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Fintechs Offer Unbanked US Households Access to Banking and Lending

  • Banking

The number of Unbanked U.S. households has fallen in recent years.

According to a 2019 FDIC National Survey of Unbanked and Underbanked Households, 5.4 percent of U.S. households (approximately 7.1 million households) were unbanked, down from 8.2% in 2011.

It can be expensive to have a bank account, so it’s easy to see why some people skip banking at a traditional financial institution. Plus, many people are unable to meet the minimum balance requirements to maintain a bank account.

But it can be expensive not having a bank account too. When people use alternative financial services, whether it be prepaid debit cards, money orders, check cashing service, pawn shop loan, auto title loan, payday loan, paycheck advance, or tax refund advance, the fees quickly stack up.

Check cashing and other fees often create a financial burden on the people that can least afford it. It has been estimated that unbanked and underbanked Americans spend $189 billion in fees and interest on financial products according to the Financial Health Network.

Here’s an example of how fees for alternative financial services stack up:

  • Check-cashing institutions charge customers between 1 and 12 percent of a check’s value.
  • To pay utilities, unbanked people often convert their cash to money orders which can cost $1 or more to pay each bill this way.
  • Reloadable prepaid debit cards come with activation fees, monthly fees, and withdrawal fees.
  • Tax refund advance costs can be a hefty 30% APR or more.
  • The average fee for a payday loan advance is $15 per $100 borrowed but because these are short-term loans (typically 2-weeks), the annual percentage rate ends up being about 391 percent.

Fintech companies can offer unbanked people an inroads into the banking and lending industry that have been previously shut out.

What is Fintech?

Financial Technology (Fintech) refers to computer and mobile-based technology where a collaboration of software, algorithms, applications, and hardware mesh together to automate the delivery of financial services.

Fintech tools, platforms, and services include transferring money among accounts, bill payment solutions, mobile check deposit, peer-to-peer lending, online investment, crypto exchanges, and more.

Several businesses use fintech but banks, in particular, are venturing further into the fintech landscape. Banks use fintech for both back-end processes as well as consumer-facing solutions: For example:

  • App use for checking account balance, transfer money, monitor activity, and deposit checks.
  • Investing with no prior experience.
  • Budgeting.
  • Digital tools along with learning algorithms help consumers make better decisions.

Growth of Fintech Firms

The growth of Fintech Firms has been unprecedented in the past several years. According to the Financial Brand, more than 50% of banking customers use fintech firms.

Consumers using fintech banks typically enjoy sleek apps that offer most, if not all, functions offered by traditional banks. Fintechs empower customers with savings and budgeting tools that promote better management of finances.

Most fintech banks operate entirely online but not without the help of traditional banks. Traditional banks provide the means for fintech banks to operate as FDIC-Insured. Fintech bank accounts are insured up to the standard maximum deposit insurance amount of $250,000 through traditional partner banks.

But that may be changing soon with the approval of deposit insurance coverage for fintech bank, Varo Money, Inc. Varo Bank no longer has to partner with a traditional bank to FDIC-insure bank accounts.

The difference between unbanked and underbanked

While the good news is that the overall number of people who are unbanked has declined, millions of households continue to lack a banking relationship.

Being underbanked can be as detrimental as being unbanked.

  • Unbanked, where no one in a household has a checking or savings account.
  • Underbanked, where a household has a bank account but they rely on alternative financial providers for their banking needs such as money orders, check-cashing companies, and payday loans—usually for a fee.

When people are unbanked or underbanked, they are boxed into paying fees for basic transactions. For instance, many unbanked people resort to check-cashing companies, payday lenders, and money orders to take care of rent, utilities, and other monthly obligations.

Add in prepaid debit card fees, it’s been estimated that being unbanked can cost up to $3,000 annually per person according to the Financial Health Network.

9 fintech banks and lenders as an option for unbanked people

1. Acorns – Good for checking, savings and investing

Acorns offers a checking account called “Spend Account” that saves, invests, and earns. Purchases made with the Acorns debit card are rounded up to the nearest dollar with the excess change being invested. Acorns charges $1 per month for an Invest account and $2 per month for an Invest and Later account.

