According to a recent National Survey by the Federal Deposit Insurance Corporation on Unbanked and Underbanked Households, over 14.1 million Americans fall in the underbanked category. That means approximately 6% of American adults don’t get the right traditional finance services because they lack proper credit scores. For households with net family incomes below 30,000, the percentage can be as high as 19%.
Whether you’re a gig employee, part-time student, a young worker, or an immigrant who hasn’t stayed in the U.S. for long, struggling to pay your bills on time can be pretty frustrating. The financial vulnerability that comes with this predicament can push you to turn to predatory financial services, payday lenders, money orders, and loan sharks. As a result, you may end up in a vicious debt circle that forces you to live from paycheck to paycheck. If you’re in this category, there are high chances that your credit score is not good enough to secure you a bank loan or credit card. Therefore, your chance of getting capital assistance to enable you to move ahead financially ranges from extremely challenging to almost impossible.
And that’s where FinTech apps like B9 come in—they bridge the financial gap by using AI to enhance credit systems and enable early wage access to the underbanked.
Traditional credit scores may not aggregate crucial data such as employment history and financial behavior essential in risk analysis and estimation. Most of them only focus on loan repayment history and do not consider factors that may contribute to delayed payments or defaults, leading to miscalculation of borrowers’ risks.
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In this regard, AI can help lenders estimate borrowers’ risks more accurately by analyzing information lacking in the conventional credit score. For instance, does the borrower use most of their money on essentials or luxuries? How much of the available credit does the borrower use? Are they employed? Who are their former employers? A comprehensive analysis of the borrowers’ financial behavior, lifestyle, and employment history gives a more detailed picture of their risks.
Using AI, financial advance apps like B9, Chime, Earnin, Brigit, and Dave allow more Americans to access traditional financial services. AI also enables them to understand borrowers better and estimate risks more accurately, reducing the chances of late payments or defaults.
B9 is one of the most popular cash advance apps in the U.S. today. A cash advance app is an application that allows you to deposit and use money that you’ve already earned even before payday is due. They generally charge zero or nominal fees and have no interest on their loans. Therefore, they can help break the paycheck-to-paycheck by enabling you to access capital at any time of the month without additional charges like overdrafts.
To use B9, you first fill out a basic information form that captures primary biodata like your name and Social Security Number. The B9 app then integrates and analyzes your data through its AI algorithms. It uses the results to profile you based on earning patterns and economic behavior.
While B9 is not a bank, it works with traditional financial service providers like Evolve Bank & Trust. Once the app has profiled you, you can apply for a B9 card to make purchases, both online and offline. You can also deposit paychecks to your B9 checking account and get salaries as early as 15 days before payday. The app has a monthly subscription fee of $9.99 that qualifies you to make as many transactions as you want for free.
B9, like most cash advance apps, integrates data relating to how much you earn, your needs, and wants and uses the result to make a more accurate risk analysis. The comprehensive approach enables the underbanked to build better credit scores and access more products and services at lower costs than traditional high yield small-dollar services.
Currently, there aren’t as many cash advance apps. Some options you can explore include:
- Empower: It has zero interest rate on loans, no late payment fees, and charges $8/month for a subscription. The app offers cash advances of between $25 to $250, which is pretty reasonable for underbanked people. Empower collaborates with Member FDIC and NBCK for banking services.
- Brigit: It’s pretty similar to Empower, with no interest or late fees and a maximum cash advance of $250. Brigit has a $9.99 monthly subscription fee.
- Kora: It gives cash advances of up to $2,000. Kora charges interest on loans and has no subscription fee.
Before you subscribe to a cash advance app, conduct thorough research on its terms of service. Some have high upfront fees with very low cash advance limits. Others may act as marketplaces for payday loans. The right cash advance app should enable you to access the cash you need without any lofty fees.