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Having a bank account probably doesn’t feel particularly remarkable to those who hold them. Many people open their first bank account when they are children, and as they grow older it becomes an inevitable necessity for earning, saving, borrowing and spending money.

However, around the world, not everybody has access to this financial staple. In fact, the most recent figures on this from the World Bank Group show that 1.7 billion adults are unbanked — over 20% of the global population.

For some people, this is their choice. Roughly 30% of unbanked adults said they simply didn’t need a bank account. Yet only 3% claimed this was the only reason they were unbanked. “This suggests that among those reporting lack of need as one of several reasons, some might be open to using financial services if the services are accessible and relevant to their lives,” the World Bank Group noted. Actually, the most common reason cited was not having enough money (60%). Others included accounts being too expensive (26%), financial institutions being too far away (22%), lack of necessary documentation (20%), and a lack of trust (16%).

That said, this hasn’t gone unnoticed within the financial services industry. Businesses within the sector are very aware of the issues facing the unbanked and are taking steps to change them. Here are just three examples of organisations trying to improve the financial experience for those that are not currently being served.

HSBC

British banking giant HSBC teamed up with housing and homelessness charity Shelter to launch its No Fixed Address programme in December 2019 to help people experiencing homelessness or housing difficulties open a bank account. Anyone receiving support from Shelter or another partner charity can apply, enabling them to keep money from work or benefits in a safe place and also save towards their future.

“Without a bank account it's extremely difficult to claim benefits, rent accommodation or receive wages, which means people who are homeless can become trapped in their current situation. That just simply isn't fair," Maxine Pritchard, head of financial inclusion at HSBC UK, told the BBC News. According to the report, a total of 1,144 accounts have been opened under the scheme as of 9 July 2021.

This is a specialist service available in selected bank branches, though HSBC is committed to extending it to more branches across the country. Jon Sparkes, chief executive of Crisis (which also worked on the scheme), told inews that with the potential for results that are “often life changing”, the charity hopes “that the success of the accounts will encourage other banks to follow suit”.

Inpay

The ability to make cross-border payments is integral in this increasingly globalised world. In addition to international businesses who regularly need to make and receive payments abroad, they’re also essential for anybody who needs to send remittances to family members overseas. For example, an Indian working in America wants to send money to their mother back home. This is also important in terms of cross-border pension payouts, when an employee decides to retire in a different country to one they worked in. If they are based in a rural location and/or are unbanked, such recipients may struggle to access such payments without a bank account. This is why Danish cross-border payment solutions provider Inpay created its PostalCheque product for banks,insurance and pension providers, and other financial institutions to take advantage of.

One of the most common ways cross-border payments like these take place is via an international bank cheque. There are many drawbacks to this method such as slow delivery, high fees and the potential for a lack of bank branches in rural areas. However, another major issue is how inconvenient this makes it for unbanked people to access the money they’ve been sent. While it’s not impossible to cash a cheque without a bank account, it can be very tricky and costly.

PostalCheque, an international money order, gets around this problem by working within the local postal network, covering over 87,000 postal outlets across 28 countries. A bank isn’t necessary, and neither is a bank account. The postal institution receives the payment order in 1-2 days and once the recipient verifies their identity, they can cash their money order within the postal branch and receive a full cash payout in their local currency.

Wells Fargo

Over in the US, financial services company Wells Fargo has announced its new Banking Inclusion Initiative: “a 10-year commitment to accelerate unbanked individuals' access to affordable mainstream accounts and help unbanked communities have easier access to low-cost banking”. According to the company, over 7 million American households don’t have a checking or savings account and over 50% of these are Black and African American, Hispanic, and Native American/Alaska Native families. These demographics are the ones Wells Fargo are most keen to support.

“We recognize the high number of unbanked households is a complex and long-standing issue that will require gathering the best minds, ideas, products and educational resources from across our communities to bring about change,” said CEO Charlie Scharf. “Through our Initiative, we will organize our resources under one umbrella and work with a broad and diverse group of stakeholders on a sustained multi-year effort to accelerate financial inclusion in the U.S.”

This initiative will see Wells Fargo team up with partners to reduce the number of unbanked people over the next decade by improving access to affordable products and digital solutions, increasing financial education and advice, and launching a National Unbanked Advisory Task Force to develop solutions to bring more people into the banking system. With the Federal Deposit Insurance Corporation (FDIC) reporting that the number of unbanked people is set to increase after the Covid-19 pandemic, this appears to be the perfect time for Wells Fargo to take action.


What is the financial services industry doing to support the unbanked?
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