It's no secret that the unbanked and under-banked segments of the American population are significant in number and growing. Many cannot open bank accounts, let alone qualify for financing. Given the potential for great returns, a flurry of entrepreneurial activity has generated products and services to cater to and better understand these individuals who live and work outside the financial mainstream. While not all of this activity is positive, a few promising innovations stand poised to increase financial inclusion in the United States and abroad.
Earlier this year, Accion President and CEO Michael Schlein and Board Chairman Diana Taylor wrote in Forbes about DemystData, a company that uses big data to evaluate creditworthiness. "Lenders can use Demyst's analyses to evaluate an applicant's quality in real-time based on a range of different attributes," write Schlein and Taylor. "This makes the process more efficient while lessening the burden on applicants: those lenders can say 'yes' to deserving entrepreneurs more frequently and efficiently." Demyst technology serves under-banked and "thin-file" customers, helping organizations like Accion make smarter lending decisions.
For individuals and families sending money to Mexico, San Diego-based startup Quippi offers a fee-free alternative to expensive remittances. According to the Pew Research Foundation, the average cost of sending remittances to Latin America in 2013 was over seven percent. By removing all fees, Quippi is changing the way lower-income individuals on both sides of the border interact with and benefit from financial services. Consumers in the United States can buy a gift card to share with their families and pay no fee whatsoever. Recipients in Mexico, by receiving funds on a card, are less vulnerable to theft.
Lastly, Revolution Credit enables consumers to actively and positively influence the way financial providers perceive and assess their credit-worthiness. By completing online financial education courses, consumers can show they are trustworthy through more than just their credit score.
DemystData, Quippi, and Revolution Credit are all examples of game changers that aim to foster a more financially inclusive world. Rather than a passing trend, this is the beginning of a flourishing marketplace. Only time will tell what impact these first-movers will have, but I'm excited to see the arrival of new financial products and services designed to engage the 25 percent of Americans that live and work outside the financial mainstream today.