America’s underbanked communities spend nearly 10 percent of their income on fees to check cashing stores and other alternative banking products, simply because they don’t have a traditional checking or savings account. This isn’t just a few families. According to entrepreneur James Guiterrez, the underbanked in America make up nearly a quarter of the population. The majority of these are minority families, making an income of less than $30,000 per year.
The challenges of the underbanked
If you’re not familiar with the problem, it would be easy to say, “just get a bank account”, says Gutierrez. However, there can be a number of obstacles to what most Americans take for granted, opening a checking account. If you don’t have the minimum deposit, if you don’t have a Social Security number, if you don’t have decent credit, a basic checking account isn’t an option for you. In addition, some families without transportation are simply too far away from a bank for it to be useful. After all, the local bar will cash their check for a “small” fee.
It’s these fees that help prevent underbanked households from bettering their situation and getting away from living paycheck to paycheck. For these families, even a small car repair or medical bill can destroy their budget and put them at risk of becoming homeless. Gutierrez has made it his mission to help change the banking situation for these families.
Working on a change
Gutierrez has been advocating for the underbanked for nearly 20 years. James Gutierrez’s company, Oportun, which opened in 2005, helped nearly half a million Hispanic families get small loans to help them out during financial challenges. The business model was to meet borrowers at the places they frequent, such as food markets, according to Gutierrez.
More recently, he has been lobbying lawmakers about the need for more Community Development Finance Institutions (CDFIs) and Minority Depository Institutions (MDIs), especially in minority neighborhoods. He’s also working on a new venture that will create a mobile platform that will provide “reasonable, affordable and accessible options to make purchases, build credit and establish financial security”.
About James Gutierrez
James Gutierrez is the CEO and co-founder of Insikt Ventures, an early stage investment fund. Just a few of the companies that Insikt has invested in include Listol, StubHub and OKCupid. Gutierrez also sits on the executive boards of the Silicon Valley Leadership Group, Talent Inc and his daughter’s private school.
Gutierrez earned a BA in economics from Yale University and a MBA from Stanford Graduate School of Business. He has served on the San Francisco Federal Reserve Board’s Centennial Advisory Committee and its Consumer Advisory Council. In 2010, “Business Week” magazine named Gutierrez on their list of the most promising social entrepreneurs of the year. if you don’t have a Social Security number, if you don’t have decent credit, a basic checking account isn’t an option for you. In addition, some families without transportation are simply too far away from a bank for it to be useful. After all, the local bar will cash their check for a “small” fee.