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Language barriers in banking
The costs of not having a bank account
Overcoming Language Barriers in Banking
What is it to be underbanked or unbanked?
In what percentages of the United States are unbanked?
What problems do bank language barriers cause?
Does the bank have 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.
The factual information was verified by Suzanne Kvilhaug.

In the United States, language barriers could make it difficult for non-English-speaking customers to gain access to banks, which means paying bills and saving money is more difficult.

About one in 12 people living in the U.S. speak limited English and a large portion of them are unbanked.1 However, today the Consumer Financial Protection Bureau (CFPB) and community banks are making efforts to bridge the gap in language so that more people can gain access to the banking services they need.

Let’s take a look at the consequences of bank language barriers and how they are being dealt with.
The most important takeaways

People who have limited English in the United States may not have the ease of access to banking services that they need.
An estimated 4.5% of the U.S. population is unbanked, meaning that they don’t have a bank account or have access to traditional banking products and services.2
Hispanic households account for 12.2% of the unbanked population.
Language issues can make it hard for non-native English speakers to get access to banking services. This can create problems with things like making payments and saving money more difficult.
Initiatives from the Consumer Financial Protection Bureau (CFPB) and community banks are helping close the language gap.

Language Barriers in Banking

Language barriers can impact people’s access to financial services. A little over 5% of the population living in the U.S. were unbanked, or didn’t have a bank account in 2020.3 But the rate for communities where English isn’t the main spoken language is more. For example, among Hispanic households, in which Spanish is usually the predominant language, 12.2 percent are not banked as per 2019 Federal Deposit Insurance Corp. (FDIC) data.4

A whopping 22% or more of 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. One in 12 people older than 5 are in the range of being limited English competent (LEP), meaning that they are able to speak English less than well.1

Communities and individuals who aren’t proficient in English might have trouble to access banking services in the U.S. Even if banks provide basic account information or customer services in a range of languages, financial disclosures and written documents may not be available in languages other than English. In addition, immigrants may be unable to comprehend how 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 speakers learn more about U.S. banking concepts, products and services.
The Price of Not Being Banked

It can be costly for a language barrier to make you bankless or underbanked. This means you have a bank account but also use alternative financial services.

People who aren’t well serviced by banks that are mainstream typically depend on more costly financial services. For example, check cashing services could charge fees that range from 1% to 12% from the cheque amount.6 That can mean paying up to $120 for an amount of $1,000. Banks are able to pay checks to non-customers but this can still entail paying a fee of $5 to $10. For people who get payed by check since they don’t have a bank account, these charges can be thousands of dollars per year.

Borrowing money can also be costly if you depend on alternative banking services. Solutions like payday loans or car title loans have significantly higher rates of interest than conventional personal loans. Payday loans, often with an annual percentage rate (APRs) at 300% and greater could create a cycle of debt that is hard to escape.7

Every state has its own laws regarding payday loans and the interest rates and fees can be charged by lenders. Some payday loans are considered predatory and are regulated in specific states.8
The challenge of overcoming language barriers in banking

In recent times there has been growing awareness of the impact of language barriers to access to financial services and banking. Both financial services companies as well as federal agencies are working to solve this issue.

For example, Mitchell Bank in Milwaukee is among the banks that are opening branches in areas with low service. There is a branch known as Cardinal Bank in a Milwaukee high school with a 70 percent Hispanic immigrants population.9 Cardinal Bank offers financial literacy programsthat help customers without Social Security numbers apply for Internal Revenue Service (IRS) Individual Taxpayer Identification Numbers (ITINs), and uses its FDIC Money Smart program to develop the financial literacy of students and their parents.63

People who have little or no English proficiency may also look to government programs for assistance with banking needs. A lot of states and cities have local immigrant advocacy organisations that can guide people to local banks that offer assistance, education, and outreach in different languages.

Additionally, there is a Consumer Financial Protection Bureau (CFPB) provides assistance to people who do not have English proficiency. Call (855) 411-2372 to get support in more than 180 languages. The CFPB also provides free education materials about banking in a variety of languages.10
Note

Alongside addressing language barriers bank and other financial establishments are taking steps to make banking accessible for people who suffer from speech and hearing impairments or cognitive impairments, as well as visually impaired.
What does it mean to be unbanked or underbanked?

Unbanked is a term used to describe a situation where you don’t have a bank account. Being underbanked implies having a banking account but you also use alternative financial services, like check cashing and payday loans.
How many people in the United States are unbanked?

About five percent of the U.S. population, or 7.1 million households, were unbanked as of May 2021. The number of unbanked households was disproportionately higher among Hispanic, Black, and low-income families.3
What issues do banks’ language barriers create?

Language barriers can make people who have low English ability (LEP) more reluctant to use banking or financial services. This could make it more difficult in managing their money, paying off bills and save money. They may also be more likely to use expensive banking options, like check cashing services as well as payday loans.
Are banks equipped with translators?

Banks are able to use automated tools for translation and interpretation to reach out to customers with only a little English proficiency. More banks are hiring interpreters and translators who can talk to customers via telephone or face-to-face.
The Bottom Line

Language obstacles can make it difficult for individuals to access the banking services or products they require, however efforts are being made to address this problem within the U.S. As the banking industry expands, people with limited English proficiency may find it easier to open bank accounts or apply for loans, and manage their financial health without paying excessive fees.
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