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America’s Digital Ghosts: Why the Lack of a Financial Footprint is Locking Millions out of the Modern Economy

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Table of Contents

Introduction ............................................................................................................................................................................. 3

Key findings ............................................................................................................................................................................. 4

Methodology ........................................................................................................................................................................... 4

Where do digital ghosts come from? .................................................................................................................................. 5

New-to-country digital ghosts...............................................................................................................................................7

Digital barriers for government services ............................................................................................................................ 9

Gen Z wants to catch up and access the financial system .............................................................................................. 11

Digital identities at risk .......................................................................................................................................................... 13

The high cost of exclusion .................................................................................................................................................... 13

Making inclusiveness a priority ........................................................................................................................................... 14

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A transformative demographic shift is on the horizon for the United States. As baby boomers age and millennials establish themselves with their preferred financial services providers, new consumer populations — especially Gen Z and new-to-country individuals — are growing rapidly. But as these populations attempt to build their digital lives — from applying for a car loan to getting approved for a new apartment to signing up for government benefits — they too often find themselves locked out of the modern economy.

Why? Simply put, their identities are difficult to verify online.

These populations are part of a phenomenon we’re calling “Digital Ghosts.” Also known as “credit invisible,” Gen Z and new-to-country individuals have little or no credit history, even though they are consumers and active participants in the digital economy. Because they lack a digital footprint — or a history of credit cards or loans, rental leases, or home purchases — their identities are extremely difficult to verify by traditional methods which paradoxically rely on credit history data. As a result, these demographics are not recognized when they first try to interact with the financial ecosystem or access government benefits.

Legal immigrants and Gen Z populations are disproportionately credit invisible people. A study found that 38% of the credit invisible population was under 25 — though they make up just 9% of the U.S. population.2 While there aren’t reliable numbers for immigrants, we do know that 30% of Black and Latinx consumers do not have credit scores compared to 17% of white people.3 And because U.S. financial institutions and fintechs often rely on credit header data to verify identities, a lack of credit history shuts out millions of Americans from accessing vital services.

Until they can be integrated into the financial ecosystem, these individuals are stuck as digital “ghosts” who largely rely on prepaid debit cards and cash to make purchases. This puts these populations in a financial void, making it difficult to access the services they deserve.

The result? Gen Z and legal immigrants are at a trust impasse with the financial sector, believing no one wants them as a customer, pushing off their first banking experiences as long as possible.

Socure commissioned a research study to understand these populations and their opinions to gain insight into the struggles they face in verifying their identities online.

According to the Consumer Financial Protection Bureau, as many as 45 million Americans over age 18 lack credit scores.1

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31%

40%

51% of immigrants

of immigrants

of immigrants

Gen Z and immigrants must wait an average of 4 days for financial account approvals. Meanwhile, Americans with good credit history can often get verified instantly and quickly accepted for loans or credit cards.

Over half of Gen Z (54%) and immigrants (51%) have experienced di­culties with identity verification.

35% of Gen Z and 31% of immigrants say their biggest limiting factor for accessing government and financial services is a lack of a digital financial footprint.

46% of Gen Z and 40% of immigrants have had to email or mail copies of identification documents to prove their identity to gain access to government or financial services.

59% of Gen Z and immigrants with a credit score have had to go in-person multiple times to provide documentation to verify their identity.

46% of Gen Z

54% of Gen Z

35% of Gen Z

Methodology: Socure conducted this research using an online survey prepared by Method Research and distributed by PureSpectrum among n=2,500 teenagers and adults (age 14+) in the United States. The sample was split between two samples, Gen Z aged 14-27 (n=2,000) and immigrants to the U.S. (n=500). The sample was split between gender, with a spread of age groupings within Gen Z and immigrants, a spread of the timeline of immigration, race groups, and geographies represented. Immigrant survey respondents or their parents were required to have Tax IDs in some form. Data was collected from March 28 to April 9, 2024.

Key findings

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It takes time and effort to join the financial system in the U.S. — and not everyone has the same opportunities to do so. A person has to be 18 years old to open a bank account in their own name without a cosigner. The process to then take out a loan, open a credit card, or participate in credit-building activities comes later. But Gen Z and new-to-country populations face greater struggles in building a digital financial footprint.

Gen Z struggles with credit card history

Gen Z typically refers to those born between 1996-2012, a generation which represents around 21% of the U.S. population, or more than 65.6 million people.4 Approximately 35% of these are Digital Ghosts, which translates to 22.9 million Gen Z individuals whose biggest limiting factor for accessing government and financial services is a lack of a digital financial footprint.

