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Financial Inclusion: Progress, Challenges, and the Path Forward

Financial inclusion is becoming a reality for more Americans. While there’s a long way to go to ensure more people have access to financial services that meet their needs, many organizations have made it a priority in 2023 and beyond to focus on this vital issue.

Financial Inclusion: Where We Are Now

The national conversation around diversity, equity, and inclusion continues to expand, and financial inclusion for consumers is a key component. Financial inclusion means people can safely and easily access the essential services, tools, and systems they need to manage their financial lives and reach their goals.

When people are excluded from the financial system, they may:

• Lack a safe place to store their funds
• Not have a reliable or convenient way to cash checks
• Lack a secure way to make payments or transfer money
• Not be able to access loans or borrow money at reasonable rates
• Lack basic financial literacy

According to a 2021 survey conducted by the Federal Reserve, 18.7 million U.S. households were underbanked, and 5.9 million households didn’t have a checking or savings account at a bank or credit union.

The Color of Financial Exclusion

The ability to build wealth is an integral part of financial health and stability not only for individuals but for entire communities. Accordingly, the impact of financial exclusion isn’t distributed equally. Year after year, the data around the unbanked, underbanked, credit invisible, and the racial wealth gap shows that communities of color are harder hit compared with their white counterparts.

FDIC survey data shows that while 13% of white Americans are unbanked or underbanked, 29% of Hispanic adults and 40% of Black adults are.

Seeing Progress in Financial Inclusion

The good news is that even slow progress is still progress. The proportion of unbanked U.S. households in 2021 was just 4.5%, the lowest since the FDIC’s National Survey of Unbanked and Underbanked Households began in 2009.

Changes in economic status, work focused on increasing financial literacy and inclusion, and advances in technology and digital offerings have all contributed to the decrease in underbanked and unbanked households.

Looking Forward: Financial Inclusion in 2023 and Beyond

While there’s much still to be done in the financial inclusion space, the overall direction is positive. Most experts and activists also agree that moving the needle in the right direction requires a nuanced and multifaceted approach.

“Solutions to financial inclusion need to be driven by public policies and include layered investments between the public, private, and philanthropic sectors,” says Nicole Elam, president and CEO of the National Bankers Association.

Making Banking More Accessible and Affordable

A key part of financial inclusion is helping consumers get connected to safe and affordable banking opportunities. Some examples include:

• Bank On, created by the Cities for Financial Empowerment Fund, is dedicated to helping financial institutions connect consumers to safe and affordable bank accounts.
• The BankBlackUSA movement is focused on helping underserved communities and the general public connect to black-owned financial institutions in local communities.
• Several legacy banks are continuing their commitment to invest in underserved communities through wealth-building initiatives.

Leveraging Technology While Reducing Bias

Technology is a driving force behind advances in financial inclusion, but there’s still action needed to protect consumers and ensure fairness. Initiatives focused on creating equality-focused lending data algorithms give those focused on financial equality a tentative hope.

FairPlay is a new tool that bills itself as the world’s first “fairness-as-a-service” solution. It uses artificial intelligence to reduce algorithmic bias for people of color, women, and other historically underserved groups.

Improving and Advocating for Financial Literacy and Equity

Financial education is critical to improving financial inclusion for Americans. From understanding budgeting and learning how to save to building credit, the benefits of financial literacy touch every area of people’s lives. These organizations are working to help consumers do just that:

• Operation HOPE is one of the leading organizations in the financial inclusion space.
• Prosperity Now focuses on racial economic justice.
• America Saves is an initiative of the Consumer Federation of America.
• The Cities for Financial Empowerment (CFE) Fund helps local governments embed financial empowerment strategies into their work.

Tools and Resources Bringing Financial Inclusion to More Americans

As more awareness grows around financial inclusion, the variety of resources has increased to help individuals build stronger economic foundations and achieve their goals.

Banking

• Ready, Set, Bank provides educational videos and other content to build online banking confidence.
• Aspiration is a “sustainability-as-a-service” company that also has a banking arm.
• Neobanks and online banks are bringing down the cost of having a bank account.

Credit

• Experian Go helps people with no credit history establish a credit report and get access to credit-building opportunities.
• Experian Boost® helps consumers get credit for bills they already pay.
• FinEQUITY helps formerly incarcerated people access and build credit and education to rebuild their lives.

Saving, Budgeting, and Investing

• Stackwell aims to close the wealth gap by helping more Black people leverage the stock market’s power.
• SaverLife’s platform uses prizes, rewards, expert resources, educational articles, and gameplay to encourage savings and budgeting.
• Prism brings users’ money, bills, and income together in one place and allows users to pay bills directly through its application.

Financial Literacy

• World of Money empowers youth with a sound financial education through online videos divided by age group and subject.
• MoneySmart is an educational initiative sponsored by the FDIC geared toward people of all ages.
• MoneySavvy Generation offers a suite of physical products, games, and tools, including an award-winning app, Savings Spree, geared toward children as young as 4.

Planning for the Future

Financial inclusion initiatives have already enormously impacted the financial landscape, and 2023 will likely continue that trend. As digital and mobile technologies drive innovation in the market, legislators and other thinkers in the space will have opportunities to create both new approaches and safeguards that benefit even more Americans as they strive for an equitable and vibrant financial future.

At O1ne Mortgage, we are committed to helping you achieve your financial goals. Whether you need assistance with a mortgage or financial advice, our team is here to help. Call us today at 213-732-3074 for any mortgage service needs. Let’s work together to build a brighter financial future.

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