A new government report finds that people of color and low-income communities are disproportionately harmed by banking and financial exclusion.
While access to banking and financial services is essential to economic mobility and opportunity for all Americans, barriers to inclusion in banking and financial services disproportionally harm underrepresented and low-income communities, according to a report released this week by the U.S. Congress Joint Economic Committee.
The report states that nearly one in five adults that are either unbanked or underbanked are disproportionately low-income and underrepresented and lack access to a bank account or rely on alternative financial services.
The report also found that:
- Black and Hispanic Americans are more than twice as likely as white Americans to be unbanked or underbanked.
- Underrepresented and low-income Americans are more likely than their white and more affluent counterparts to have no usable credit score or to be “credit-invisible.”
- The unbanked, underbanked and those with no credit record are forced to rely on costly alternatives that widen existing income and wealth disparities.
- These disparities not only limit the economic participation and financial integration of these underserved Americans, but also limit economic opportunity for all.
- While innovations in financial technology have led to improved equity in some areas, more data and novel algorithms have failed to eliminate discrimination in lending.
- New digital assets in the decentralized finance sector pose serious risks to consumers who need more protection from regulators.