Financial services

Many consumers still struggle to access financial services

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While consumers often complain about banks and other financial services companies, a recent consumer survey suggests that discrimination isn’t high on the list of grievances.

The poll, conducted for the National Endowment for Financial Education (NEFE), found that only 16% of respondents reported perceived bias or discrimination in their dealings with financial institutions. Those who report discrimination most often cited age bias, as well as their lack of assets. Others attributed the reason for bias to their identity or personal circumstances.

“While the high-level results of this survey are positive, the percentage of those who report feeling ostracized by the financial services industry represents millions of American adults who cannot participate equally in the economic system because of their gender. , their age, race or other reason related to socio-economic circumstances,” said Billy Hensley, President and CEO of NEFE.

“Unbanked”

When people feel discriminated against, they are less likely to use the services of a financial institution. This can lead to a group of consumers who have no banking relationship, said to be “unbanked”.

Aaron Schumm, CEO and Founder of Vestwell, explains that there are several institutional and societal factors that could cause someone to be unbanked, especially African Americans.

“For retirement alone, we can see that only 44% of black Americans have retirement savings accounts, compared to 65% of white Americans, according to the Federal Reserve’s 2019 Survey of Consumer Finances,” said Schumm at ConsumerAffairs.

Schumm says companies have an important role to play in improving the financial future of employees, not only by offering retirement savings plans, but also by providing them with financial education. He cites PwC’s 2021 Employee Financial Wellbeing Survey which concluded that “employers can further support inclusion by ensuring that any financial advice or education offered in the workplace is explicitly linked to thoughtful services, products and opportunities”.

The emergence of fintech companies

The unbanked population increased following the 2008 financial crisis, when many banks unilaterally closed customers’ bank accounts if they were perceived as a risk. Many experts we consulted say that emerging fintech companies, as well as online banks, have brought relief.

“One of the main reasons people don’t have a bank account is because they think the fees are too high,” said Richard Gardner, CEO of fintech company Modulus. “Financial technology can help the unbanked, including reducing fees. As technology continues to infiltrate the financial sector, look for ever lower costs, as well as new ways to make banking more convenient.

Erik Poch, Managing Director of Digital at Ria Money Transfer, believes that technology overcomes many barriers that discourage consumers from interacting with the financial services industry. He notes that mobile wallets can replace a bank account, making it easy to save money and pay bills. But he says that for people who aren’t ready to embrace the technology, feelings of discrimination can linger.

“The challenge is that a lot of people aren’t willing to give up money, so right now to be really inclusive you need to have a strong physical presence so that a transaction can be initiated in cash or in cash. digital and offer both options for payment as well,” Poch said.

Poch says the transition to a cashless world is underway, but the first step is to “make access to financial services available to everyone”.