FinTech Keeps Banking Deserts at Bay

Banking deserts is a term used to describe geographic areas where there are few bank branches. Technically, banking deserts are census tracts with no bank branches within a 10‐mile radius of their centers. As customers embrace digital banking and transactions become easier via smartphone, some financial institutions are rethinking their brick-and-mortar locations, leading to questions about the negative impact of banking deserts.

Given technological evolutions, however, the most relevant question is no longer whether a consumer has easy access to a physical bank branch. Instead, the question is whether consumers have access to the functionality needed to engage in relevant financial services. With respect to many services, including payments, the answer to that question is undoubtedly yes.

Thanks to the continued proliferation of new financial-service technologies, banks and other financial technology providers have closed the gap on access to financial services. Consumers of all means, including low- and moderate-income (LMI) Americans, now have many ways to receive, hold, and spend their funds in a secure manner no matter where they are in America.

• Modern payments products allow consumers to conduct their daily financial transactions — receiving, holding, or spending money — from their home, on the road, or wherever they may be.
• Many banks offer mobile solutions that allow consumers to access their services without physically entering a branch.
• Examples of the modern payments products offered by the digital transactions industry include the following:
  • Banks offer mobile apps to allow consumers to deposit checks, make transfers, check balances, and complete other financial transactions.
  • A prepaid card allows holders to receive, hold, and spend money from the card.
    • LMI families prefer to use prepaid debit cards over cash by a wide margin; less than 20% prefer cash.
    • Prepaid cards are being used to quickly and securely distribute federal and state government benefits, including EIP, Social Security, SNAP, and unemployment.
    • Consumers can load and withdraw cash from prepaid cards.
    • Consumers can receive payroll on their prepaid cards and through peer-to-peer (P2P) services.
  • P2P payments allow account holders to store and transfer funds to others via a mobile phone app.
    • P2P payments are now the norm; 79% of consumers say they’ve used the service.
    • Mobile P2P payments in the U.S. increased from $232.58 billion in 2018 to $393.87 billion in 2020. Volume is expected to more than double to $797.43 billion by 2024.
  • E-cash solutions allow cash-based consumers to make purchases online.
  • Mobile wallets offer consumers the ability to securely control their finances in their smartphone.
    • Stimulated by the pandemic, the number of unique digital wallet users is expected to exceed 4.4 billion globally by 2025, up from 2.6 billion in 2020.
    • The total amount spent through digital wallets is expected to nearly double to $10 trillion annually by 2025.
  • Same day pay, or daily payroll, gives workers more flexible access to the money they’ve earned, strengthening cash flow and helping employees avoid added costs such as late fees.

Ensuring that everyone in the country has access to financial services is a top priority for ETA and its members. We support an inclusive financial system that provides high-quality, secure, and affordable financial services for the broadest possible set of consumers. The products and services outlined above work both independently and in concert to help LMI Americans conduct their everyday banking/financial transactions, be it receiving and spending government benefits, making a purchase in store or online, transferring money to a family member or friend, or receiving a small business loan. By making digital transactions possible for all Americans, especially LMI, FinTech has effectively kept banking deserts at bay.