Financial education, accessibility and overall inclusion has improved as technology has advanced in the past decade but many consumers remain unbanked or underbanked. 

The term “unbanked” refers to people who don’t use any financial institution; “underbanked” refers to those with insufficient access to financial services, according to Merriam-Webster. 

Only 50% of the global population had access to formal financial services in 2011, according to World Bank Group’s Global Findex report. By 2021, that number had grown to 76%. 

Today, as smartphones and online channels provide growing access to financial education and services, the unbanked population continues to decrease, according to the Federal Reserve, which breaks out the U.S. unbanked rate annually.  

“One in five people across America don’t have access to credit,” Aaron Long, head of client advisory at automated decisioning platform Zest AI, told Bank Automation News.  “There are definitely issues within the current financial system right now.”

Ongoing use of traditional credit scoring methods is one reason, he said. More technology, better math and data can be used to make unbiased credit decisions. 

AI can assist in that, he said.  

“More people will not only be approved, but more folks that are typically said ‘no’ to will be able to get a ‘yes,’” Long added. 

With AI adoption, financial inclusion is expected to improve. This will go hand in hand with prioritizing financial education across schools and financial institutions, and the implementation of advanced technology online and in branches, as well.  

Role of open finance  

Open finance allows consumers access and more control over their own financial data, presenting them with an opportunity to improve budgeting, investing, lending and more.

In today’s evolving tech landscape, open finance is becoming a reality; the Consumer Financial Protection Bureau finalized the Section 1033 Open Banking Rule on Oct. 22, which could improve financial access, Simon Paris, chief executive officer of tech provider Finastra, told BAN.  

According to the CFPB, the ruling allows consumers to transfer their bank data to other FIs, compare rates on financial services and products and use open banking for secure payments. 

“Through the combination of open finance and [digitalization], financial institutions are increasingly able to reach communities, businesses and people that were perhaps considered too small, too dispersed or too niche to serve effectively,” Paris said. 

For example, open banking data could be used by fintechs to offer less traditional methods of lending and financing to underbanked populations through cash flow underwriting and income verification, according to a July 30 Stripe blog post.  

Open finance “is key to breaking down the barriers that have historically created challenges for accessibility, affordability, availability,” Paris said. “This has been especially severe for the unbanked and underbanked.” 

Branch and digital investment 

While some consumers want to be met via digital channels, others lack access to physical bank branches, especially after more than 4,000 physical branch locations closed during the pandemic, according to an analysis from the National Community Reinvestment Coalition. 

FIs are investing in both their branch networks and digital capabilities to fill these gaps. 

Bank of America announced in September it will add more than 165 branches across 63 markets, including its first financial centers in Boise, Idaho, by the end of 2026. 

“While most clients are using our digital capabilities for their everyday banking, they are visiting our centers for in-person conversations about more complex financial needs and advice on their life priorities and financial goals,” Aron Levine, president of preferred banking at Bank of America, said in a Sept. 23 release. 

Ninety-five percent of the bank’s client interactions take place on a digital platform, which is why the bank has adapted its financial centers to focus on in-person appointments, according to the release. 

This effort opens up banking access to 246 million people — more than 75% of the U.S. population — according to the release. 

Similarly, Chase plans to hire 75 community managers by 2030 to better understand local financial inclusion challenges in the locations they serve while investing in its branch network through “Community Centers”, according to Chase’s Oct. 2 release. 

The “Community Centers” showcase a new branch design combined with the latest banking technology, according to the release. One new “Community Center”, located in Brooklyn, represents an investment of $6 million. The location offers the following: 

• Complimentary financial health workshops; 

• Complimentary Wi-Fi; and  

• Pop-up shops for small business clients. 

While some banks are prioritizing branch investment, others are investing in digital capabilities to meet unique client segments. 

Signature Bank of Arkansas, for example, opened Banco Si, a branch network specifically designed to serve the Spanish speaking community, tapping tech provider CSI to ensure Spanish speakers have access to the $1.2 billion institution’s full financial services offerings, bank President Brant Ward told BAN.  

Multimodal education 

In addition to digital services and branch accessibility, some banks are investing in multimodal education to increase financial understanding and access.  

To ensure accessibility to financial services, financial institutions of all sizes are investing in education and technology to increase financial inclusion.  

Bank of America, for one, offers its Better Money Habits online resource center, which is equipped with presentations, videos and workbooks. It allows bank clients access to educational tools about saving and budgeting, homeownership, credit access, investing and more.  

For student education, Discover Financial Services teamed up with Discovery Education to create the Pathway to Financial Success in Schools program in 2017. 

The online-based curriculum is offered in a variety of formats including video, activities, activities for families, self-paced modules and more, Abbe Kalina, director of corporate communications at Discover, told BAN.  

The program has reached 6.5 million students and has gained the following results since 2017, according to Discover Education’s Amy Nakamoto: 

• Students show a 44% increase in understanding savings methods; 

• A 42% increase in understanding the dynamics around credit; and 

• 47% of students reported an increase in understanding financial fraud. 

“Getting students to engage in financial literacy and financial inclusionary topics in a tech space is really just part and parcel of what it means to be a consumer in this world,” Nakamoto said. “We’re trying to set the foundation through technology on how they’re going to interact with financial tools for the rest of their life.” 

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