How the other half banks: Exclusion, exploitation and the threat to democracy – A book review

In the United States (U.S.), the poor and rich operate in two different banking systems. Mehrsa Baradaran’s book, How the other half banks: Exclusion, exploitation and the threat to democracy, provides historical evidence on why these systems exist and how they came to be. The central point of her argument is that the rich and poor need similar financial services to advance in life. However, this dual system makes the poor spend more to access financial services. She explains that this situation is especially frustrating because, in reality, both banking systems are primarily subsidized by the government with taxpayer money. She perceives that the only way to achieve equality and democracy in the financial sector is for both market participants to operate in a uniform banking system. In this review, I discuss Baradaran’s view on the unbanked and how they became unbanked, how far regulations or education can go to protect consumers from financial exclusion, and the need for the U.S. government’s direct involvement in curbing exclusion in the banking sector. I also share some thoughts on the potential for digital finance and innovative regulations as possible panaceas to banking the unbanked.