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Fintech: Financial Technology Research Guide

Unbanked & Underbanked

Carol Highsmith, photographer. Open bank vault, at the Mechanics and Farmers Savings Bank. Between 1980 and 2006. Library of Congress Prints and Photographs Division.

During the June 8, 2017, congressional subcommittee hearing on digital commerce and consumer protection, among the topics discussed were the unbanked, underbanked, and their use of alternative financial services. The subcommittee concluded that as new technology disrupted established financial services institutions it would provide the unbanked and underbanked greater access to relevant financial services.

The Unbanked and Underbanked

According to a 2017 Federal Deposit Insurance Corporation (FDIC) survey, most U.S. households were “fully banked." Meaning that they had either a checking or a savings account with an FDIC insured financial institution, and had not used alternative financial services (AFS) in the past 12 months. An alternative financial service is a non-traditional bank or lender, such as a check cashing company or payday lender. An “unbanked” person is someone that does not have a checking or savings account with an insured (FDIC) institution. The term “underbanked” means that the household had a checking or savings account with FDIC insured institution, but regularly used alternative financial services (AFS).

The FDIC's survey also asked a group of unbanked respondents why they did not have a checking or savings account. The most common responses were "do not have enough money to keep in an account," "don't trust banks," "avoiding a bank gives more privacy," "bank account fees are too high," "bank account fees are unpredictable" and "lack of convenience." As for “lack of convenience,” traditional banks are commonly not located in certain neighborhoods, but alternative financial services companies are plentiful in those neighborhoods.

Mobile Banking

According to a 2017 FDIC focus group, mobile banking meets the consumer needs in areas where traditional banking is perceived to be weak. Mobile banking’s major strengths include more convenient banking services, consumers’ have better control over their finances, and in some cases, more affordable banking services. Mobile banking provides customers with mobile financial alerts and other monitoring tools. These alerts and tools help customers reduce bank fees, keep better track of their finances, improve on-the-spot decision making, help maintain better records which makes payment disputes easier to resolve. Mobile technology gave rise peer-to-peer (P2P) payment services that allow individuals to directly pay others without cash or checks though apps. Technology development can better assist consumers manage payments conveniently and quickly.

Government regulators are striving to improve banking services for all U.S. residents. In July 2018, the Office of the Comptroller of the Currency (OCC) said it would begin accepting National Bank Charter applications from financial technology companies that offer mobile financial services products. The decision was documented in a policy statement and supplement to the OCC’s Comptroller's Licensing Manual.

Additional Reading

The following sources from the Internet and from the print collections at the Library of Congress are useful in learning more about FinTech and the issue of access to banking services.

External Websites

Print Resources

This is just a selection of books on this topic. The books listed below link to fuller bibliographic information for each item in the the Library of Congress Online Catalog. Links are provided for additional online content when available.