As Facebook touts a new cryptocurrency as a way to serve people who are “underbanked,” mobile-technology companies may provide the same path to financial services using good old-fashioned dollars.

The technology would avoid many risks worrying lawmakers and regulators, such as money laundering and undermining the Federal Reserve’s ability to set monetary policy. But some who track these technologies said allowing tech companies to become the bankers for the underserved carries risks of its own.

In the United States, 8.4 million households have no bank accounts, according to a 2017 Federal Deposit Insurance Corp. survey. An additional 24.2 million U.S. households are considered “underbanked.”

Typically those households are poor, and the lack of financial services can keep them in poverty.

That’s the justification Facebook is using for its cryptocurrency, called Libra, according to David Marcus, the man leading the effort for the social media giant who testified to Congress about it last week. Anyone with a “$40 smartphone and a data plan” would be able to access banking services through Libra, he told lawmakers.

“You don’t actually need a new currency to make all that happen,” said Rivka Gewirtz Little, research director of global payment strategies at the market intelligence firm International Data Corp. ”What you need is fair and accessible services.”

A service called M-Pesa, launched in Kenya in 2007 by wireless carriers Vodafone and Safaricom, is considered a runaway success in mobile banking. It allows people to move money using Kenya’s currency, the shilling. The service is now available in 10 countries across Africa, Asia and Europe.

U.S. adoption of fintech products like mobile wallets has been “lackluster” in comparison, largely because most products required a link to traditional banking institutions. That’s starting to change, Gewirtz Little said.

Although M-Pesa has no exact equivalent in the U.S., the new T-Mobile Money comes close, she said.

People are taking notice.

The Financial Clinic, a nonprofit group that operates clinics that coach the working poor on finances, is taking a good look at T-Mobile Money and other fintech innovations for their potential to be a “great equalizer” for the unbanked, assistant director Andy Collado said.


Reilly writes for CQ-Roll Call.