Unbanked and Underbanked in Europe

Both terms come from the United States, where the FDIC surveys households. Bankrate sums up the definitions: an unbanked household has no checking or savings account at any bank or credit union, and an underbanked household has an account but used at least one alternative financial service in the past 12 months, such as a payday loan, an auto title loan, rent-to-own or check cashing. In the FDIC figures that Bankrate cites, 4.2 percent of US households are unbanked and 14.2 percent are underbanked. High fees, minimum balances and a lack of trust in banks are the reasons Bankrate names first.

People without an account still pay. Bankrate lists prepaid debit cards, money orders, cash and payment apps such as PayPal or Venmo used without a linked bank account.

For the euro area, the ECB estimates 13.5 million unbanked people. About 2 percent of adults had no access to cashless payment methods, and in Cyprus, Greece and Malta the share was around 10 percent. A 2024 report by Finance Watch, covered by Euronews, put the unbanked share in Romania at roughly 30 percent of people over 15 in 2021, and at 12 to 16 percent in Bulgaria and Hungary.

The EU Payment Accounts Directive of 2014 gives consumers a right to a basic payment account. Finance Watch found the barriers that remain: proof of a permanent address, fees, and banks that refuse customers over money laundering concerns. According to the report, a basic account in Germany cost up to 27.83 euros a month. Homeless people often cannot show an address, and refugees run into identification and anti-money laundering checks. The financial inclusion page covers the German basic account.

For many people without an account, identification is the first hurdle. Banks in Germany open accounts remotely by video identification or with the eID function of the identity card. Under eIDAS 2, the European Digital Identity Wallet gives citizens a wallet credential that banks must accept when a customer chooses to use it.

Card programs reach people outside the account system. German states pay benefits to asylum seekers onto an IBAN-linked payment card, and the Eurosystem plans the digital euro with an offline function that pays device to device like cash.

Basic accounts, de-risking and payment cards for people without an account belong to the Payments & Digital Money track at Finance Loop. The When Banks Say No seminar in Frankfurt deals with banks that refuse customers over sanctions and money laundering risk, and the access to cash page covers the ATM network that people who pay in cash depend on.

An unbanked household has no checking or savings account. An underbanked household has one but also uses services such as payday loans, check cashing or rent-to-own. The definitions come from the FDIC in the United States.

The ECB estimates 13.5 million unbanked people in the euro area. Finance Watch put the share at about 30 percent in Romania and at 12 to 16 percent in Bulgaria and Hungary, for 2021.

In the United States, high fees, minimum balances and a lack of trust lead the list. In the EU, Finance Watch found proof of address, fees and banks refusing customers over money laundering concerns.

Remote onboarding by video identification or eID removes the visit to a branch, and the European Digital Identity Wallet gives citizens a credential that banks must accept on request. Proof of address and money laundering checks still apply.