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More From the FDIC Unbanked Survey

Adam Rust's picture

Posted September 14, 2012

The FDIC published the results its triennial survey of the unbanked and underbanked on Tuesday. The main headline was the sheer number of new members of both groups.

I think that more and more people are coming to recognize "unbanked" as a blanket term. This is because

people differ in how they got to this status. The FDIC found that a bit more than half of all unbanked had never had an account. This group is also known as the "never banked." Those that have exited the formal payments system, by contrast, can be thought of as "previously banked." According to the FDIC's estimate, almost 45 percent of the unbanked have such a history.

What is the profile of the unbanked?

  • 75.5 percent of the unbanked have no educational credential beyond a high school degree.
  • 45.9 percent of unbanked households are not in the labor force. Approximately 56 percent earn less than $15,000.
  • 37.3 percent are under 35.
  • 9.2 percent are Spanish-only speakers.
  • One-third of all unbanked households have a female unmarried head of household. Only on in five unbanked households is led by a married couple.

One assumption of why people drop out of banking is that they are afraid of overdrafting. This year's survey contradicted that perspective. The desire to overdraft lagged others. More common: high service charges and high minimum account balance rules. Many had no other option because a bank had already canceled their account.

California

The FDIC estimates that there are more than 1 million unbanked households in the Golden State. Another 2.3 million are underbanked.

An executive with an AFS company in California talked with me about his takeaway from the study. "Most troubling to me," he said, "is that more people are unbanked in this report than were in the other report," . And look at California. I walk around California and I don’t know how you live here in a cash-free environment."

In California, about 8 percent of households were unbanked. Another 18 percent were underbanked - meaning that they had either a savings or a checking account but not both.

"This is something that the governor’s office should be looking at," he added. "It cannot be acceptable for Jerry Brown that 10 percent of his people do not have any kind of a bank account... You can’t even use a parking meters because here, the coin dispensers are all broken.”

The poor uptake of basic banking services in California is likely driven by its demographics. California has many Latinos, African-Americans, and immigrants. Each of those groups are overrepresented within the unbanked and under-banked.

Redesigning

Many people say that banks do not fit their needs.  But what if a bank decided to market its products in a way similar to other industries, where a la carte production has become the norm. Today, you can order a car or a computer with any configuration of features. Today, largely due to regulatory pressure and subsequent legislation, banks can only put overdraft on to a checking account with the account holder's permission.

What if a bank put together an a la carte menu:

  • $3 per month to write checks
  • Branch visits: 50 cents each.
  • Maintain less than $100 in your account: $1
  • $2 discount with 20 interchange-generating transactions.
  • $2 discount for opting out of paper statements.