Underbanked need control of funds

A large number of Americans lack access to traditional financial services resources, and this can pose significant challenges to their everyday lives. American Banker recently looked at the issue of the underbanked population, and how alternative payment methods, such as ACH cards, can help them get back on track.

According to American Banker, underbanked individuals are affected in nearly every aspect of their lives. From walking to a utilities office to pay their bills to being turned down for housing, the inability to open a checking account can stifle a family's attempts to get ahead. In the cycle of being unbanked, consumers are unable to maintain the minimum balance required at a bank, and because they cannot afford these services, it becomes difficult to save. Innovations like ACH cards can help them keep their heads above water.

"[My research] paints a picture of how difficult it must be to be underbanked" Schwanhausser told American Banker. "It's hard to understand what life would be like without a basic banking account. It's like oxygen. A prepaid card may be a different flow of oxygen. But you have to have some kind of financial building block in which to start building access to credit, one of the aspects of building a life."

According to a 2011 study by the FDIC, 1 in 12 American households are unbanked, and 1 in 5 are underbanked. Both of these rates had increased since 2009, with the number of unbanked households increasing by 0.6 percent. The number of underbanked households rose by 18.2 percent.

Schwanhausser told American Banker that the key to serving this population will likely involve giving them increased control over information about their funds. ACH card programs should include tools that allow these users to develop better financial management skills through access to a wide range of solutions, including integrated bill payment services, reminders and fraud alerts.