Analyst: In the Future Everyone Will Be Unbanked (By Choice)

Last week, a new article appearing in Morning Consult and written by Morning Consult’s financial services analyst examines recent data to break down the banking status of U.S. adults. One of its prime conclusions is that as consumers’ comfort level with nonbank financial services continues to grow, the terms “unbanked” and “underbanked” will likely need to be reevaluated.

“Underbanked” has long been understood to mean a consumer who has a bank account but has used alternative financial services like check cashing, money orders, payday loans, pawn shop loans, or auto title loans within the past 12 months. Similarly, “unbanked” consumers are those without a bank account. According to the Federal Reserve, 13 percent of the population qualifies as underbanked, five percent are unbanked, and the remaining 81 percent are “fully banked”—or have a bank account and did not use alternative financial services within the past year.

Many believe that unbanked and underbanked consumers use alternative financial services out of necessity—i.e. they lack access to such services from traditional financial institutions. As Charlotte Principato, the Morning Consult analyst, puts it, “the long-held assumption in the financial services industry is that consumers wouldn’t choose to use services qualifying them as underbanked—cashing checks, purchasing money orders, or paying bills through nonbank providers—if they had a banking relationship that provided such services.”

Instead, Principato argues from looking at Morning Consult’s data, “these adults are simply taking advantage of the wide array of financial services innovations that have evolved over the last decade. […] In the future, everyone will be underbanked in some way—but by choice, relying only on alternative, nonbank service providers to manage their financial lives.”

Principato also forecasts that consumer adoption of nonbank financial services has grown and will continue to do so.