Mastercard: Europe Not Immune to Unbanked Problem

Written by FinTech Futures
13th December 2016

More than 138 million Europeans do not have access to formal banking services, says Mastercard in a new report—news that could present an opportunity to prepaid providers and so-called “challenger banks.”

Mastercard says a third of those Europeans without bank accounts have jobs, and that 35 percent are between the ages of 18 and 34. Mastercard also found that 87 percent of those without traditional bank accounts have lived in the same country their entire lives, and that 88 percent pay for nearly everything in cash. Additionally, 49 percent own or have access to smartphones. Mastercard also said that 20 percent of those without accounts do not want them, and that a further 10 percent of the unbanked do not trust their money with financial institutions.

“For many people the concept of exclusion is often seen as a developing markets problem, but today’s report shows clearly that this is as much of a problem in the perceived developed markets of Europe as it is around the world,” said Ann Cairns, president, international markets, for Mastercard. “That the tools and technology are readily available to those who are in need of inclusion demonstrates that this is a solvable problem and one that partnership, education and innovation can easily solve.”

In a Viewpoint published last week, Mastercard’s Executive Vice President, Global Prepaid Solutions, Michael Fiore, writes more about the importance of public-private partnerships and using technology, including prepaid cards, to reach financially excluded consumers. Many prepaid and alternative financial services providers are reaching out to those without traditional bank accounts in Europe. For instance, earlier this fall, prepaid card issuer Wirecard Card Solutions Ltd., a subsidiary of Wirecard AG, announced it’s working with payments processor GPS and Bottomline Technologies to support a digital banking solution called “U” that targets consumers without traditional banking relationships.

Also this year, U.K. challenger bank OakNorth moved its entire core infrastructure to Amazon’s Web Services cloud and claimed to be the first U.K. bank to do so. OakNorth was founded by Khosla and Joel Perlman, entrepreneurs inspired to launch the bank following the financial challenges they faced from high street banks as founders and promoters of Copal Amba, which they grew to 2,500 employees before selling to Moody’s Corporation in 2014, according to the company.