One of the biggest influences on Gen Z’s lack of an identifiable credit footprint is the Credit Card Accountability Responsibility and Disclosure Act of 2009, which introduced requirements for those under 21 trying to get a credit card to have a cosigner, proof of income requirements, and more, pushing back their first traces of a financial footprint further in life than previous generations.5 While the regulation does have benefits in helping Americans make better financial choices by delaying access to credit, it has created problems with building a credit history.

Due to their age, Gen Z is also much less likely to own a home, have an auto loan, or a permanent address that could help to establish credit history. Gen Z is also lagging behind previous generations in obtaining driver’s licenses, a key government document for identity verification.6

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For the purposes of this report, here’s how we define these key survey respondents:

Where do Digital Ghosts come from?

Defining a demographic

Gen Z Survey respondents between ages 14-27

New-to-country Legal immigrants (or their parents) who have a U.S. Taxpayer Identification Number (TIN) or Social Security Number (SSN)

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35%

of Gen Z

31%

of immigrants say a lack of any digital financial footprint.

The biggest limiting factor for accessing government and

financial services?

The verification vortex

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Immigrants’ uphill battle for financial inclusion

Immigrants face a similar, but different challenge as they start from scratch in a new country. Financial footprints in other countries are not easily transferable, and immigrants must go through multiple hurdles in person and with varying documents to prove their identity. It is a time-consuming and difficult process for immigrants to even get visas or permanent residency status; building a credit score is often not the first priority.

We found that most approvals for financial accounts occur within a week (75%), an average of 4 days for both Gen Z and immigrants. This is in stark contrast to Americans who have credit cards and loans approved instantly or within one business day.

With this in mind, it’s no surprise to learn that one in five Gen Z (20%) and one in six (16%) immigrants believe banks do not want them as a customer.

Our research suggests these issues are tied to problems with verifying identities online that disproportionately affects Gen Z and immigrants.

Over half of Gen Z (54%) and immigrants (51%) have experienced difficulties with identity verification.

More than half of Gen Z (51%) and immigrants (57%) say they’ve had to go in person multiple times to verify their identity for financial accounts.

Though they can typically verify their identity in two visits, one in five (18% of immigrants and 20% of Gen Z) had to go three or more times. Forty-six percent of Gen Z have had to email or mail copies of identification documents to prove their identity — 40% of immigrants have done the same.

Even Gen Z and immigrants with a credit score have had to go in-person multiple times to provide documentation to verify their identity (59%).

On average, immigrants say it takes them more than 2 years to feel like they have enough of a financial footprint to open financial doors, such as faster credit approval. But for some (21%) the problem is lifelong.

Gen Z respondents say it takes them a year and ten months on average to build a digital footprint to open most financial doors.

Financial approvals take an average of 4 days for Gen Z and immigrants

1 in 5 Gen Z

1 in 6 Immigrants

believe banks do not want them as a customer

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The potential impact of immigration on U.S. economic growth is astounding. According to research conducted by FWD.us, high rates of legal immigration between now and 2050 will result in approximately $47 trillion in GDP.7

Irrespective of how government policy on immigration shakes out over the coming decades, it’s clear that those who are new-to-country — which currently account for almost 14% of the population — bring with them significant buying power as participants in the U.S. economy.

Meanwhile, the U.S. Census Bureau estimates that 2030 will mark a demographic shift. As the population ages, deaths will outnumber natural births of the younger generations.8 As a result, population and economic growth in the U.S. is expected to be driven primarily by immigration.9

This seismic shift in demographics will require that financial institutions, retailers, government agencies and other organizations have an accurate way to validate and onboard these individuals so they can participate in the U.S. economy and access government benefits. In our survey of legal immigrants, we found that:

New-to-country Digital Ghosts

of immigrants believe they will never build a sufficient financial footprint to access government and financial services on equal terms with U.S.-born citizens — a barrier they expect to face for life (21%).

of immigrants say that a passport or visa doesn’t equal full access to government services.

Nearly half of immigrants say they were denied access to the job market because of identity verification issues.

Half of immigrants (51%) wished they’d started applying for financial accounts earlier in life — regretting not having a strong foundation in the financial system.

44%

45% 51%

21%

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For many immigrants, the process of verifying identities and gaining access to government services and benefits in the U.S. is more arduous than what they experienced in their countries of origin. They feel the U.S. system falls short by creating excessive difficulties in identity verification, which results in denials of service or benefits.

