Bank On It: How to Serve Underbanked Communities

A record level of US households has access to a bank or credit union account, according to the latest biennial survey from the Federal Deposit Insurance Corporation (FDIC).

Approximately 124 million households, or nearly 95%, were ‘banked’ in June 2019, the FDIC found, the highest level since it started the survey in 2009.

Just 5.4% of households did not have access to an account. However, despite the encouraging data, the American Bankers Association (ABA) has called for a renewed effort to address this shortfall, which amounted to approximately 7 million families.

ABA president and CEO Rob Nichols said the unbanked segment was more likely to include non-white families. The FDIC reported that 14% of African American households and 12% of Hispanic households were unbanked in 2019. While this was the lowest level for both groups in the history of the survey, it was still high relative to the 3% of white households that were unbanked.

Amid rising racial tensions in the US this year in the wake of the death of George Floyd, banks and financial services companies have sought to improve their offerings to non-white customers.

The association has launched a new initiative aimed at encouraging every US bank to offer ‘Bank On’ certified accounts, which are specifically designed to offer simple access to deposit accounts, online payments and debit cards for those currently outside the banking system.

“With more banks offering these kinds of accounts, we can further expand access to the mainstream banking system and all the economic opportunities that come with a bank account,” the ABA said in a statement.

According to the FDIC, nearly half of unbanked households said they did not have a bank account because they did not have enough money to meet minimum balance requirements. One third said they did not have an account because they did not trust banks.

More than 40 banks already offer Bank On certified accounts, while the ABA’s website lists 20 banking technology providers that have signed up to facilitate such accounts, including FIS, Fiserv, CSi and UFS Data.

The Bank On certification was created by the Cities for Financial Empowerment (CFE) Fund. To be certified, accounts must have low costs, no overdraft fees and online bill payment facilities.

Jonathan Mintz, president and CEO of the CFE Fund, said: “By urging banks of all sizes to join this initiative, particularly community banks, we can welcome millions of Americans into the banking system safely and efficiently. We also deeply appreciate the critical role the nation’s core providers are playing to make it happen.”