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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.
  • Tax calculations.
  • 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.

10 fintech banks and lenders as an option for unbanked people

1. Chime – Good for checking, high-interest savings and fee-free overdraft

Chime does not require a credit check to open an account and receive a Chime debit card. Chime offers a checking account called “Spending Account” that features early direct deposit and fee-free overdraft up to $100.

Plus, if you open a high-interest savings account (earn 0.50% APY), Chime can help you automatically grow your savings every time you make a purchase or pay a bill with your Chime Visa® Debit Card by rounding up transactions to the nearest dollar and transferring the amount to your savings account.

Chime Spending Account details:

  • No monthly fees or maintenance fees.
  • Get fee-free overdraft with SpotMe. Eligibility requirements apply¹.
  • Direct deposits arrive up to 2 days early².
  • Grow your savings, automatically.
  • Access cash at 38,000+ fee-free ATMs.

Chime Savings Account details:

  • 1.00% variable APY¹ — that’s 16x³ the national average.
  • No fees²
  • Automatic Savings features – Save money every time you make a purchase or pay a bill with your Chime Visa® Debit Card.
  • No minimum balance requirement, no maximums on interest earned.
  • Funds are held at FDIC insured banks⁵.

Learn more.

2. 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.

3. 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.

4. Varo Bank – Good for cashback checking

Varo was founded in 2015 as a mobile-only bank. Varo currently offers free checking account, high-interest savings account and Access to more than 55,000 Allpoint® ATMs. Savings customers can earn 0.81% APY*, and then earn up to 2.80% APY* if certain requirements are met.

Varo Checking Account details:

  • No monthly maintenance, foreign transaction, transfer or debit card replacement fees.
  • There is no minimum balance required to open a Varo Bank Account.
  • Access to more than 55,000 Allpoint® ATMs.
  • Lock your card on your phone in seconds.
  • Get your paycheck up to two days early with direct deposit.*
  • Deposit cash at 90,000+ retail locations using Green Dot ReloadⓇ @ the Register. Retail service fee applies.
  • Deposits are FDIC insured up to $250,000.

Varo Savings Account details:

  • Earn a 0.81% APY.
  • Upgrade to a 2.80% APY if you meet certain requirements:  (1) Make at least five qualifying Varo Bank Visa® Debit Card purchases, (2) Receive $1,000 or more in qualifying total direct deposits, and (3) Do not exceed a daily savings balance of $10,000 for the calendar month.
  • Two automatic savings features.
  • No monthly or hidden fees.
  • $0.01 minimum balance to receive APY.

Learn more.

5. Level Bank – Good for checking and free cash advance

The Level Bank Account is a type of hybrid between a checking and savings account that offers 0.50% APY on all balances and 1% cash back on all qualified debit card purchases when you have at least $1,000 in direct deposit per month. Plus, customers can get no-fee cash advances up to $500.

Level Bank Account details:

  • Requires no minimum deposit to open.
  • No monthly fees or overdraft fees.
  • Pays 0.50% APY.
  • Earn 1% cash back on qualifying spending with your debit card.
  • Comes with a Visa debit card for spending online and in person.
  • No foreign ATM fees from Level (the ATM owner may charge fees).
  • ATM fee reimbursement up to three times per month ($4 per fee maximum).
  • Receive direct deposit up to two days early.
  • FDIC insured.

Level Bank Cash Advance details:

Level Bank does not charge any interest or fees for cash advances but there are requirements.

  • Customer must be enrolled in Plus or Premium membership which has monthly membership dues.
  • You must receive direct deposit(s) of $500 or more for two consecutive months in your active Level Bank Account.
  • All cash advances must be repaid in full within 15 calendar days. See the Level Bank Account Agreement for more information.

Learn more.

6. OppLoans – Good for poor credit personal loans

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

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

OppLoans details:

  • Loan amounts up to $4,000
  • Loan Repayment Terms up to 36 months
  • APR ranges from 99.00%-199.00% 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.

7. Upgrade – Good for loans up to $35,000

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 $35,000
  • 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. Oxygen Personal or Business Account

Oxygen makes it easier for individuals or small business owners to open checking accounts with bad credit, the application process takes 10 minutes or less. Oxygen is a fintech company that offers personal or business checking accounts that don’t use ChexSystems through its banking partner, FDIC-Insured Bancorp Bank.

Oxgen Account Features

  • No monthly fees, no minimum opening deposit, no minimum balance requirements.
  • Savings 0.25% APY.
  • Unlimited fee-free transactions.
  • 40K Fee Free Allpoint® Network ATMs Nationwide.
  • 2 Day Early Direct Deposit.
  • Earn cashback on everyday purchases at approved merchants.
  • Enjoy the power to create single-use or merchant-locked cards that mask your card details. Even send money to friends.
  • Cell Phone Protection.
  • Extended Warranty Protection.
  • Hotel Theft Protection
  • Auto Rental Collision Damage Waiver.
  • Lost Luggage Protection.
  • Oxygen accounts are FDIC-insured through their partner bank (The Bancorp Bank).

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 laiden with fees.


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