For Americans who don't have a bank account or a credit card, shopping for a chair or a computer they need can quickly turn into an exercise in humiliation.

The misconception of being unbanked can make it stressful to ask a sales associate who is guiding them around the store whether alternative options are available. Then come the application forms, followed by an anxious wait to see if the store can issue credit. Customers who receive a rejection end up doubly demoralized—and still in need.

For brick and mortar retailers, who were already hit hard by online shopping before the COVID-19 pandemic arrived in North America, losing a sale to customers who can pay given the right solution is equally galling.

After seeing the GDP drop more precipitously in Q2 and Q3 2020 than during any recession on record, solving this gap for unbanked and underbanked consumers will be critical in restarting the retail industry. It will require a combination of technological innovation, creative approaches to payment alternatives, and an acknowledgement of the size and shopping power of underserved consumer markets.

The size of this segment is massive. According to the findings from the FDIC's 2019 survey of Household Use of Banking and Financial Services, which the commission published in October 2020, 66 million American adults--more than one in five--are unbanked or underbanked.

The 5.4 percent of Americans living in an unbanked household have no checking or savings account, as well as no access to credit cards. Another 16 percent, considered underbanked, may have a bank account but still rely on other financial services such as check-cashing loans. Given the spike in job losses the United States has seen since March 2020, the FDIC warned, "The COVID-19 pandemic is likely to contribute to a rise in the rate of unbanked households."

Americans who make less than $40,000 a year are more likely to be unbanked or underbanked. There are higher numbers of unbanked and underbanked among those who have less education, a disability, or an income that fluctuates. According to the FDIC survey, almost 50 percent of unbanked individuals said they don't have an account because they can't meet the minimum balances most banks have established.

Yet, these 66 million Americans still require household, electronic, and everyday goods for their daily lives to operate smoothly and their children to attend school. Fortunately, there's one resource many unbanked and underbanked people do have: mobile phones, the essential communication tool of our age. Why is this form factor not being used to empower such a vast segment of American consumers?

According to a 2019 Pew Research Center report, 81% of Americans now own a smartphone—and that proportion is only slightly lower (71%) among people who make less than $30,000 a year. One in four low-income Americans, in fact, have neither desktop computers nor internet service, so they exclusively rely on their smartphone to check the news, read important communications, and shop online.

We've seen a surge in innovative mobile-based financial solutions designed specifically for the unbanked and underbanked market across the world. With M-Pesa, Kenyans can make deposits and withdrawals by texting the bank before meeting a live representative who accepts and disperses cash. GMobi allows unbanked Indians to use Oxymoney, its mobile wallet product, to top up their data and make money transfers. In the United States, peer-to-peer lending providers have traditionally rebuffed the unbanked, but that isn't the case in countries like Indonesia.

In the United States, the call to make creative, mobile-based financial services similar to M-Pesa and Oxymoney for unbanked and underbanked people is growing. New technologies have made mobile banking and payments more secure, intuitive, and less costly for financial institutions and customers. Mobile devices offer the unbanked the same portability, discretion, and ease of use that banked consumers take for granted. That said, these solutions fall short of providing these consumers with buying power to make the larger essential purchases their households require.

It's not enough to give this underserved group of consumers greater financial services. If individuals can afford the items they want and already possess the technological tools they need, all fintech providers need is to create opportunities for retailers to reach this massive consumer base. Instead, greater focus needs to be turned on leveraging a combination of smartphones, payment networks, and AI-based decisioning to reimagine proven models that empower consumers and improve their quality of life without risking their credit, such as lease-to-own, subscriptions, and rentals.

Additionally, we must increase our efforts to integrate digital and peer-to-peer payment services into POS systems at brick-and-mortar locations. Use of both forms of digital payments have surged since the pandemic began, the Kansas City Fed recently reported, primarily because it compelled more people to shop online.

Customers without bank accounts are already using both digital payment systems. For example, PayPal has already established a network of retail stores that accept cash and transfer it to a customer's account, allowing him or her to shop online. Peer-to-peer payments can be linked to prepaid cards issued by employers or government agencies. More and more online vendors are starting to accept peer-to-peer payments. So are a handful of traditional retailers such as CVS.

As this country begins to look forward to economic recovery, retailers will need to approach their business in innovative ways to recapture their customer base and pivot to serve a post-COVID-19 economy. As a society, we need to invest in creative solutions that remove the financial roadblocks keeping 66 million Americans from participating in this recovery.