FDIC White Paper: Assessing The Economic Inclusion Potential Of Mobile Financial Services

ASSESSING THE ECONOMIC INCLUSION POTENTIAL OF MOBILE FINANCIAL SERVICES

Division of Depositor and Consumer Protection

Federal Deposit Insurance Corporation

Last Revised: April 23, 2014

This white paper is presented for discussion purposes and does not represent official policy views of the Federal Deposit Insurance Corporation.

Assessing the Economic Inclusion Potential of Mobile Financial Services

EXECUTIVE SUMMARY

This white paper considers how mobile financial services (MFS) can help increase financial inclusion among the unbanked and underbanked (collectively referred to here as the underserved). Although banks are rapidly making MFS available to their customers, additional steps could be taken to implement MFS in a way that draws underserved consumers more comprehensively into the banking system.

Key Finding: In the short run, MFS is best positioned to have an economic inclusion impact through its day financial services needs of underbanked consumers as well as consumers at risk of account closure. The anytime, anyplace, and actionable nature of MFS offers the potential to enhance the sustainability of existing relationships between consumers and banks. MFS also has the potential to help the underserved gain access to the banking system and grow their financial capability. However, the technologies to deliver these benefits are less well established in the marketplace.

There is a Significant Gap in Banking Services to the Underserved. The FDIC has found that approximately 17 million U.S. adults live in households without a checking or savings account. An additional 51 million U.S. adults live in households that have a bank account but rely on nonbank providers to obtain some financial services. Consumers who obtain financial services outside the mainstream banking system may not receive the same level of safety and security provided by deposit insurance and various federal consumer protections that are guaranteed by law, ensured by supervision, and enforced through a system of ongoing examination.

In order for underserved consumers to choose financial services in the mainstream banking system, and those consumers must be aware of the availability of those products or services. Underserved consumers report using alternative financial services, such as nonbank check cashers or money orders, because of their convenience, speed, and price.  Banks report a number of factors that can make it difficult to meet Efforts to Serve the Unbanked and Underbanked (2011 FDIC Bank Survey), these factors include the regulatory environment, fraud, a lack of consumer understanding about financial products and services, underwriting, and profitability.

Read entire report https://www.fdic.gov/consumers/community/mobile/Mobile-Financial-Services-and-Economic-Inclusion-04-23-2014revised.pdf.

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