Acorns Spend Account details:

  • Digital banking with mobile check deposit, check sending.
  • No minimum-balance fees, overdraft fees, and fee-reimbursed ATMs.
  • Instantly invest your spare change and save for retirement.
  • A tungsten metal, matte green card with your name engraved.
  • Earn up to 10% cashback at participating merchants.
  • For each credit card transaction, Acorns rounds up to the nearest dollar and invests it into an Acorns account.
  • Acorns’ Found Money feature will contribute an extra amount to your Acorns account every time you use an Acorns-linked credit or debit card at a partner retailer.
  • The money in your Acorns Spend Account is FDIC insured for up to $250,000.

Acorns Invest Account details:

  • General investing accounts (taxable) with low-cost index ETFs, IRAs with low-cost index ETFs.
  • No Commissions (ETF expense ratios ranging from 0.05% to 0.15%, depending on the instrument).
  • Full mobile functionality, automatic recurring investments, robo-advisory services (depending on tier)

Learn more.

2. Unifimoney – Good for checking with interest

Unifimoney offers a high yield checking account along with automatic investing and commission-free trading. With the Unifimoney account, you save, spend and invest in one place. Manage your money with the banking app that features basic banking, investing, crypto trading, insurance, credit cards, loans, and mortgages. You must be at least 18 years old and a permanent resident or citizen of the United States to open an account.

Unifimoney account details:

  • Earn 0.20% on checking account deposits.
  • Invest in stocks, ETFs, crypto, and precious metals.
  • $100 minimum opening deposit.
  • Get up to a $5,000 Bitcoin reward.
  • Free cash withdrawals at Allpoint ATMs.

Learn more.

3. Current – Banking for modern life

Current was founded in 2015 as a multi-product fintech offering accounts for everyone including teens. Customers have the ability to deposit cash at over 60,000 stores without the need to visit a bank branch or ATM. One unique feature Current offers is no-holds on debit card gas purchases. Some gas stations may apply a hold of up to $100 when you use a debit card. These holds lock the amount being held, making it unavailable for spending. The Current debit card will immediately refund the hold so that you don’t have available funds locked for days.

Current Account Features

  • No minimum balance.
  • No overdraft fees when you overdraw by up to $100 with Overdrive™.
  • Get your paycheck up to 2 days early with direct deposit.
  • Earn points for unlimited cashback at participating retailers.
  • Gas station holds immediately credited to your account.
  • Send money instantly for free.
  • 24/7 member support.

Learn more.

4. Sable Banking

The Sable Checking account gives you everything you’d expect from a traditional checking account without the fees. Get second chance banking by downloading the Sable Banking App.

Sable banking offers a way to open a checking account with bad credit to get back to banking. You can start using your account and card as soon as you complete the application and your account is verified. Your physical debit card will be shipped to your mailing address within 5 – 8 business days after you open your account with Sable. However, you can start using your virtual card for online transactions as soon as you deposit money and it is credited into your account.

Sable Account Features

  • Open your account with as little as $25.00
  • Get a dollar-for-dollar match on all cash back at the end of your first year with Sable’s Double Cash Bonus.
  • Earn 1% cash back on everyday purchases at Amazon, Uber, Uber Eats, Whole Foods, Netflix, Spotify, and more!
  • No credit check or US credit history required and no SSN required for non US citizens.
  • Open a restricted account before you step foot in the U.S or have a U.S address.
  • Zero hidden fees—no annual fees, no additional ATM fees, no overdraft fees, no card replacement fees, and no minimum deposit.
  • Premium benefits like extended warranty where Sable will double the warranty for eligible items purchased with your Sable card, and satisfaction guarantee where Sable will cover most purchases if you become dissatisfied with a new product within 60 days of purchase, and much more!

Learn more.

5. UpStart – Good for poor credit personal loans

UpStart is a financial technology platform focused on helping middle-income people with bad credit borrow money. UpStart is designed for borrowers that would otherwise be denied by traditional lenders.  Because they deal with high-risk loans, Upstart interest rates range from 5.22% – 35.99%. There is no minimum credit score required to apply.

