Wednesday, April 28, 2021
The Federal Deposit Insurance Corp. reported last fall that 5.4 percent of U.S. households were unbanked in 2019. That's down from 6.5 percent in 2017 and 8.2 percent in 2011. But it still leaves 7.1 million households where no one holds a checking or savings account at a bank or credit union.
An even larger number of households are considered underbanked – that is, someone in the household may have a bank account, but the households also rely on non-bank providers of basic financial services, like prepaid debit card, check cashing and payday loan providers. The latest FDIC report doesn't offer any details about the underbanked. But the FDIC reported that 18.7 percent of households (24.3 million) were underbanked in 2017.
The ETA, a trade association representing payments technology companies, just published How FinTech is Addressing the Needs of the Underserved, detailing "unprecedented technology advancements" that have broadened access to financial services among the unbanked and underbanked.
"ETA members are leaders in reaching the underserved, and providing the financial technologies they need," said Jodie Kelley, ETA's CEO.
Most fintech-driven consumer products and services referenced in the ETA report are not new, but became increasingly more important in the face of COVID-19 restrictions and stay-at-home orders.
"COVID accelerated things a lot," Kelley said in an interview with The Green Sheet. Technologies like contactless payments, ecommerce, QR code payments and e-cash have all really taken off over the past year, eclipsing previous expectations. And the transitions to these technologies are not apt to be sidelined after the pandemic is over and the economy ramps up.
Consider, for example, e-cash. There have been several iterations of this over the years, but none has taken off. Recently, however, Paysafe Group brought to market a product that allows online shoppers who may not have credit or debit cards to choose a "pay with cash" option, which then triggers creation of a barcode that can be sent to a mobile device or printed. The purchaser then takes that to any one of 70,000-plus retail locations and completes the transactions with cash. Several major retail chains are participating as cash-accepting locations, including CVS, 7-Eleven, Walgreens and Family Dollar, the ETA reported.
"Once you get used to using new things and they work well there's no going back. That's true of so much we're seeing right now," Kelley said. "Innovations are just going to keep building on this momentum"
In its white paper, the ETA highlights several innovative approaches its members have taken to delivering government benefits and economic stimulus payments. For example, as the pandemic increased demand for online grocery shopping, Fiserv partnered with the U.S. Department of Agriculture so EBT cardholders could shop online with small, mid-sized and large grocers.
The solution leverages a proprietary PIN-on-glass solution within Carat, Fiserv's omnichannel ecosystem, that allows EBT cardholders to verify each transaction, as required by the USDA. Grocers can also separate goods in a shopper's online basket based on EBT eligibility and split payment at checkout. As of the fourth quarter of 2020, EBT online purchasing had grown 25-fold, the ETA noted.
Another ETA member and leading EBT processor, FIS, built a first-of-its-kind job portal, the Tax Credit Job Board, that helps connect EBT recipients with willing employers, who can also qualify for up to $9,600 in federal tax credits for each beneficiary hired.
FIS also helped build a program for pandemic-related EBT cards, to help 6.5 million families with eligible children purchase the equivalent of government-subsidized school lunches, slashing the typical delivery cycle for cards for the program from several months to 10 days.
ETA members also played a major role in helping the government disburse billions of dollars in federally-guaranteed small business loans and stimulus payments to individuals and families. "By using prepaid cards and peer-to-peer services for distribution, [federal stimulus money] reached consumers quickly, with funds that could be used immediately. To expedite the [money] delivery for individuals without bank accounts, some fintech companies like Square allowed individuals to create free bank accounts," the white paper stated.
Lendio Local, a first-of-its-kind marketplace lending franchise program, helped over 7,000 small business access $425 million in Paycheck Protection Program loans. It did this by matching small business owners with online lenders. For every PPP loan generated through the platform, Lendio also provided a microloan to a low-income entrepreneur through the Kiva microlending platform.
In a separate initiative, Lendio partnered with hundreds of lenders to get 115,000 PPP loans totaling $8 billion approved in 2020. FIS leveraged its real-time lending platform to help process more than 146,000 PPP loans through nearly 60 financial institutions, delivering more than $15 billion in PPP loans, the ETA noted.
Several fintech companies also ramped up working capital products, such as merchant cash advances, to help struggling merchants, the ETA reported.
The ETA report – the sixth in as many years – also included a message to policymakers. "ETA member companies are creating innovative offerings in financial services and revolutionizing the way commerce is conducted with safe, responsible, convenient and rewarding payment solutions and lending alternatives that are available to a broad set of consumers," the white paper stated. "ETA encourages policymakers to support these efforts through polices that encourage innovation and the use of technology to improve financial outcomes for all consumers."
The ETA stands ready to work with policymakers, Kelley added. "Let's partner to make sure consumers are protected. Let's ensure we're doing it in a way that doesn't stifle innovation." 
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