Credit unions were created to help people overcome financial challenges. But are credit unions ready to help the financially underserved overcome the challenges they face today?
More than 60 million Americans are underserved when it comes to financial services. They don’t have access to traditional bank accounts or tools — many don’t even have a job — and in 2012, they paid about $89 billion in interest and fees for “alternative” financial services like predatory payday loans.
Although the struggles of this underserved community can be easily overlooked, the truth is that this is not an isolated problem that only affects low-income or irresponsible consumers. The financially underserved are our friends and neighbors, and their struggles trickle outward to the communities in which they live.
What It Means To Be Financially Underserved
The FDIC found an astounding 25 million adults are completely unbanked, which means they don’t even have a basic checking or savings account. But millions more are underserved. They are missing the strong banking relationships needed to adequately manage their money.
According to credit reporting agency FICO, these financially underserved people are often viewed as high-risk and, therefore, “unbankable” by financial institutions. That’s an unfortunate perception. Credit Union Times reports that the average monthly income for financially underserved borrowers is $3,061, and about a third of consumers who use payday loans and similar products actually own their homes and have mortgages.
The FDIC found an astounding 25 million adults are completely unbanked, which means they don’t even have a basic checking or savings account.
Really, the underserved problem comes down to a lack of access to mainstream financial services, low financial literacy, or other barriers to entry. But many banks aren’t willing to remove those barriers and help elevate the financial well being of everyone who deserves it.
Here’s How To Help
It’s a sad day when 20% of the population is being ignored by the financial industry. Although credit unions were specifically created to bring affordable banking services to those who need them most, credit unions are not alone in looking for ways to address this issue.
CO-OP Financial Services and MasterCard have joined forces with OpenIDEO to launch the Financial Empowerment Challenge, which prompts credit union leaders and the public at large to explore how they can use the power of communities to financially empower those who need it most. Right now, people from around the world are contributing their perspectives, experiences and ideas in hopes of finding real, new solutions. Top collaborators will share the $10,000 THINK 15 Prize for innovation.
A community is only as strong as its members, and financial stability is at the core of any community’s ability to thrive. Join the challenge and encourage your friends to join, spread the word, and push for equal financial opportunity.
To learn more about the THINK 15 Prize Financial Empowerment Challenge and to join the conversation, click here.