FDIC: Use tech to bring bank to disabled

With one in five un- or underbanked households in the United States headed by working-aged individuals with disabilities, judicious use of technology could bring economic inclusion.

So said FDIC Chairman Martin Gruenberg at a meeting of the National Disability Institute in Washington, D.C., recently.

Increasing such households’ access to safe, secure, and affordable banking services “improves their ability to build assets and create wealth, makes them less susceptible to discriminatory or predatory lending practices, and can provide a financial safety net against unforeseen circumstances,” Gruenberg said.

He cited statistics from a 2013 FDIC survey—the most recent available—that indicate almost half of households headed by individuals with disabilities rely on providers outside of the financial mainstream for some or all of their financial services. In response, Gruenberg pointed to various relatively new technological solutions that could address this issue.

Mobile Banking

“Mobile financial services can provide account information from virtually any location, at any time. Along with this information, mobile financial services can provide tools consumers can use to manage their finances, conduct transactions, and avoid potential problems such as overdrafts, late fees, and fraud,” he said.

Quoting again, from the FDIC survey, he said 68% of unbanked households and more than 90% of underbanked households own a mobile phone. Also, underbanked mobile phone users are more likely to have used mobile banking and are more likely to rely on it as their primary banking method than fully-banked households.

However, the data indicate more could be done to encourage such use, specifically among households headed by individuals with disabilities. Less than 40% of these report having a smartphone and, even among banked households, those headed by an individual with a disability were only half as likely to use mobile banking relative to others (14% versus 30%)

“This difference suggests an opportunity to learn whether and how mobile technology can be better used as a tool for financial inclusion for individuals with disabilities,” Gruenberg said.

Prepaid Cards

Overall, between 2009 and 2013, the proportion of unbanked households that indicated they had ever used a prepaid card more than doubled—most recently, data indicate that more than one in four unbanked households have used prepaid cards. Looking just at households headed by individuals with disabilities, 13% used prepaid cards within the prior year.

“Consumers using prepaid cards generally report that they received them from nonbank sources, but are using them to conduct the same sort of day-to-day transactions associated with bank accounts,” Gruenberg said. “It may be interesting then to learn that almost half, 46.5%, of unbanked households that used prepaid cards in the last year report that they are somewhat or very likely to open a bank account in the future.”

Direct Deposit

While FDIC’s data showed that, in general, one in five households that recently opened a bank account said a new job contributed to their decision. However, for those households headed by a person with a disability, the main reason they decided to open a bank account was because of the availability of direct deposit.

“Nearly half of recently banked households headed by an individual with a disability said they opened the account mainly to receive direct deposit of a paycheck or benefits. Taken together, these results suggest that interventions or product features designed to help households maintain and renew their banking relationships through economic challenges may reduce unbanked rates over time,” he said.