Despite a sprawling and varied financial industry, more than one-quarter of Americans don’t have adequate access to basic banking tools, such as checking accounts, credit cards, or loans for instance. That group—known as the underbanked—is made up of those who suffer the most from growing inequality and systemic marginalization: Americans with low incomes, those with less than a college degree, and minorities.
There are signs of improvement: A recent study from the FDIC found that the share of the totally unbanked—those without any checking account or access to traditional financial services at all—had declined to 7 percent from 7.7 percent in 2013. But the share of the underbanked—that is those who have checking accounts but still rely on alternative products such as payday or auto loans to make ends meet—has remained just about the same, at around 20 percent. That means that there is still a significant amount of work to be done when it comes to providing the necessary services for vulnerable Americans.
Over the past few years, the financial invisibility that has long plagued many Americans has become decidedly more visible, with more media attention paid to those without access to banking. That’s allowed important momentum to build on the existing work of nonprofits and other groups that have for years been attempting to help the underbanked. This shift to greater awareness didn’t happen by chance—it came about in part because of the creation of a federal agency tasked with protecting consumers and ensuring fair and equitable financial access to financial products, the Consumer Financial Protection Bureau. Since the Bureau’s inception, the dangers of high-priced loans, cycles of debt, and the lack of sufficient banking tools have been in the news again and again. And that’s led other agencies to make the underbanked a priority too: About a year ago, President Obama lamented the continuing cycles of poverty that are worsened by lack of financial access, and made financial inclusion one of his stated priorities for the Treasury Department. Spearheading that effort has been Treasury Secretary Jacob Lew, who says that the U.S. faces some unique challenges when it comes to making financial services universally available.