Checking, savings, and investment accounts are things that most Americans take for granted and assume everyone can access. As inclusivity activist James Gutierrez points out, that is not the case. Almost one-quarter of American households do not have any type of bank account and need to search elsewhere to meet their financial needs. The coronavirus pandemic has only highlighted these disparities as people continue to struggle to stay financially solvent.
James Gutierrez is a fintech investor working to bring more inclusive financial services to the public. He feels this is just one of many necessary steps towards solving the growing inequality of income in this country.
What Does Lack of Access to Banking Services Mean in the United States?
People cannot access banking and other financial services for a variety of personal reasons. For example, new immigrants to this country may not have a social security number required to open a bank account. Other people do not have enough cash on hand to open an account or keep a minimum balance. Another possibility is that people do not understand the resources available to them, leaving them vulnerable to predatory lenders.
Payday loan companies are notorious for charging up to 500 percent interest for people to get a short-term loan, sometimes for only a few days until they receive their paycheck. The fees for cashing a check and paying bills with money orders adds up, cutting even deeper into the pockets of low-income households.
Annual income is the biggest determiner in whether a person uses typical banking and financial services. According to James Gutierrez, one-fifth of households with annual income under $30,000 meet the definition of unbanked or underbanked. This is in contrast to the 2.4 percent of households earning more than $30,000 per year meeting the same definitions. Because of this disparity, 49 million Americans have sought financial services from alternative providers.
Unbanked and Underbanked Pay a Heavy Price for Access to Financial Services
People without access to traditional banking services live in all areas of the United States from urban to rural. Due to the high fees charged by payday lenders, check cashing companies, and alternative lenders, unbanked and underbanked households pay almost 10 percent of their income in financial transaction fees.
The inability to save money with a standard savings account sets people up for catastrophic consequences. Without a credit history to finance the basics of life such as a vehicle, they have few options in an emergency. A car breaking down can mean losing a job and an unexpected emergency room trip can set families back for months or years.
James Gutierrez Has New Solutions
As a venture capitalist and angel investor, James Gutierrez has offered better financial services solutions for low-income households for almost a decade. He has been instrumental in getting new laws passed to make loans more accessible to those who need them the most, especially in light of the pandemic.
Two recent programs he helped develop are Minority Deposition Institutions and Community Development Financial Institutions. These programs have made a real difference for minority and low-income borrowers in getting the financial help they need.