How Can We Improve Financial Inclusion?

Financial inclusion is a unique and complicated problem to solve. But the benefits of achieving financial inclusion are immense as millions of households across the country will have access to financial services that are essential to their personal finances, small businesses, and communities. 

What is Financial Inclusion?

Financial inclusion is about ensuring that everyone has access to the financial services they need. Unfortunately, many are unable to access these financial services. In addition, many are concerned about financial services being limited to only a few people or industries. By widening access to financial services, more people and companies can take advantage of insurance, investment, and business opportunities. 

The use of financial services is straightforward to measure. A bank can check how many users it has in a given time frame. However, measuring access to financial services is much more challenging. Some parts of the population may choose to refrain from using financial services even if they have access. While others may be prohibited from accessing it in the first place

The Unbanked and the Underbanked

There are two essential classifications to consider when looking at financial inclusion. First is the term unbanked, which refers to those who do not have a bank account. The second is underbanked, referring to those who use cash checking, money orders, and payday loans instead of more reliable financial services. These two categories include millions of Americans who lack essential financial tools

In recent years we have made progress in reducing the overall numbers of the unbanked and underbanked. Yet millions of households remain unbanked, with this problem disproportionately affecting communities of color and rural communities. Addressing this problem with America's finances benefits these underserved communities and can drive overall growth for the US. 

Why are People Unbanked and Underbanked?

While wealthy consumers receive many benefits for accessing financial services, poor consumers often face higher fees and APRs. In addition, research shows there are banking deserts throughout the US in which whole communities lack access to essential financial services. This makes it all the more difficult for small businesses to succeed as they need access.

Underserved communities face significant hurdles when accessing financial services. These can include a lack of physical bank branches in the area, restrictive conditions of service that prohibit those with low incomes, and outright discrimination on the part of financial institutions.

The unbanked and underbanked are reluctant to work with established financial services for various reasons. Many are driven off due to fees and minimum fund requirements to open and keep a bank account. Financial inclusion efforts must focus on reducing and eliminating these barriers to financial services. 

Impact of the Pandemic

The pandemic allowed the numbers of America's unbanked to reach all-time lows. The pandemic has provided a unique opportunity for financial services to become available to unbanked Americans as millions of previously unbanked people opened bank accounts to access federal assistance. The Treasury also created the Direct Express program and digital interface, allowing individuals to receive a prepaid card and invest in government securities

Solutions Available

Treasury Accounts

One of the proposed methods to significantly expand access to financial services across the US is providing Treasury Accounts. Such accounts offer an option for the underbanked. Moreover, such accounts could be established relatively quickly under current regulations.

This solution could allow millions to access financial services easily. Such financial services can give underserved communities and individuals the tools they need to succeed. Such a solution could allow people across the country to open up a bank account at no cost to themselves. 

Local Publicly Run Banks

Another proposal to drive full financial inclusion is to have publicly owned local banks that focus on getting the underbanked access to adequate financial services. These local banks can also focus on providing financial services access to smaller businesses that may not usually be able to work with mainstream financial institutions

Opening these banks could also help resolve the issue of bank desert by providing more physical branches in communities. Again, there is a real-world example of this model succeeding in the Bank of North Dakota. Originally opened over a century ago to serve the state's farmers, and has provided financial services to those that larger banks were unwilling to serve North Dakota's farmers. This demonstrates the potential for such banks to assist underserved rural communities. 


Fintechs are also uniquely placed to help address financial service access. New technologies allow them to provide financial services at low costs and with more accessible methods. These technologies can also dramatically reduce the cost and work involved with more traditional financial services. 

Fintechs can also offer low-interest loans that are very easy for people to apply for with a completely digital application and verification process. This saves time for both the Fintech and those seeking loans. This can also be applied to allow the underbanked to acquire credit cards.

Digital banking is also very easy with Fintech. A person can access all the financial services they need from their phone. This is critical for communities with bank deserts that lack physical bank locations and for those who may not have the time or resources to go into a physical branch regularly. 

Some Fintechs have even invested in programs to drive financial literacy so that people know what financial solutions are available. Additionally, the mission of many fintechs is to make banking as accessible as possible. These companies are a valuable tool in addressing the need for financial inclusion across the US


Despite progress in recent years, millions of American households remain either unbanked or underbanked. This means small businesses and communities need more financial services to grow and develop. Such lack of access occurs for a variety of reasons, such as bank deserts, excessive fees, and minimum requirements. 

Fortunately, there are various solutions available to improve financial inclusion. Some include public efforts to make bank accounts and physical banks more accessible. At the same time, fintechs provide technical solutions to make financial services cheaper, faster, and more accessible to everyone. 

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