Embedded Finance: Making Credit Accessible for All

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Unbanked and underbanked consumers represent a significant segment of the U.S. consumer market. An estimated 22% of adults are unbanked or underbanked, according to the Federal Reserve – meaning that no one in the household has a checking or savings account at a bank or credit union – and many have no credit and little cash on hand. This could be attributed to barriers such as limited access to traditional financial institutions, poor credit or a lack of awareness about the options available to them. Moreover, many consumers fear rejection when applying for a loan, so they push it off or never get around to applying.

This trend is even more prevalent among the younger generations, with Gen Z and millennials making up nearly 60% of the unbanked and underbanked, according to a Morning Consult survey. These consumers are digitally-savvy and increasingly comfortable banking beyond traditional financial institutions; so they often opt for popular fintech companies or alternative finance products to meet their everyday financial needs. This not only impedes traditional community financial institutions’ growth and success, but can have a significant impact on consumers’ financial health as these options often charge higher interest rates.