Here are some concrete steps credit unions can take to enhance financial inclusion:

Remove the usual obstacles. A few common hurdles that stand in the way of low-income members include minimum fee balances, service fees and overdraft fees. In fact, according to the World Bank, the primary reason the unbanked cite for lacking an account is simple lack of money.
Incentivize mobile banking. According to the World Bank, lower income consumers tend to have a mobile connection rather than home-based internet. Designing mobile banking and financial services products that appeal to the unbanked will reduce exclusion.
Expand access points to advanced digital services. ATMs are morphing into digital financial services outposts, and as they start to behave more like smartphones and less like giant cash dispensers, regions without robust banking sectors suddenly have an entirely new type of branch that is more accessible and lower in cost. This directly addresses one of the key issues with the unbanked – transportation to a credit union itself.
Emphasize prepaid products. In 2017, nearly 27% of unbanked U.S. households used prepaid cards, according to an FDIC household survey. Prepaid credit cards or debit cards can offer a secure path to credit histories, which can solve many existing challenges to accessing financial services.
Find new ways to analyze members' creditworthiness. Many companies are using AI to create alternative and more accurate creditworthiness assessment systems. For instance, Upstart looks at over 1,000 indicators to assess whether someone is likely to pay their loans back, with a particular focus on identifying people who might not qualify for credit under traditional underwriting processes but are in fact good risks. It's time for traditional institutions to identify new ways to unlock greater access besides traditional criteria such as credit scores.

Credit unions are in a unique position to break down financial barriers and offer greater access to financial support. By fostering increased access to technology, greater openness in the financial system, and a more robust, fair marketplace for financial products, credit unions can improve lives and jumpstart a once-in-a-generation business opportunity that will benefit society and contribute to overall economic growth.

Instant Insights /

Credit Unions Play a Critical Role in Financial Inclusion

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