The financial knowledge gap

Another major obstacle for immigrants is the lack of sufficient financial education and guidance on understanding the U.S. financial system and building a robust financial footprint. The United States falls short in effectively communicating these crucial aspects.

• One in 10 (13%) immigrants say a lack of education on the U.S. financial system is their biggest barrier when applying for financial accounts.

• Nearly half of immigrants (45%) say that getting started with building credit is “really hard to figure out.”

Contrary to popular belief, technology access is not itself a driver of inequality. From our survey, it appears that the onboarding speed (or lack thereof) and friction caused by antiquated identity verification solutions create unequal access to financial services.

• Almost half of immigrants (46%) report that obtaining approval for financial services in the U.S. involves more complexity compared to the process they encountered in their country of origin.

• Nearly half (48%) of immigrants report that accessing basic government services in the U.S. is more difficult compared to their previous country, primarily due to challenges in verifying their identities that create bigger obstacles to obtaining these services.

Immigrants say that across

the board, they were denied

after difficulties verifying

their identity, with the highest

percentage of denials in:

Immigrants report approval for financial services are more complex in the U.S.

Immigrants report access to basic government services is more difficult

in the U.S.

48% Government services

45% Job market

45% Student loans

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44%

46%

After experiencing di�culties verifying their identities, immigrants sometimes face multiple denial of services and benefits, mostly seen in:

— Government services (48%)

— Job market (45%) — Student loans (45%)

62% of immigrants think the U.S. government should make it easy to verify an identity online.

Because of di�culties with identity verification, two in five (40%) immigrants have had challenges accessing government services, especially: — Social Security Administration (16%) — Medicaid health coverage (15%)

44% of immigrants say that a passport or visa doesn’t equal full access to government services.

Two in five (40%) immigrants say that in their previous country, basic government services were not as di�cult to access due to an inability to verify their identity as the ones in the U.S.

Nearly half (46%) of immigrants say they have to go in-person or call into a call center at least half of the time when applying for government or financial services.

62%

40%

40%

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4

5

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Digital barriers for government services Government benefits are critical to starting a life in a new country. Yet the immigrants we surveyed found it difficult to interact with government agencies online due to poor identity verification infrastructure.

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Language and discrimination barriers are also a key issue for immigrant populations attempting to access government and financial services.

• Immigrants face different barriers when applying for bank accounts, namely differences in language (20%)

• One third (34%) of immigrants who prefer other languages to English say financial institutions don’t accommodate their preferred language

• One in 10 (9%) of immigrants first experience applying for a bank account included first-hand discrimination or prejudice

What’s in a name?

New-to-country populations are more likely to use surname and first name characteristics not commonly seen in the U.S., as well as hyphenated names and apostrophes. These standard international naming conventions often don’t work well with the decades-old methods of verifying names in place in the U.S. and often result in negative bias for Latin, Middle Eastern, and Asian names, which may entail hyphenation or short string length.

The disparity in the performance of legacy identity verification providers can often be explained through their overreliance on Soundex phonetic encoding — which takes the first letter of a last name and three numbers to index surnames based on how they sound — and rigid lexical rules that have long been favored in entity resolution problem solving.

Immigrant language and discrimination barriers

Sri

Steve

Bhārata

Barrows

DisagreeAgree Agree

80

-10 -3-5

70

0

25 35 0

Disagree Missing

Comp Exact Exact Fuzzy Exact

Must match 150 Threshold

Soundex phonetic encoding methodology

Match

No Match

123

123

Roosevelt

Rosevelt

= 135

Street

150

Experienced a language barrier

Financial institutions don’t accomodate

preferred languages

Experienced prejudice or discrimination

when applying for a bank account

20% 34% 9%

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Gen Z wants to catch up and access the financial system

Gen Z will rise to become the largest share of the U.S. workforce and the primary consumer group in the 2030s.10

Yet as we’ve seen, their access to the financial system is currently very limited.

Gen Z currently earns $7 trillion across its global 2.5 billion-person cohort, according to Bank of America Research.11 By 2025, that income will grow to $17 trillion, and by 2030, it will reach $33 trillion, representing 27% of the world’s income and surpassing that of Millennials the following year.

This important segment of the population presents identity verification challenges. Younger generations are already less likely to have credit history by default due to being college students, renting, or living with their parents. It’s estimated that 31% of Gen Z is living with parents or relatives, and Gen Z drivers also own cars at a lower rate than previous cohorts.12 Gen Z is also behind in credit card usage.13

These factors point to a generation that is underrepresented in the financial system, and thus locked out of identity verification solutions that rely on credit data.

