Financial inclusion for the ‘unbanked’ could ease US economic woes


In rural America and urban centers across the country, there is a little-known impediment to economic growth and personal prosperity that is preventing millions of people from achieving financial independence and building personal wealth.

Many people are unbanked and unbanked, while others are “underbanked” and need to use alternative financial services such as money orders, check cashing services, and payday loans instead of traditional loans and credit cards to manage their finances and fund purchases. Both of these situations hinder personal financial stability for millions of people across the country and affect our overall economic growth.

Despite significant progress over the past decade in reducing the number of both banked and unbanked people in the United States, there is a growing bipartisan consensus that now is the time to redouble our efforts toward true financial inclusion. Financial inclusion needs to go beyond banking to have a tangible impact on the financial lives of people in America. Financial inclusion means individuals and businesses have equal access to affordable financial products and services to meet their payment, savings, credit and insurance needs.

That’s why over 110 businesses, trade groups and consumer groups have joined the Aspen Institute Financial Security Program and are calling for the adoption of a national financial inclusion strategy to achieve better financial outcomes for all people, regardless of their zip code. This unprecedented coalition brings together a diverse range of organizations committed to a national financial inclusion strategy. It represents the wide range of sectors and policies that need to be addressed in a coherent approach.

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For too long, the US has taken a fragmented approach to financial inclusion. Federal agencies, financial institutions, community organizations, and advocacy groups have initiated important individual initiatives to address the lack of inclusive financial systems in the United States, but there have been no coherent, strategic efforts to address this very complex issue.

The Biden administration’s executive order making supporting racial justice in underserved communities a top priority for federal agencies was a good first step, but data shows more action is needed.

For example, more than 7 million US households are unbanked and disproportionately black, Hispanic, Native American or Alaskan. Almost 10 percent of rural Americans live in “banking deserts,” compared to 1.7 percent of urban Americans.

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It’s not just rural Americans who are being left behind. In a 2020 report compiled by McKinsey, data shows that exclusionary policies and strategies — from restricted access to federal mortgage loans to geographic barriers to physical bank branches — have hampered black economic well-being.

In fact, recent research has found that Black and Hispanic households account for over half of payday loan interest and fees (22 and 29 percent, respectively), despite making up less than a third of the population. A report by New America found that financial institutions are charging Latin American consumers $262 more to open a checking account than their white counterparts.

International Monetary Fund research shows a long-term difference of 2-3 percentage points in GDP growth between financially inclusive countries and their peers. The United States lags behind other countries in lacking a comprehensive financial inclusion strategy, but a Presidential Commission can set common goals for federal agencies and the private sector to expand financial inclusion strategies, ongoing resources to coordinate actions between leading agencies and organizations To develop and track progress in building an inclusive financial system in the US

Organizations from across the political and philosophical spectrum have recognized that our national failure to develop a coordinated strategy to advance financial inclusion harms the individuals concerned and limits our financial growth. A recent multi-source analysis by McKinsey & Company estimates that promoting financial inclusion could result in 4 to 6 percent higher real GDP growth by 2028.

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Resolving this persistent program requires bold leadership across sectors to develop a shared vision for how policies, products and business models can create the inclusive financial systems needed to create an equitable and sustainable economy.

This recommendation is the result of several years of research and dialogue with the leading voices in the financial services industry and those who have been systematically excluded. It’s time to put everyone in America on the path to better outcomes and greater financial security for all.

Ida Rademacher is Vice President of the Aspen Institute and Executive Director of the Financial Security Program.



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