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.

The Vergent EMPOWER Program: A Turnkey Solution for Financial Inclusion

To further support financial inclusion, Vergent LMS proudly introduces the Vergent EMPOWER Program. This cutting-edge, end-to-end lending platform is specifically tailored for community banks and credit unions, empowering them to manage the entire lifecycle of a loan seamlessly—from origination to servicing and collections.

Key Features of the Vergent EMPOWER Program:

• Integration Partners: Streamlined collaboration with loan decisioning, servicing, and collections partners for a seamless process.
• Advanced Decision Engine: Configurable workflows implementing both traditional and non-traditional data sources to deliver risk-based pricing and loan recommendations.
• Flexible Funding Options: ACH, RCC, instant debit, prepaid card, checks, and in-person cash handling.
• User-Friendly Interfaces: Brandable mobile apps and customer-facing portals for easy account management, payments, and document reviews.
• Regulatory Compliance: Comprehensive reporting and built-in eSign functionality to ensure compliance with industry standards.
• 24/7 Capabilities: Accessible solutions for both lenders and borrowers, regardless of time or location.

By leveraging the Vergent EMPOWER Program, financial institutions can offer personal loans that expand access to credit, increase household financial stability, and foster community growth. This turnkey solution removes the need for additional staff while ensuring that underserved populations receive the financial opportunities they need.

How Vergent Helps

Vergent’s loan management software is specifically developed to support financial inclusion efforts. Our platform empowers lenders to:

• Offer affordable and accessible loans, including microloans, small business loans, and personal loans with flexible terms.
• Reach remote and underserved areas with mobile banking and digital wallet integration.
• Build trust with transparent processes and reliable service delivery.
• Overcome barriers such as lack of financial literacy and infrastructure limitations through advanced technology.

Vergent’s commitment to financial inclusion means constantly evolving our software to meet the changing needs of the market and our clients. Together, we’re fostering a more inclusive and equitable financial system.