Aug 24, 2013 Sean Albert
Since the economic recession, and especially the "Too Big To Fail" controversy, more Americans have shifted away from traditional banks and toward alternative financial services providers. Among the most popular users of these solutions are the underbanked and unbanked populations, which represent rapidly expanding segments of the overall economy.
The Huffington Post recently questioned whether these types of services are unnecessary and bad for users, or are instead crucial tools for underbanked households. The source referenced a report from the Federal Deposit Insurance Corporation (FDIC) that found the underbanked population has ballooned to the staggering number of one in five households.
According to the news provider, it might be too early to clearly and definitively define whether alternative financial services are good on the whole. However, certain products have been a big help to those who do not have access to traditional banking services, and the role of these organizations has grown in light of tightened credit distribution from the nation's largest institutions.
The Huffington Post added that many economists and social activists agree that financial inclusion is a critical driver of overall national wellness. Since underbanked households have made it clear that they will not be using traditional financial services any time soon, alternative avenues remain some of the best options to boost inclusion.
Several studies indicate that the underbanked, and especially unbanked, population will begin to run into serious issues when it comes to paying for healthcare and other critical services in the next few years. However, by using alternative financial products that can also help establish a credit score and general history, these households might be better positioned to obtain the services they need to survive.
It is important to note that alternative lending has also served as somewhat of a savior in the small business community, with entrepreneurs increasingly turning to these channels to either grow or simply survive.