“[I] tried signing up [for a financial account], uploaded a picture of my ID and myself to their app for verification. A month later I was still waiting to be verified, and people online said it shouldn’t take that long. So I canceled my account and made a new one. Then I got an email that they were terminating my account and I couldn’t become a client. I signed up for a competitor and was approved within an hour.”

Respondent reference: Adult Gen Z (22-27) U.S. native

2025 20302023

Gen Z income will represent 27% of the world’s income

by 2030

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However, our research found nearly half of Gen Z respondents (49%) would prefer to have financial accounts earlier in life, meaning there is a demand that is not being met. Part of this late start is due to poor financial education — with 60% of Gen Z born and raised in the U.S. saying education around having a credit history is severely lacking.

Yet even those who know what to do are met with unnecessary friction. Half (50%) of Gen Z say that getting started with building credit is really hard to figure out.

Although Gen Z is a digital-first generation, they often don’t have bank accounts because they need to go in-person to prove their identity and often with a parent. Our survey found that 44% of Gen Z don’t currently have any bank accounts and nearly half (48%) of Gen Z can’t open a bank account digitally as their first account, facing requirements to bring an adult as a sponsor or requirements to go in-person to a branch location.

In addition, a lack of identity verification accessibility has led to 20% of GenZ having issues accessing education-related government services such as Federal Student Aid (FSA) or college loans or grants due to difficulties verifying their identity.

“After applying and depositing funds, those funds were placed on hold due to ‘security concerns for my safety.’ And it was my money I [had] just deposited.”

Respondent reference: Adult Gen Z (22-27) immigrant

Gen Z respondents who would prefer to

have financial accounts

earlier in life.

Percentage of Gen Zs that

don’t currently have any

bank accounts

Percentage of Gen Zs that can’t

open a bank account digitally

as their first account

Number of Gen Z saying education around

having a credit history is severely lacking.

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Digital identities at risk

Gen Z also finds itself at high risk of identity theft. Our survey found 13% of identity theft for Gen Z occurred before they were 5 years of age — with four in 10 (45%) of thefts occurring before the age of 16.

However, only a little over half (56%) of Gen Z are concerned about identity theft, with one in five (20%) not being concerned about it at all. Over a third (37%) of Gen Z believe no one would be able to do much with their identity if it was stolen.

The high cost of exclusion As the U.S. economy relies more on new-to-country and Gen Z consumers to be active contributors, America’s outdated identity verification systems will become a severe drag.

Our research has shown that these Digital Ghosts are ready and willing to participate in the traditional financial system, but they are being locked out through no fault of their own. As Gen Z consumers age and immigrants settle in, they will need to make significant capital purchases. But with legacy identity verification approaches, they will be saddled with time-consuming delays.

Gatekeepers of these services need to do better.

Percentage of Gen Z identity thefts occurring before the

age of 16

Percentage of Gen Zs that believe no one would be able to do much with their identity

if it was stolen

Our survey found 13% of Gen Z identity theft occured

before they were

5 years old

Digital Ghosts are ready and willing to participate in the traditional financial

system, but they are being locked out through no fault of

their own

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Making inclusiveness a priority

Building inclusive products is vital for any business that wants to maximize its potential customer base.

By making inclusiveness a priority, organizations can better understand their users’ needs, provide alternative and flexible options, and consider cultural differences. This investment pays off in the form of wider financial system access, higher user engagement, and a larger addressable market.

In developing these solutions, it’s crucial that we center the voices and experiences of those most impacted by financial exclusion. By collaborating with Gen Z individuals, immigrants, and other marginalized groups who have firsthand knowledge of the barriers they face, we can ensure that our efforts are grounded in the real needs and priorities of the communities we aim to serve.

Ultimately, addressing the Digital Ghost phenomenon requires all of us to reflect on our own role in perpetuating or challenging the systems that create these inequities. Whether it’s examining our personal biases, advocating for policy changes, or supporting organizations working for financial inclusion, we all have a part to play in building a more equitable society. By recognizing our collective responsibility and taking action in our own spheres of influence, we can work toward a financial system that truly serves everyone.

As part of our commitment to building the most inclusive identity verification solution in the industry, Socure has invested heavily in evaluating and designing innovative techniques to bridge the gap for systemic challenges present in our technology ecosystem, piecemeal legislative framework, and fragmented U.S. digital identity infrastructure.

