Financial Inclusion Solutions for Traditional Lenders

Many people in the U.S. and the communities served by us lack access to the basic financial services that others take for granted. Bank accounts and debit cards are out of reach to many due to their location, mobility, and financial situation.

According to the Federal Reserve, 13% of U.S. adults are underbanked, meaning that they have a bank account but instead of using it, they rely on non-depository lending services. Another 6% are unbanked, meaning that they have no bank account at all and completely rely on those services. Factors such as income, education, and ethnicity are strongly correlated with access to banking.

Unbanked and underbanked people face many financial difficulties, including lack of access to credit or lending services and an inability to build savings. However, fintech can make a positive impact in expanding financial services to these groups—which is what financial inclusion is all about.

What is Financial Inclusion?

Financial inclusion means that all individuals and businesses in a society can access the financial services they need at an affordable price. This includes services like banking, lending, insurance and other crucial financial tools that are essential for economic participation and development. Financial inclusion aims to ensure that everyone, including low-income or marginalized communities, can use these services to improve their financial well-being.

With large swaths of the population unbanked and underbanked, including in the U.S., we are clearly not living in a financially inclusive society. The financial inclusion meaning is simple but the solution is complex. It involves bridging this gap and making financial services accessible to everyone, enabling them to participate fully in the economy. It encompasses efforts to remove barriers to financial services and to develop financial products that cater to the needs of diverse populations.

Why Financial Inclusion is Important

Financial inclusion is important because it brings affordable and convenient access to basic financial services that have historically been less accessible for low-income and marginalized groups. When access to financial services, which often comes through fintech, is expanded to these groups, financial empowerment increases. This empowerment allows individuals to save money securely, obtain credit for personal and business needs and manage risks through insurance.

Globally, the rise of fintech and financial inclusion coincide. As of 2021, 76% of adults worldwide had a bank or mobile account, up from just 51% in 2011. That accounts for billions more people with bank accounts over the course of a decade, mostly in developing countries. This increase is tied to fintech’s contribution to financial access and is fostering a more financially inclusive world. By leveraging technology, financial services can reach remote and underserved areas, providing tools that help people improve their economic status and contribute to overall economic growth.

The benefits of financial inclusion are numerous. It also promotes economic stability and growth by integrating more people into the formal economy. It helps reduce poverty and inequality, improve health and education outcomes, and empower women and other disadvantaged groups.

Challenges in Financial Inclusion

Despite the progress made, significant challenges remain in achieving full financial inclusion. One of the primary barriers is the lack of financial literacy among underserved populations. Many individuals are not aware of the financial services available to them or how to effectively use these services to their benefit.

Infrastructure limitations, especially in rural and remote areas, also pose a significant challenge. In many developing countries, the lack of reliable internet access and financial institutions makes it difficult for people to access digital financial services.

Regulatory hurdles can impede the growth of financial inclusion as well. Different countries have varying regulations that can either facilitate or hinder the development of inclusive financial systems. These regulations can affect everything from the ability of fintech companies to operate to the protection of consumer data and privacy.

Trust in financial institutions is another critical issue. Many people in underserved communities have a distrust of banks and other financial institutions, often due to past experiences or cultural beliefs. This distrust can prevent them from seeking out and utilizing available financial services.

Addressing these challenges requires a coordinated effort from governments, financial institutions, fintech companies and nonprofit organizations. By working together, these stakeholders can develop innovative solutions to overcome barriers and make financial services more accessible to everyone.

The FDIC Economic Inclusion Strategic Plan

In the U.S., the FDIC’s Economic Inclusion Strategic Plan aims to bring millions of unbanked and underbanked Americans access to affordable and sustainable financial products and services from insured depository institutions. The FDIC advances this plan through work with collaborative networks, community promotion, education, innovation, research, and policy.

Largest Areas of Impact | Key Benefits

• Expanding access to traditional banking services
• Expanding access to credit
• Greater financial access through fintech apps
• Economic growth and social impact

Individual and Economic Growth

The benefits aren’t just for the individuals who gain access to financial services they need: financial inclusion solutions also contribute to economic growth. When more people can use financial services, they are better positioned to contribute to the economy to expand growth for all.

How Vergent Helps

Vergent’s loan management software is specifically developed to support financial inclusion efforts. Our software provides lenders with the tools they need to reach underserved populations effectively. By offering a user-friendly interface, robust data analytics and seamless integration with digital financial services, Vergent enables lenders to offer affordable and accessible loans to those who need them most.

Vergent’s platform facilitates microloans, small business loans and personal loans with flexible terms, ensuring that even those with limited financial histories can access credit. Our software also supports mobile banking and digital wallet integration, making it easier for people in remote and underserved areas to manage their finances.

By leveraging advanced technology, Vergent helps lenders overcome barriers such as lack of financial literacy and infrastructure limitations. Our comprehensive reporting and compliance features ensure that lenders can meet regulatory requirements while still offering inclusive financial products. With Vergent, lenders can build trust with their clients through transparent processes and reliable service delivery.

Vergent’s commitment to financial inclusion means that we are constantly evolving our software to meet the changing needs of the market and our clients. We understand that financial inclusion is not just about providing access to financial services but also about ensuring that these services are used effectively to improve lives. By empowering lenders with the right tools, Vergent plays a crucial role in fostering a more inclusive and equitable financial system.

Our Lending Platform | Key Features

• Streamlined applications through our brandable customer-facing application portal
• QR code (link to app portal) can be placed on bank-designed marketing materials
• Configurable decision engine (“DE”) implementing multiple decisioning waterfalls with traditional and non-traditional data sources and capable of returning risk-based pricing with maximum loan amount, and validation of elements for review by underwriters (staffed by Vergent partners or bank resources)
• Configurable workflows driven by automated DE
• Funding options include ACH, RCC, instant debit, prepaid card, check, and cash at bank location
• Integrated loan documents with included eSign functionality
• Recurring payments at time of origination driving repayment (ACH, RCC, instant debit, prepaid card)
• Brandable mobile app for customer-driven account management functions including payments, review of documents, location finder, and more
• Call-center servicing functionality (staffed by Vergent partners or bank resources)
• Portfolio reporting in real-time