It may be surprising to find that in today’s digital world many people are still affected by the issue of financial inclusion. If you’re unaware of this important topic you can read more about it on our post “Financial Inclusion: The Imperative, Impact, and Innovative Solutions”.
Did you know that having a bank account is a luxury that not everyone can afford? It’s true, and it’s a financial hurdle that affects millions of people around the world, particularly in underserved communities. That’s where prepaid cards come to the rescue! As an accessible and inclusive financial tool, prepaid cards provide a crucial lifeline, leveling the playing field in a world often defined by traditional banking. There are many advantages to prepaid cards for underserved communities. These include their accessibility, no need for credit checks, no risk of going into debt, access to online shopping and digital bill payment, safety and security, among others.
The Landscape of Financial Exclusion
Before going deeper into the benefits of prepaid card solutions, let’s first understand the landscape of financial exclusion.
According to a 2022 article by the World Bank, about 1.4 billion adults remain completely unbanked worldwide. This lack of access to financial services only perpetuates poverty as many financial products are meant to financially empower the individual. These include products such as business loans, credit cards, home loans, and more.
It’s important to note that this lack of access exists due to the limitations of banks dictated by the financial regulations they must (understandably) adhere to. In addition, as any business, banks must keep their target customers at the forefront of their efforts. These are people who have steady incomes, proper identification documents, solid credit history, and maintain minimum balances on their accounts. Marginalized communities often struggle with all of these key factors.
Harnessing the Power of Prepaid Cards
Prepaid cards, issued by financial institutions, are an absolute game-changer for many individuals, especially in underserved communities. Straightforward, user-friendly, and readily accessible, they allow users to load funds onto the card, much like a regular debit card. Users can then pay for goods and services, make purchases online or in person, pay bills, and even withdraw cash at ATMs. The best part is that there’s no need for a credit check, a bank account, or a specific income level, making them easy to obtain. This accessibility and convenience present none of the risks or complications that come with traditional banking, marking prepaid cards as a significant tool in financial inclusivity. Now, let’s dive into the various advantages these cards offer.
Advantages of Prepaid Card Solutions
So now that we know what they are, let’s talk about their advantages and how they address many financial inclusion issues for underserved communities.
1. Easy Accessibility
Starting with their biggest advantage; they are very easy to obtain. Users don’t need a bank account to get a prepaid card. Also, cash funds can be loaded at many supermarkets and pharmacies. This accessibility helps make reloading simple and convenient so users don’t have to go too far out of their way to keep their card funded.
2. No Need for Credit Checks
Since the funds for the card are loaded in advance, they are not considered a credit product. Therefore, prepaid cards do not require a credit check for approval like a credit card would. This is an excellent advantage for those who do not have credit history or those who have a low credit score due to financial hardships. In short, no matter what your credit history is, you can still get a prepaid card.
3. Budgeting and Control
With prepaid cards, users can only spend as much as they load in. This completely eliminates the risk that they will overspend and go into debt, providing a good foundation for developing good spending habits. These habits can later spill over to their use of credit cards if they are approved for one in the future. It’s a great way to develop financial discipline.
4. Online Shopping and Bill Payments
In our modern digital world, e-commerce and online bill payment has become a convenience that many people utilize regularly. For people who don’t have access to credit or debit cards, they often end up paying the price of their time, when they have to shop in person or pay bills at physical locations. Since prepaid cards can be used for online purchases, unbanked users can participate in the convenience of e-commerce and paying bills straight from their mobile phones.
5. Safety and Security
Carrying large amounts of cash on hand poses a risk. It’s easy to forget or drop your wallet somewhere, or worse, it could get stolen. However, by using prepaid cards these concerns can be mitigated, if not completely eliminated. If a prepaid card is lost or stolen, it can be cancelled and the balance can be transferred to a new card. It’s also much more discreet to use a card than to pull out a roll of cash.
6. Financial Empowerment
Prepaid cards are an excellent gateway into exploring other financial services. This can help individuals who are only starting their journey towards financial literacy to feel empowered and gain confidence in their ability to handle finances responsibly. It can create a curiosity about financial tools in the areas of savings, insurance, and investing.
7. Promotes Inclusion
In the broader scheme of things, prepaid cards help improve financial inclusion for underserved communities. This may seem like a small stepping stone on the path of economic development but it can be an important one. It can help reduce poverty, offer new financial opportunities and boost economic growth.
In the world of finance, prepaid cards are the unsung heroes, driving inclusivity, and accessibility. For underserved communities, these cards are not just a tool for financial transactions but a passport to financial inclusion, independence, and empowerment. They break down the barriers set by traditional banking systems, offering a practical, efficient, and accessible solution for managing money. Let’s continue to champion the cause of prepaid cards and ensure everyone gets a fair shot at financial prosperity. After all, finance should be for all, not the few.
EMIDA Technologies is a fintech company offering digital access to millions of underbanked consumers via its 36-country retailer network. Our products & services enable financial inclusion for 3MM monthly users through 50K+ points-of-sale offering a cash onramp solution. Additionally, we offer IT cloud-based services, SAS & ISO options, and a mobile network. Learn more at Emida.com.