Imagine your life without a bank account. As of 2021 that is the reality of around 6 million Americans who were unbanked and this problem disproportionately affects Blacks and Hispanics households of which 10% have no checking or savings account. There are a lot of reasons that can keep people outside of the banking system. Language barriers, legal status, disabilities, and the inability to reach a minimum balance requirements or coping with fees. Research shows that households that are outside of the banking system miss a critical step in building wealth and financial stability as it prevents them from accessing credit, which can be an important wealth building tool, not to mention, they rely on riskier methods of savings and managing money.
Bringing unbanked communities into the system is a hard task, but Government-to-Person payments has been incentivizing communities to enter the system. In 2021, 18% of adults in developing countries opened their first bank account to receive government payments, according to the world bank. Similar consumer behaviors were seen in the US as well, where half of newly banked households reported receiving payments made as part of government disbursements for Covid-19 aid as a cause for account opening.
This change can help communities grow and offer an insight into consumer behavior. For businesses in such communities, having more payment options can attract new customers, especially those who are still outside the banking system.
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