You’d be excused for thinking that most individuals have a bank account to manage their finances, but this is far from the case. There are many people who are unbanked or underbanked in the United Kingdom, with over a million people in this situation. Why do people end up in this situation, and how can they get out of it? Continue reading to learn about some of the most common reasons why people in the UK are unbanked or underbanked.
What Is the Difference Between the Unbanked and Underbanked?
Before we go into the reasons, it’s important to understand what the terms “unbanked” and “underbanked” represent, as they’re not often used terms.
When no one in a family has a bank account of any kind, they are unbanked and unable to obtain financial services through a bank.
When someone in a family has a bank account but prefers to use alternative financial services rather than relying on their bank for assistance, they are referred to as underbanked. Payday loans and check cashing shops are examples of these services.
The Reasons Many People Are Still Underbanked
There are a variety of reasons why someone could be unbanked or underbanked; have a look at the most common ones below.
1: A Bad Credit Score
It may be tough to find a bank ready to take you on if you have bad credit, CCJs, or have even gone bankrupt. Many banks, on the other hand, are willing to offer simple accounts to assist people in repairing their reputations. You merely need to be aware that you won’t be able to access the complete range of products available and will have to open an account in a branch. If you are unable to create a bank account with a traditional high street bank, there are many more banking options available today that allow you to have access to financial services and manage your money safely and securely.
2: Insufficiency of faith in mainstream banking institutions
Many people who are unbanked or underbanked say they don’t trust the banking system and instead choose to manage their money in other ways. This implies that, while individuals may not be able to use the goods offered by a bank, they maintain complete control over their finances at all times.
3: They are unable to use banking services due to language barriers
Due to linguistic issues, many people who come to the UK to work are unable to use major banks. Because many British banks lack translation services, those who cannot converse effectively in English are unable to get a bank account. The only other choice is to go unbanked and rely on alternative sources of funding.
4: They want to save money on bank fees and charges
Many consumers grow dissatisfied with banks that levy fees, and they find themselves in a debt spiral as costs mount, and they are unable to clear their accounts. They choose to remain unbanked rather than use banks in order to avoid this predicament from becoming a reality for them.
Why Is Crypto the Answer to Underbanking?
Cryptocurrencies like Ethereum are the ideal solution to make financial services accessible to anybody, regardless of their location or income. Ethereum provides solutions for folks who do not have access to good local institutions.
It’s not just quick and inexpensive, but it’s also more secure than mobile banking. The technology is adaptable, and the entrance hurdles are minimal. The unbanked can benefit from blockchain technology because it allows them to develop their own financial alternatives in an efficient, transparent, and scalable manner.
Using cryptocurrencies such as Ethereum as a way of remittance may become a reality for many people in the world as Ethereum and blockchain technology improve and transaction costs fall. Furthermore, Ethereum and blockchain technology are gaining traction among young people who want to not only use but also learn and innovate with the technology. With global demand for Ethereum on the rise and an increasing number of millennials grasping the fundamentals of the technology, cryptocurrencies such as Ethereum might very well become a solution for the world’s unbanked in the near future.
There are a variety of reasons why someone may be unbanked or underbanked, and while it may be a choice in certain situations, it can also be a source of stress in others. If you fall into one of these groups and wish to create an account, it might be a good idea to go with a more modern bank that can accommodate your needs.