Checking your bank account should feel like part of a daily routine, but unfortunately for many Americans — and billions globally — this is far from reality. Basic banking products and services to facilitate daily life remain unavailable to millions in the U.S., thanks in large part to how traditional banks have continued to misunderstand regulatory risk and compliance, and failed to provide secure, cost-effective access to those who need it most. But with advances in both fintech and regtech, and a re-thinking of community-based engagement, the twin aims of broader banking access and increased compliance with global standards can be achieved, and a wave of U.S. — and global — economic resilience can be realized.
In 2017, nearly a quarter of U.S. households, according to the Federal Deposit Insurance Company (FDIC), were considered unbanked (no one in a household had a savings or checking account) or underbanked (a household with an account at an insured institution, but also using financial services outside the banking system). The exclusion of one in four Americans doesn’t count the millions of people who are relatively infrequent users of the financial system. Seasonal workers, for example, are often excluded because of their inconsistent incomes. The un- and underbanked label applies to millennials who may otherwise be “asset rich” but have chosen not to participate in the formal financial sector for one reason or another — including an understandable skepticism of traditional banking, particularly after last decade’s financial crisis. Even many U.S. Service members and their families, particularly the junior enlisted, suffer from being un- and underbanked. Look at many military bases across the country and you can see the proliferation of payday loan operations and pawn shops that fill the gap traditional banks have not served well (or at all) — and too often exacerbate already strained personal financial conditions.
Importantly, beyond individuals and families, businesses and organizations can — and often do — find themselves excluded from the financial system. A large and growing number of institutions, from non-governmental organizations (NGOs) to small and medium enterprises (SMEs) and technology startups, are being denied access to traditional financial tools, effectively impeding entrepreneurism, stifling innovation, and hampering job creation opportunities. The systemic risk lies in the failure to build economic resiliency in places where it is needed most — in individual communities across the country. From a national security perspective, these exclusions prevent NGO and IGO efforts to help those communities in unstable and poorly governed spaces gain access to capital and secure financial services. This systemic risk creates an even greater challenge to the country’s collective security as SMEs account for greater than two-thirds of net new private sector jobs. America’s economic resilience — the foundation of its global strength — is significantly hampered without greater access to capital and secure financial services