A Fantastic Fintech Opportunity Is Playing Out With The Underbanked

It’s no secret that most Americans live paycheck to paycheck, which makes maintaining a simple bank account all the more challenging. Overdraft and other banking fees for low balances and other account “missteps” only set customers back more and prevent them from building basic assets like a savings account.

This underserved market of customers has opened the door to fintech startups that can create low-cost, simple banking solutions for billions of individuals struggling each day. The opportunity to serve the underbanked is massive, according to Angela Strange, a general partner at Andreessen Horowitz during the recent Forbes Under 30 Summit in Detroit. Today, there is anywhere from 2 to 3 billion people who fall under the traditional banking threshold worldwide.

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“More than 50% of Americans live paycheck to paycheck in this world, and it’s replete with a ton of problems like unpredictable fees,” said Strange. “Until recently there hasn’t been much startup opportunity. The opportunity is now.”

Larger institutions like Chase, Bank of America, and Wells Fargo are too big to cater to poorer customers, who often tap into payday loan companies and other predatory financial services. Startup competitors are already expanding their services in countries like Africa, Asia, and Latin America, where there’s as much as 60% of the population who are underbanked. Fortunately, these populations have a mobile device, and that’s where new banking platforms capture these customers.

New, mobile-driven banking models can help underserved customers without penalizing them because of low balances or other typical revenue drivers of the big banks. Several companies have already tapped into this customer base like Chime, which offers no overdraft fees, early access to paychecks, and other features.

Propel is focused on people using food stamps—something 40 million Americans are utilizing—by offering a platform to instantly check and manage EBT balances, save money with coupons for favorite brands or stores, and a job post section for earning extra income.

Branch offers microloans to individuals in countries like Africa. The company has already issued more than $350 million in loans to individuals, and all banking and transactions can be done via smartphone.