum may become more common in the next generation. One thing is for sure now: many financial industry professionals refer to digital currency as more inclusive than paper-based monetary systems.
What makes cryptocurrency more inclusive? On the one hand, investors can come from any area of life. As Flori Marquez of BlockFi mentioned, many cryptocurrency investors are new to the world of investing. Crypto is the first financial asset they have decided to have, perhaps because it is very easy to buy and trade online. Even banks are joining the crypto act, albeit in smaller numbers. They are dedicated to bringing in internal cryptographic services to attract new consumers.
Of course, cryptocurrency is still in its infancy. However, it could provide another way to moderate the ever-expanding wealth gap. Over time, cryptography could have an equalizing effect in favor of people in lower-income situations.
Focusing heavily on affordable financial education
As with any subject, finances can seem complicated for those who have had limited experience dealing with money. The easiest way to unravel the complexities of finance is through education. And social media is not only a way to provide education, but even a way to make money for anyone.
For example, take the videos of PJ Uscreen founder PJ Taei. During the pandemic, Taei made a point to help entrepreneurs find ways to monetize live streaming. Share tips and advice designed to give all emerging creators the information they need to grow their followers, create their brands, and impress with every budget.
Wells Fargo has announced that some of its banks in major metropolitan areas will host HOPE Inside Centers. Each HOPE Inside space will offer free financial advice and resources aimed especially at non-banks. Darlene Goins, head of Wells Fargo’s Banking Inclusion Initiative, explained that “financial education and guidance, and a person’s sense of inclusion and confidence, are important factors in incorporating more people than not. are banking in the formal banking system. ”
Introduce inclusion in the financial services sector
One last, and fundamentally essential, way to achieve financial inclusion is the move to hire more diverse financial services personnel. The reasoning is that as more people of color and minority background move into finance, finances will be more welcoming to all.
Employees from marginalized families can also introduce new concepts, especially if they work with strangers with issues related to financial inclusion. Think of the recent adoption of custom money transfer platforms like Zelle. Vendors like Zelle have made fast transfers using smartphones that are part of modern life. They have allowed people to exchange wealth almost instantly, eroding barriers to quick access to money, such as being able to access a physical ATM.
So far, the initiative to bring representation to finance has worked, at least at the entry level. More than half of beginner-level financial workers are women. However, the positive representative tends to go down later. At the C-Suite corporate scale, the number of women of color is reduced by 80%. But many people hope that even though 77% of certified financial planners are men, the tide is changing.
Financial inclusion is not experiencing a “day-to-day” experience. However, every day that passes is becoming more and more a reality. Every year, more innovations begin to take root in the global financial community. It is only a matter of time before all these disruptions come up with a surprising calculation: access to financial services — and perhaps even freedom — as a human right.
The publication Financial Trends Closing the Wealth Gap and Contributing to Inclusion first appeared in Two.