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This looks like providing guidance for our customers around:

• How to handle foreign scripts • How to collect identity information in cultures that don’t use first names at all and in cultures where customers want to use their preferred name, rather than their legal name

• Localizing all languages, allowing names and addresses to be entered in each script • Redesigning sign up flows to accommodate limited connectivity and only collect information that’s needed so they can provide a personalized progressive onboarding experience.

• Designing solutions that can be deployed in an omnichannel way to meet people where they are — be that their home, a public library computer, or kiosk in a government services office.

Public and private organizations that are serious about delivering inclusive onboarding for Digital Ghosts must operate with a solution that moves beyond the limited scope of the analytical capabilities of legacy identity verification solutions. Failure to do so means they will not effectively reach consumers that represent the primary growth driver of the population, which will result in missed opportunities for revenue, financial inclusion, and developing a positive reputation within the communities they serve.

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About Socure Socure is the leading platform for digital identity verification and trust. Its predictive analytics platform applies artificial intelligence and machine learning techniques with trusted online/offline data intelligence from physical government-issued documents as well as email, phone, address, IP, device, velocity, date of birth, SSN, and the broader internet to verify identities in real time. The company has more than 2,300 customers across the financial services, government, gaming, healthcare, telecom, and e-commerce industries, including four of the top five banks, 13 of the top 15 card issuers, the top three MSBs, the top payroll provider, the top credit bureau, the top online gaming operator, the top Buy Now, Pay Later (BNPL) providers, and over 250 of the largest fintechs. Marquee customers include Chime, SoFi, Robinhood, Gusto, Public, Stash, DraftKings, State of California, and Florida’s Homeowner Assistance Fund. Socure customers have become investors in the company including Citi Ventures, Wells Fargo Strategic Capital, Capital One Ventures, MVB Bank, and Synchrony. Additional investors include Accel, T. Rowe Price, Bain Capital Ventures, Tiger Global, Commerce Ventures, Scale Venture Partners, Sorenson, Flint Capital, Two Sigma Ventures, and others.

6196408422-01© Socure 2024, Inc. All rights reserved.

Citations

1. Credit report answers. Consumer Financial Protection Bureau. (n.d.). https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/answers/key-terms/# 2. Government Accountability Office. “Credit Scoring Alternatives for Those without Credit.” GAO.gov, 5 Jan. 2022, www.gao.gov/blog/credit-scoring-alternatives-those-without- credit#: :text=But%20roughly%2045%20million%20Americans. 3. Population distribution by age. KFF. (2023, October 27). https://www.kff.org/other/state-indicator/distribution-by-age/ 4. Consumer Finance Protection Bureau. Who Are the Credit Invisibles? How to Help People with Limited Credit Histories. Dec. 2016. 5. Federal Trade Commission. CREDIT CARD ACCOUNTABILITY RESPONSIBILITY and DISCLOSURE ACT of 2009. 2011. 6. Osaka, Shannon. ““I’ll Call an Uber or 911”: Why Gen Z Doesn’t Want to Drive.” Washington Post, 13 Feb. 2023, www.washingtonpost.com/climate-solutions/2023/02/13/gen-z- driving-less-uber/. 7. FWD.us. “Increasing Future Immigration Grows U.S. Competitive Advantage.” FWD.us, 7 Apr. 2021, www.fwd.us/news/future-immigration/. 8. Batalova, Jeanne. “Frequently Requested Statistics on Immigrants and Immigration in the United States.” Migration Policy Institute, 13 Mar. 2024, www.migrationpolicy.org/article/ frequently-requested-statistics-immigrants-and-immigration-united-states-2024. 9. U.S. Census Bureau. “Demographic Turning Points for the United States.” The United States Census Bureau, Feb. 2020, www.census.gov/library/publications/2020/demo/p25- 1144.html. 10. NACE. “Generation Z in the Workplace.” Default, www.naceweb.org/talent-acquisition/student-attitudes/generation-z-in-the-workplace#:text=Generation%20Z%2C%20 often%20shortened%20to. 11. Bank of America. “Engaging Millennials in Philanthropy.” Bank of America, www.privatebank.bankofamerica.com/articles/millennial-motivation.html. 12. Martin, Shannon. “Gen Z and Car Ownership.” Bankrate, 19 July 2023, www.bankrate.com/insurance/car/gen-z-and-cars/. 13. PYMNTS. “Younger Consumers Less Likely to Use Credit Cards.” PYMNTS, 28 Dec. 2023, www.pymnts.com/credit-cards/2023/younger-consumers-less-likely-use-credit-cards.

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