For the Unbanked and Underbanked, is Fintech a Solution?

Manali Mehrishi

7th Dec'22
For the Unbanked and Underbanked, is Fintech a Solution? | OpenGrowth

Underbanked refers to a section of the population that has access to banking services. Still, they prefer to use other alternatives like payday loans or cash transactions to manage their finances. Unbanked refers to those who do not have access to any banking facility like a checking account, saving account, or credit card. It’s either by choice or due to scarcity of resources. 

Fintech is the term used to describe technological innovations in banking and other financial services such as investment, stock trading, and lending.

Banking institutions have strict criteria like minimum credit balance, financial records, and identification documents. These rules protect against fraud and money laundering. But it has also created a barrier for the underprivileged to get into the banking system. 

We live in a dynamic economy where everything is available and paid for at the click of a button. Low or no-income groups have no access to essential services but have access to mobile phones. Fintech aims to tap into this and create an accessible banking system for the unbanked and underbanked. It makes commercial sense, though our society also has a moral obligation to provide financial inclusion to the underprivileged.

Read on to find out how fintech can venture into this market, do fintech will work for the unbanked and underbanked, and whether fintech is a plausible solution.


How Do Fintech will Work for the Unbanked and Underbanked


Homeless people, students with debt, convicts, immigrants, and the elderly primarily constitute the unbankable population. They do not have access to the traditional banking system due to high fees, stringent identification rules, and inconvenient processes. 

Now, Fintechs can provide low-cost and instantly accessible services with the advancements in the latest technology like AI, Robo-advisors, and a digital database that can cut the cost of rigorous administrative work,  automate workflow, and speed up the process. Many Fintechs are also working under the umbrella of large banking corporations and NGOs to provide financial solutions to the unbanked and underbanked in the following ways.


Instant loans at low-interest rates


do fintech will work for the unbanked and underbanked

Many people can’t afford to have credit cards or pay high-interest rates against loans. Fintech start-ups offer hassle-free loans at very low-interest rates. The verification process is also entirely digital. Once the basic risk assessment is complete, the loan is either approved or rejected within minutes. 


Credit Cards

Like traditional banks offer credit cards, fintech companies also provide credit cards. But getting a credit card requires an existing relationship with the bank and past credit records. Well, the process with Fintechs is much simpler and cheaper. They need basic personal details and a mobile number to send an OTP. With no physical documentation, the credit card gets issued. Interest rates, fees, and charges are also quite nominal.


Global money transfer


do fintech will work for the unbanked and underbanked

Complicated and expensive cross-border money transfers are one of the shortcomings of the traditional banking system. Fintech enables instant, cost-effective, and flexible global money transfers. They have low exchange rates, no hidden charges, no cancellation fees, and several payment options. Migrant workers without access to bank accounts can send remittances to their homes transparently and cost-effectively.


Digital Banking

Opening and maintaining an account in traditional banks can be relatively intimidating. Digital banks operate solely online with no ATMs or physical branches. They provide banking services to the unbanked by offering complete access through their phones. They can open accounts and make payments without the hassles of documentation and high fees. Nubank and Webank are two examples of digital banks.


There are other ways in which Fintech is helping the unbanked are underbanked. Few fintech startups solely provide financial literacy for the unbankable to manage their finances better. Some fintech companies offer banking solutions to emerging startups created by the underprivileged. Fintech trends are revolutionizing not only banking but the enitre finance industry.

Accessibility and equal financial opportunities have many social and economic benefits. Fintech is moving towards creating a solution for the unbanked and underbanked. Gradually other financial service providers like investment, trading, and Insurtech can also move towards financial inclusion and financial literacy for those who can not afford conventional banking methods. 



The traditional banking system is not affordable and accessible to everyone. Banking institutions are realizing this and acquiring Fintech startups to foster financial inclusion and diversify banking services. With constant efforts to provide comprehensive and approachable solutions, fintech appears as a solution for the unbanked and underbanked. 

Fintech wants to capitalize and explore avenues where traditional banking is lacking. But it won’t be easy for emerging startups to disrupt the conventional models. Collaboration of large corporations, NGOs, and fintech will propel the growth of a lean, inclusive, and accessible system for the unbanked and underbanked.


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Manali is a versatile content writer with experience in creating compelling blog posts, website copies, and content strategies across several industries. She is committed to delivering top-notch content that meets both her readers' expectations and her clients' standards. Outside of work, she enjoys traveling, baking, and acquiring new knowledge and skills.