How neobanks help underserved communities


Too many banks fail because of underserved communities – but if used correctly, financial technology can make a positive contribution.

Underserved communities tend to pay excessive bank fees or are even completely displaced by traditional banking services. That’s unacceptable, and mission-driven neobanks like mine are working to make real change for the better.

Neobanks are becoming the face of modern banking, especially for those that have not been well served by traditional financial institutions. Many of these online and mobile-first fintech companies promise low fees and transparency and are presented in a user-friendly interface. In addition, the latest mission-driven neobanks face an additional challenge: to meet the special and far-reaching needs of underserved communities.

For example, cheese aims to serve Asian American customers, and daylight offers banking for the LGBTQ + community. Just, the banking platform that my team and I started this year, is the first Halal-certified neobank in the US. Among other things, we are introducing a membership-based platform that does away with traditional bank fees. Think of Costco, but for banking.

I came to the United States from India with $ 100 in my pocket and eventually started a technology company, AMSYS Group, which is now worth over $ 350 million. But I will never forget how difficult it was as a new immigrant to use the US banking system. I still remember vividly that opening a bank account and taking out a loan were serious challenges.

After all, bank accounts and loan agreements are complicated and burdened with small print. Many people have difficulty understanding everything and often skip the process altogether. Also, when contracts are not in your native language and the whole system is foreign, as in my case, it’s hard to tell when someone is trying to take advantage of you.

These banking challenges are real and measurable. For example in 2020, a Bankrate survey found that black and Hispanic respondents pay twice as much in banking fees as white respondents. This is unacceptable and unnecessary, and I appreciate the opportunity neobanks have to address these differences.

At Fair, for example, we have created an easy-to-understand membership-based platform. A monthly or annual membership gives you access to a wide variety of banking services without countless fees.

Beyond banking deserts

When banks close branches in slums, the residents have few alternatives due to the resulting banking desert. Unfortunately, nearby check cashing shops are often the most convenient – but expensive – option. In addition, the lack of local banking services means less access to capital, making it difficult to start or grow a business.

Neobanks offer a convenient and user-friendly mobile experience, an important step in the right direction for the population. In 2019 the Pew Research Center found that approximately 25% of Hispanic and Black Americans can only access the internet from their smartphones at home. Only 12% of white Americans are in the same situation.

It’s also encouraging to see neobanks expand beyond basic banking services to create personal finance platforms. You can integrate key budgeting, investing and credit tools right into the same mobile app that your paycheck arrives in.

From a personal point of view, I know our approach has led us to new ways to help our customers. For example, we are certified by the Accounting and Auditing Organization for Islamic Financial Institutions and meet the standards of Sharia and Jewish law. It goes without saying that our services, such as international money orders and free debit cards for children, are also aimed at secular customers.

Later this year, we will be launching interest-free loan products for homes, automobiles and small businesses in accordance with Islamic law prohibiting interest charges. We’re also building a robo-advisor to help members save for the future with socially responsible investment (SRI) options. And I expect our new wealth-building investment feature, which can earn members annual dividends of up to 4%, will be popular.

I believe fintech companies require a conscious focus on intent and impact to truly help underserved communities. For me that means doing more than just creating a beautiful aesthetic on a white label banking product.

By listening to your customers, you can really invest in technology that directly addresses their specific needs. But you need to have the humility and flexibility to adjust the course as needed for the benefit of the consumer. And finally, you have to be nimble: the ability to act quickly is an advantage of many neobanks over traditional stationary retail.

Khalid Parekh founded and ran the technology company AMSYS. He launched Fair in 2021 to provide convenient, cutting-edge financial services to underserved Americans.


Leave A Reply