Australia’s banking sector is often praised for its stability and innovation, but a significant portion of the population remains underbanked. As 2025 unfolds, digital disruption, cost-of-living pressures, and evolving financial needs are exposing the gaps in traditional banking services. So, who are the underbanked in Australia, why is their number growing, and what’s being done to bridge the gap?
Defining the Underbanked: Beyond the Unbanked
The term ‘underbanked’ refers to people who have a bank account but lack access to the full suite of financial services that meet their everyday needs. This group includes individuals who rely on alternative financial providers—think payday lenders, pawnshops, or buy now, pay later (BNPL) platforms—because mainstream banking products are inaccessible, unaffordable, or unsuitable.
- Gig workers whose incomes are volatile and struggle with credit assessment algorithms.
- New migrants without a credit history in Australia.
- Remote and Indigenous communities where bank branches are closing and digital access is patchy.
- Young Australians who prefer digital wallets but find traditional banks slow to adapt.
According to the Australian Banking Association, more than 2.5 million Australians are underbanked in 2025—a number up 12% since 2022, driven by economic stress and digital exclusion.
What’s Fueling the Rise of the Underbanked in 2025?
Several converging trends are making life harder for underbanked Australians:
- Branch Closures: Major banks have accelerated branch closures, especially in rural and regional areas. In 2024 alone, over 200 branches shut their doors, leaving communities reliant on online banking or Australia Post’s Bank@Post service.
- Cost-of-Living Crisis: Rising rents, food costs, and utility bills are pushing more Australians to the financial edge. Many turn to payday lenders or BNPL schemes for short-term relief, despite higher fees and risks of debt spirals.
- Digital Exclusion: While fintech apps are booming, not everyone can access or use them. Older Australians, those with disabilities, and people in low-connectivity areas are often left behind.
- Stricter Lending Rules: As a response to regulatory crackdowns on risky lending, banks have tightened credit assessment. This leaves gig economy workers and casual employees—whose incomes don’t fit neat boxes—struggling to qualify for loans or overdrafts.
These challenges mean the underbanked are more likely to pay higher fees, experience financial stress, and have limited ability to save or build credit.
Fintech to the Rescue? New Solutions and 2025 Policy Moves
Despite these headwinds, 2025 is seeing a surge of innovation targeting the underbanked:
- Neo-banks and digital wallets: Players like Up, Hay, and Revolut are rolling out low-fee, mobile-first accounts with real-time notifications and budgeting tools, making banking more accessible to young and tech-savvy users.
- Alternative credit scoring: Fintechs are using rent payment histories, utility bills, and open banking data to offer credit to those with thin or no credit files—helping new migrants and gig workers gain access to loans.
- Government initiatives: The 2025 federal budget includes $35 million for digital literacy programs and support for regional connectivity, aimed at reducing digital exclusion. The Australian Competition and Consumer Commission (ACCC) is also reviewing BNPL regulation to protect vulnerable users from predatory practices.
- Community banking and partnerships: Credit unions, Indigenous-owned banks, and not-for-profits are stepping in with tailored products and financial counselling.
One standout example: Indigenous Business Australia’s ‘Saver Plus’ matched savings scheme, which helps underbanked families build emergency funds and access financial education—proving that targeted support can make a lasting difference.
Why Financial Inclusion Matters for Everyone
Ensuring that all Australians have access to affordable, appropriate, and safe financial services is about more than fairness—it’s vital for economic resilience. Underbanked individuals are more vulnerable to shocks, less able to invest in education or housing, and often locked out of mainstream credit markets.
As Australia moves further into a cashless, digital-first economy, the risk is that the underbanked will fall further behind. Bridging the gap is not just a moral imperative, but an economic one—unlocking the potential of millions and reducing the social costs of financial exclusion.
