Meeting Financial Needs Beyond the Banking System

Insights from the FDIC’s 2023 Survey

The FDIC’s 2023 National Survey of Unbanked and Underbanked Households provides a rich perspective on how Americans navigate their financial lives. While much attention often focuses on the benefits of traditional banking, the survey also highlights the choices of millions who either lack or avoid bank accounts. For those who provide alternative financial services, these findings offer an opportunity to better understand and serve this diverse group.

Who Chooses to Be Unbanked?

In 2023, about 4.2% of U.S. households—representing 5.6 million homes—were unbanked. These households rely on alternative financial tools instead of traditional checking or savings accounts. This number represents a historic low, but it’s important to note that some people actively choose to remain unbanked.

The survey reveals the main reasons for being unbanked: insufficient funds to meet minimum balance requirements, mistrust of banks, and a preference for alternative services that meet their specific needs. These preferences are not failures of financial literacy but reflect thoughtful choices about cost, accessibility, and convenience.

How the Unbanked Manage Their Finances

The unbanked often rely on a combination of nonbank money orders, check-cashing services, and money transfers to handle financial transactions. These services offer benefits like immediacy, simplicity, and independence from account fees. For example, money orders allow individuals to pay bills without worrying about overdraft fees, while check-cashing services provide instant access to funds without the wait times of traditional deposits

Additionally, many unbanked households have embraced digital tools like prepaid cards and nonbank payment platforms (e.g., PayPal, Venmo, Cash App). These platforms provide flexibility, allowing users to send and receive money electronically without a bank account. Nearly 50% of all U.S. households used nonbank payment services in 2023, a testament to their growing appeal across the financial spectrum.

3. Comparable Fees, More Convenience

A concern customers might have when switching from money orders to bill payments is cost. But here’s the thing: the fees for bill payments are often very similar to those for money orders.

On top of that, when you factor in the extra costs of sending a money order—buying envelopes, stamps, and making a trip to the post office—bill payments start to look even better. Customers can make several payments at one time, saving minutes and simplifying the payment process. In many cases, they’ll pay the same amount they’re paying now for money orders. Plus, your location typically sees similar profits from bill payments to those you have come to expect from money orders.

Bridging the Gaps with Customized Solutions

For businesses in the financial services space, this presents a unique opportunity. Unbanked households represent a market that needs tailored solutions, especially in communities where access to banks or trust in traditional institutions is low.

For example:

Prepaid cards can serve as a gateway for financial management, enabling unbanked individuals to shop online, pay bills, and even access direct deposits without needing a checking account.
Cash-focused services like bill payment kiosks or local agent networks can fill gaps for individuals who prefer in-person transactions.

Nonbank loans or microcredit offer a path for those who need occasional credit without the hurdles of a credit score or traditional bank approval processes.

Opportunities to Innovate

Alternative financial providers can focus on services that address specific pain points of unbanked households:

Transparency in fees: Many unbanked households avoid banks because of concerns about hidden fees. Offering straightforward, upfront pricing for services like money transfers or bill payments can build trust.

Convenience and accessibility: Providing services in convenient locations open when they can be available allows users to manage their finances on their terms.

Education and outreach: Helping unbanked individuals understand their options—without pressuring them to adopt bank accounts—can position providers as trusted partners rather than competitors to banks.

A Financial Ecosystem That Works for Everyone

The FDIC survey reminds us that financial inclusion doesn’t have to mean fitting everyone into the same solution. Millions of Americans navigate their financial lives without traditional banking, and they do so with a combination of ingenuity and pragmatism.

For providers of alternative financial services, this is an opportunity to meet people where they are—offering tools that respect their choices and help them thrive. By focusing on accessibility, transparency, and innovation, nonbank financial providers can play a vital role in creating a financial ecosystem that truly works for everyone.