Financial trends closing the wealth gap and bringing inclusivity

Financial inclusion is one of the more ambitious goals that countries, leaders, companies, communities and individuals around the world are trying to achieve. Little by little, financial inclusiveness makes progress in the wallet and makes a difference. And it’s all backed by a mix of ingenuity, technology and disruption.

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This problem cannot be solved too quickly either. For example, look at the sheer number of people who would be considered bankrupt. About 25% of Americans have no or underbanked, meaning they have no or limited access to traditional financial systems. While a quarter of the population is still overweight, this is a smaller percentage than a decade ago. Between 2017 and 2019 alone, the number of underbanked people fell by 1.3 million.

Having no bank account, underbank or no access to traditional financing is not just a theoretical shame. It creates a multifaceted ripple effect that undermines society in numerous ways. For example, adults without financial accounts have no credit scores, making it difficult for them to buy cars or start a business. In addition, without the ability to work with finance teams, households may struggle to grow wealth or set aside emergency or retirement funds.

The good news is that financial inclusion is on the radar globally, which means it’s finally getting its fair share of the conversation. Yes, we are still a long way from achieving a sense of financial fairness and inclusiveness across all demographics. Yet we are getting closer and closer to the possibility of truly fair access to all things finance. Some key initiatives are moving us forward, as listed below.

Offer attractive incentives for start-ups without CEO experiences

The dream of owning a business can be overwhelming, especially for people who don’t have the money to start a business. Banking platform Nearside supports fledgling founders by offering loans up to $10,000 without a credit check of the application. This will allow almost anyone to apply for a Nearside debit card with an unlimited cashback rate of 2.2% on eligible purchases in 2022. Entrepreneurs such as perfumer of color Chavalia and Generation Z baker Morgan Davis are crediting Nearside to help them develop their vision of start a business to realize .

Innovative card products have only begun to appear in recent years. Not only do they lower the barrier to entry for dreamers, but they also help them manage their resources. At the same time, they enable them to build a positive credit history while engaging in entrepreneurial ventures.

Using AI to go beyond the need for classic credit scores

Historically, many people could never get loan approval because financial institutions viewed their credit scores as subprime. Usually, a score of 670 or less indicates that a potential borrower falls into the subprime category. However, credit scores only tell part of the story. AI-powered fintech solutions can paint a more holistic picture of someone applying for funding.

Many companies are far from resilient to this change, but welcome the opportunity to work with underserved consumers. In fact, financial institutions and lenders are becoming increasingly interested in evaluating borrowers through non-traditional data points. Consider a potential borrower’s payment history. A record of paying rent on time can be a useful indicator that the payer may pose significant credit risk.

The government has even begun to incorporate various types of verification and evaluation into its lending processes. Fannie Mae has incorporated rental history into her underwriting. As FHFA Acting Director Sandra L. Thompson has said, “There is absolutely no reason why timely payment of monthly housing costs should not be included in insurance calculations.”

Opening the door to digital currencies

Many experts believe that the future of money could be paperless and digital. The rise of and interest in cryptocurrency is fueling this sense that crypto such as Bitcoin and Ethereum could become more mainstream within the next generation. One thing is now certain: many professionals in the financial sector praise digital currencies as more inclusive than paper-based money systems.

What makes cryptocurrency more inclusive? First, investors can come from all walks of life. As Flori Marquez of BlockFi mentioned, many crypto investors are new to the investment world. Crypto is the first financial asset they decided to own, perhaps because it is so easy to buy and redeem online. Even banks are getting into the crypto act, albeit in smaller numbers. They are dabbling in bringing crypto services internally to attract new consumers.

To be sure, cryptocurrency is still in its infancy. Nevertheless, it could offer another opportunity to dampen the widening wealth gap. In the long run, crypto can have an equalizing effect that pulls people out of a lower income situation.

Strong focus on accessible financial education

As with any subject, finance can seem complicated to those who have little experience with money. The easiest way to unravel the complexities of finance is through education. And social media is not just a way to provide education, but maybe even a way to make money for everyone.

Take, for example, the videos of PJ Uscreen founder PJ Taei. During the pandemic, Taei made a point of helping entrepreneurs find ways to monetize live streaming. He shares tips and advice designed to give all budding creators the insights they need to boost their followers, build their brands, and impress on any budget.

Wells Fargo has announced that some of its banking facilities in major metropolitan areas will house HOPE Inside centers. Each HOPE Inside space offers free financial coaching and resources specifically aimed at unbanked individuals. Darlene Goins, head of Wells Fargo’s Banking Inclusion Initiative, has stated that “financial education and mentoring, and an individual’s sense of inclusion and trust, are all important factors in getting more unbanked people into the formal banking system.”

Bringing Inclusion to Financial Services

A final – and essential – means of achieving financial inclusiveness is the move to hire more diverse financial services personnel. The rationale is that the more people of color and minority backgrounds step into the financial world, the more welcoming the financial world will be to everyone.

Employees who come from marginalized families may also be able to introduce new concepts, especially if they work with people unfamiliar with the issues associated with financial inclusion. Consider the recent embrace of personalized money transfer platforms like Zelle. Providers like Zelle have made high-speed smartphone transfers an essential part of modern life. They have enabled people to exchange wealth almost instantly, removing barriers to quick access to money, such as the ability to go to a physical ATM.

To date, the initiative to bring representation to the financial sector has worked, at least at an entry level. More than half of entry-level finance executives are women. Still, the positive representative drops out later. On the C-Suite corporate ladder, the number of women of color is falling by 80%. But many people have hopes that despite the fact that 77% of certified financial planners are male, the tide is turning.

Financial inclusiveness does not undergo an overnight success experience. However, it is becoming more of a reality every day. Every year, more innovations begin to take hold within the global financial community. It’s only a matter of time before all these disruptions add up to one astonishing calculation: access to financial services – and perhaps even freedom – as a human right.

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