For some of us, everyday banking is an uneventful task. Technology has allowed us to go digital and automate the many hoops we used to have to jump through. Without fail, our pay lands in our bank accounts on schedule. We no longer stand in line, check in hand, waiting patiently for a teller to wave us over. We do not need to concern ourselves with financially disrupting check-hold policies. We have long-standing relationships with our financial institutions.
With creditworthiness comes opportunities we don’t give much thought to. We have access to overdraft protection. We reap the benefits of financial offerings that support our decrease in debt and ensure we remain in good financial standing. Our financial institutions ply us with financial products, services and tools to help us manage our money better and, in turn, create more wealth.
Meanwhile, a disproportionate number of individuals needing access to funds faster and easier continue to face barriers that are often too high to climb.
I tout financial inclusion as a potential economic salve among the constant chatter of recession, inflation and dire economic conditions. It’s an antidote that might not only soothe financial turbulence but also add a much-needed economic boost at a time when one is required.
It is said that close to 2 billion adults worldwide do not have access to formal financial systems. This includes 30 million Americans. Meanwhile, in Canada, it is estimated that 10%-20% of Canadians are not accessing the banking services available to them. These are the unbanked or underbanked in our society. More often than not, these Canadians are from low-income households—those living in remote communities, including Indigenous peoples, people with disabilities and newcomers (refugees) to Canada.
A topic of great discussion in the past two decades is the rise in inequality and its impact on society. As former president Barack Obama noted back in 2011, “Over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk.”
Financial inclusion is a way to bridge the divide and lessen the space between rungs. The goal is equal access to financial services so that no one is left behind. Access to financial and social assets is vital in helping those needing it the most escape poverty. Advances in financial technology and digital transactions have never been easier to achieve. That has a significant societal impact.
The underbanked are known to rely on check-cashing services and payday loans to fund purchases, bridge the gaps between pay periods, and manage their finances. They remain at a disadvantage when it comes to the ability to access mainstream financial services.
What is important to note is the high use of checks and cash among the unbanked or underbanked and the challenges this can pose. A dependence on checks presents a significant impediment to those recognized as financially challenged.
There are many drawbacks to relying on these payment methods. Checks are difficult to deposit, easy to lose and prone to theft. Not to mention that funds are not available immediately, they don’t allow for online purchases, and they have an over-reliance on slow payment processing practices like mail delivery. If the check is in the mail, those funds are not accessible to anyone, including the recipient. And that is money that is not moving freely throughout our economy.
Outdated payment methods slow down the speed at which crucial parts of the economy operate and can make paying for even the most basic necessities a slow and painful process for the underbanked.
We are at a turning point. As digital products and services continue to evolve, so do financial services. This paves the way for new opportunities for everyone.
The ultimate goal of the financial industry as a whole is to ensure that individuals have control over their financial health, provide them with the tools for greater resilience and allow them the ability to save for a rainy day to deal with life’s unexpected.
And while I admit there is no easy solution, there are steps we can take to help eliminate financial exclusion:
It is an exciting time to be part of this industry. The foundational building blocks for digital banking have been laid, and—no matter who they are, where they live or how little they have—people are one step closer to conveniently paying, investing and accessing financial services equally. If we can ensure everyone can participate fully in the financial system, we have set the stage for a robust economy to thrive.
Because, after all, financial services should be available to everyone.
Achieving Equality Through Financial Inclusion was originally published on Forbes on December 21st, 2022.