Customers that are successful in repaying UpStart may qualify for better interest rates in the future when they apply for different loans with other lenders.

Upstart details:

  • Loan amounts up to $50,000.
  • Loan Repayment Terms either 3 years or 5 years.
  • APR ranges from 5.22% – 35.99% APR
  • You can get access to your funds as soon as the business day after approval.
  • Loan origination fee varies
  • There are no prepayment fees⏤You can pay off your loan at any time without worrying about a fee.
  • Late payment fees vary by state

Learn more.

6. Universal Credit – Good for bad credit personal loans

Universal Credit has a simple application for consumers to apply for a loan online for up to $50,000. All loans have a fixed interest rate with a fixed monthly payment. Borrowers are not required to have a particular credit score.

You can use your online loan for debt consolidation loan, a wedding loan, an unexpected medical expense loan, a fix-my-car loan, an I-need-a-vacation loan, a kitchen remodel loan, or for whatever legal purpose you want.

Universal Credit details:

  • Loan amounts range from $1,000 – $50,000.
  • Repay monthly, over 3 to 5 years.
  • Estimated APR: 8.93% to 35.43%.
  • Loan origination fee of 4.25% to 8% of the loan amount which is deducted directly from your loan funds.
  • Universal Credit reports loan payments to all three major credit bureaus.
  • No prepayment fee.
  • Offers a 0.5 percentage point rate discount for setting up autopay.
  • Universal Credit borrowers have free access to their credit score, credit monitoring and a credit score simulator tool.

Learn more.

7. Upgrade – Good for loans up to $50,000

Upgrade is an online financial company that offers loans and lines of credit to people with poor to fair credit. Loans are available almost any purpose, including debt consolidation, emergency repairs, home improvements or a major purchase.

Upgrade details:

  • Loan amounts up to $50,000
  • Loan Repayment Terms up to 36 or 60 months
  • APR ranges from 7.99% to 35.97% APR
  • You can get access to your funds as soon as the business day after approval.
  • Loan origination fees can range from 2.90% – 8.00% of your loan amount.
  • There are no prepayment fees⏤You can pay off your loan at any time without worrying about a fee.
  • The late fee is up to $10 and charged if your payment isn’t received within 15 calendar days of your payment due date.

Learn more.

8. Self – Good for credit builder loans 

Self is a financial technology company with a mission to help people build credit by offering credit builder loans. Credit builder loans are not new, with many credit unions offering secured loans to build credit.

What’s different with Self’s credit builder loans is that no money is required upfront. Self’s credit builder loans help borrowers build their credit with an installment loan (if they make their monthly payment on time) while at the same time, save money.

Self Credit Builder Loan details:

  • Apply for a loan that’s held by a Self partner bank. Your money is secured and protected in a bank account.1
  • Loan amounts range from $600 to $1,800.
  • Loan pay off terms range from 12-24 months.*
  • $9 administrative fee; finance charge varies.
  • There is no credit check.
  • Loan payments report to all three credit bureaus.
  • At the end of the loan term, you get the money — and likely a better credit score.
  • You can’t have had a negative ChexSystems report, such as bounced checks or unpaid fees, in the previous 180 days.
  • Credit builder loans are available in all 50 states.

Learn more.

9. Nearside Business Checking


Nearside offers free online business checking with cashback rewards with no monthly fee. Small business owners can grow their business by saving money and using valuable rewards and discounts offered by Nearside.

Nearside Account Features

  • No monthly fee.
  • No monthly minimum requirements.
  • No NSF fees.
  • Cashback rewards and perks.
  • No debit card replacement fees.
  • More flexible and less fees than prepaid debit cards.

Learn more.

Second chance checking as an option for unbanked

When bad credit is the barrier to opening a bank account, second chance checking can be the answer.

Many banks and credit unions offer customers with negative banking records a chance to get back on track. These types of second chance banks are familiar with customers that need a second chance at banking.

Unbanked consumers reviewing second chance banking offers should look out for fees. You never want to open a bank account that is laden with fees.


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