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Language barriers in banking

The Price of Not Being Banked

Overcoming Language Barriers in Banking

What is it being unbanked or underbanked?

How many people in the United States are unbanked?

What are the problems that language barriers in banking cause?

Are banks equipped with translators?

The Bottom Line

Personal Finance Banking

The challenge of overcoming language barriers in banking

Language barriers make it hard for some people to gain access to banking services

By Rebecca Lake

This article was published on December 02, 2022.

Confirmed by Suzanne Kvilhaug

In the United States, language barriers could hinder non-English-speaking customers to gain access to banking services. Therefore, making payments and saving money may be more difficult.

Around one-in-12 individuals living in the U.S. speak limited English and many are unbanked.1 In the present, there are steps being taken by the Consumer Financial Protection Bureau (CFPB) and community banks are working to bridge the gap in language to help more people gain access to the banking services they need.

Let’s take a look at the consequences of the language barrier in banking and the ways in which they are dealt with.

Key Takeaways

People who have limited English on the United States may not have an easy access to the banking services they require.

An estimated 4.5% from the U.S. population is unbanked, meaning that they do not have a bank account or are using traditional banking products and services.2

Hispanic households make up 12.2% of the unbanked population.

Language issues can make it hard for non-native English people to gain access to banking services, which can create problems with things like making payments or saving funds more challenging.

Initiatives of organizations like the Consumer Financial Protection Bureau (CFPB) and community banks are helping to bridge the language gap.

Language Barriers in Banking

The language barrier can affect people’s access to financial services. About 5% people in the U.S. were unbanked, or had no bank account in 2020.3 However, the percentage for communities where English isn’t the main language is significantly higher. For instance, among Hispanic households, in which Spanish is typically the main langue, 12.2 per cent aren’t banked, according to the 2019 Federal Deposit Insurance Corp. (FDIC) data.4

Nearly 22% from the U.S. population speaks a language other than English at home – that’s 67.3 million people.5 A lot of these people have a good command of English However, a lot of them don’t. More than one in 12 adults over 5 are in the range of being limited English skilled (LEP), meaning that they are able to speak English less than well.1

People and communities not proficient in English might have trouble to gain access to banking services in the U.S. Even if banks offer basic account information and customer services in a range of languages, financial disclosures and written documents might not be available in languages other than English. Additionally, foreigners may struggle to understand the way that bank accounts, investments and other financial products operate in the U.S.1

The Consumer Financial Protection Bureau (CFPB) offers numerous tools online to assist Spanish users learn more about U.S. banking concepts, products and services.

The Price of Not Being Banked

It is costly to have a language barrier cause you to be unbanked or underbanked. This means you have a bank account but also use other financial services.

People who aren’t well served by mainstream banks often rely on more more expensive financial services. For instance, cashing check services can charge fees ranging from 1% to 12 percent from the cheque amount.6 This could mean that you pay $10 to $120 to cash a $1,000 check. Banks may pay checks to non-customers however, this could mean paying a fee of $5 to $10. If you are payed by check since they don’t have a bank account, the fees could be thousands of dollars per year.

The process of borrowing money can be expensive if you rely on alternative banking services. Options such as payday loans or car title loans have significantly higher interest rates than traditional personal loans. Payday loans, often with APRs (APRs) of 300% or higher, can create an unsustainable cycle of debt that is difficult to escape.7

Each state has different laws regarding payday lending which include what rates of interest and fees can be charged by lenders. Some payday loans are considered predatory and are not permitted in some states.8

Banks: Overcoming language barriers

In recent years, there has been a growing awareness of the impact of language barriers to access to financial services and banking. Financial services firms and federal agencies are working to solve this issue.

For example, Mitchell Bank in Milwaukee is among the banks which are opening branches in the areas of low-service. The bank has a branch named Cardinal Bank in a Milwaukee high school with a 70% Hispanic immigrant population.9 Cardinal Bank offers financial literacy programs, helps customers who do not have Social Security numbers apply for Internal Revenue Service (IRS) Individual Taxpayer Identification Numbers (ITINs) as well as an FDIC Program Money Smart to develop financial skills for students as well as their parents.63

Individuals with little or no English proficiency can also seek out government programs for help with banking needs. Many states and large cities have local immigrant advocacy organisations that can guide people to local banks that provide services, education, and outreach in different languages.

Finally finally, the Consumer Financial Protection Bureau (CFPB) can provide assistance for those who do not have English proficiency. Call (855) 411-2372 for help in over 180 languages. The CFPB also provides educational materials on banking in dozens of languages.10

Note

Alongside the need to address the issue of language barriers, bank and other financial establishments are also taking steps to make banking more accessible for people with hearing and speech disabilities, cognitive disabilities, and visual impairments.

What is it to be unbanked or underbanked?

Unbanked is a term used to describe a situation where you don’t have an account with a bank. Being underbanked implies that you have a bank accounts, however, you are also using alternative financial products, such as cashing checks and payday loans.

In what percentages of the United States are unbanked?

About 5% out of U.S. population, or 7.1 million households, were not banked at the time of May 2021. The percentage of households that were not banked was disproportionately higher among Hispanic, Black, and low-income families.3

What issues do language barriers in banking cause?

Language barriers can make people with restricted English ability (LEP) more hesitant to look for banking and financial services. This can make it more difficult for them to manage their finances, pay bills, and save money. Additionally, they are more likely to use expensive banking options, for example, check cashing service and payday loans.

Does the bank have translators?

Banks can make use of automated tools for translation and interpretation for customers who have limited English proficiency. The banks are now hiring interpreters and translators who are able to communicate with customers via phone or in person.

The Bottom Line

Language barriers can make it difficult for those with limited English to obtain the banking services or products that they need, but steps are being taken to combat this problem in the U.S. As the banking sector becomes more inclusive those with limited English proficiency might have a better chance of opening bank accounts and apply for loans, and manage their finances without having to pay excessive fees.