At PiP iT banking we frequently meet with people who find it hard to believe that there are people in the first world who are ‘unbanked’ or ‘underbanked’ but it is a very real situation even in counties with developed financial services sectors like UK or Ireland.
The UK Financial Inclusion Commission say there are 1.5 million adults with no bank account in the UK today which is only ranked 9th in the world for Financial Inclusion. Interestingly, only 50% of the unbanked actually want a bank account!
As the blog post below from our Canadian Collection partner, Payment Source, shows; this is also an issue in Canada. (click here to go directly to the blog)
By Alicja Nowak
We may be living in the 21st century, but according to the Global Findex report, 2 billion adults globally are unbanked. You may think that this number reflects third world countries that do not have the technological capabilities or financial means. However, this number includes developed countries such as the United States, where 28% of the population is either unbanked or underbanked. In most cases the unbanked are people living in poverty that do not have the funds or education to be part of the banking system. But poverty is not the only reason people refuse to be part of the mainstream banking system.
Below are some reasons people are unbanked:
- Millennials – this generation was born and live in a digital age and prefer to use alternative products such as prepaid cards, money transfers, companies like PayPal2, and solutions like Loadhub. As a millennial I can fully agree with the convenience and ability to budget more effectively without having to ever step into a bank.
- Bank Fees – Many banks add transaction fees such as for cashing cheques, withdrawals, overdraft facilities bill payments, and account maintenance. This can add up! These extra costs can make some people look elsewhere.
- Privacy – Increasingly many people prefer to keep their finances private. Cybercrime has increased exponentially in recent years and this has caused distrust of the financial sector. If there is a cash alternative available then these people will use it.
- Bad customer experience – Many have had a bad customer service experience, but for some people this has prompted them to leave the banking system and use one of the increasingly available alternative money management options
- Incorrect Documentation – In some cases, like migrant workers, people do not have the proper paperwork, personal documentation or income to open a bank account to begin with. This is the main reason people are unbanked in the world today
- Lack of access – In remote areas, or poorer neighbourhoods, access to a physical bank or to the internet may prevent people accessing a bank, or it might mean that bank accounts have no relevance to their day to day lives. They may be unaware of the benefits financial inclusion would make to their lives and that of their families.
- Blacklisted – Many banks reject customer applications due to their financial history or previous experiences.
The banking system cannot reach everyone for several reasons, so what can we do to improve financial inclusion among the world's unbanked population? In this digital world, we need a solution that is easy for everyone to use that bridges the gap between digital and cash payments. This is where PiPiTbanking comes in. Our solution is a convenient and secure financial solution that makes it easy to lodge money, transfer funds or pay bills using the PiPiT collection network.