Since 2021, financial access in the U.S. has remained largely unchanged, with 4.2% of households—about 5.6 million—unbanked in 2023, according to the FDIC. Disparities persist, with Black (10.6%) and Hispanic (9.5%) households unbanked, compared to 1.9% of White households. Additionally, 14.2% (19 million) are underbanked, relying on costly alternative financial services.
Unbanked individuals depend on cash, exposing them to fraud and expensive services like payday loans. In 2023, American households spent $415 billion on financial service fees, a 17% increase from 2022. Black and Latinx households spent a higher share of their income (8% and 6%, respectively) than White households (4%), despite lower average earnings.
Banks view the underbanked either as a distinct market or part of existing segments. However, they present a growth opportunity, as those who open accounts are more likely to use additional banking services.
What's at Stake When Underbanked Markets Are Unengaged
Banks offer a secure way to manage money, helping individuals build wealth and credit through products like high-yield savings accounts and loans. Without a credit history, underbanked individuals struggle to buy a home or bridge generational wealth gaps. Underbanking also makes it harder to save for emergencies—27% of U.S. adults have no emergency savings, and 59% feel unprepared, according to Bankrate. In a crisis, underbanked individuals may have no access to the funds they need.
Data-Informed Engagement Tactics to Unlock Financial Equity
With wealth inequality rampant in the U.S., financial institutions have a vested interest in growing their customer base. According to the Federal Reserve, the top 10% of U.S. households held 67% of total wealth through the second quarter of 2024, compared to the 2.5% held by the bottom 50% of households.
By centering financial access, financial institutions can provide underbanked communities, and neighborhoods with disproportionately low credit scores, access to financial resources including credit and loans allowing more individuals to build wealth. Emphasizing financial literacy can also bridge the access gap. One study found that less than one-third of Black respondents answered more than half of personal finance questions correctly, compared to 57% of white respondents.
Here are four proven tactics to help financial leaders as they navigate the nuances of underbanked communities:
Conduct Hyperlocal Dialogues
One of the biggest barriers to banking in underserved communities is distrust, so financial institutions must find a way to remedy this. Ichor helps companies engage community members to identify their needs and pain points. Whether through one-on-one or small-group active listening, companies can leverage those insights to build trust.
Create Educational Opportunities
Another barrier to banking in underserved communities is a lack of education or awareness of the financial system. Targeted outreach and financial literacy programs can help individuals make informed decisions and build awareness of the benefits of having a checking account versus costly, non-banking alternatives.
Ichor identifies prospective community organizations to partner with companies in providing financial education. Strengthening neighborhood ties creates greater opportunities for financial inclusion.
Go Mobile
According to the Pew Research Center, 91% of Americans own a smartphone. Not only that, but the FDIC report found that the use of mobile banking jumped to 48.3% in 2023. This presents a unique opportunity for financial institutions to reach underbanked communities via mobile means. Mobile-based fintech companies enable more people to open bank accounts or access other financial services. Ichor’s data analysis and market prioritization help banks adapt their digital engagement and marketing efforts to reach potential new customers.
Tailor Your Offerings
Minimum deposit requirements present a barrier to banking for underserved communities. Monthly and overdraft fees are an additional challenge for low-income individuals. One way to better engage unbanked and underbanked communities is with increased transparency surrounding costs and offering affordable products, such as no-fee accounts and lower opening deposits.
Bringing underbanked and unbanked communities into the mainstream financial system requires a combination of meeting individuals where they are and creating unique solutions to mitigate the challenges they face. By creating a pathway to financial inclusion, building wealth is possible for all communities.