The Federal Deposit Insurance Corporation convened a meeting last week in Washington DC as part of the agency’s broader efforts to expand access to the financial system. Hosted by the FDIC’s Advisory Committee on Economic Inclusion, the meeting covered a variety of topics extraordinary Results of a survey of 30,000 American households.
Simply put, the number of American households without a bank account or credit union The 2023 National Survey found that the number of households without a bank account or credit union has been low: 4.2 percent of US households, or about 5.6 million households. That’s the lowest the FDIC has ever documented, nearly halving since its peak in 2011.
The reasons for this progress are multiple and complex. Lobbyists seeking to influence various regulations warn that if the policy is changed (or not changed), many of those gains will be lost. But with shared unpublished internal FDIC documents luck Exhibition regulation is not among its key “areas of opportunity”; technology is the main driver of progress.
“I don’t know that politics has been a big part of this story,” Keith Ernst, associate director of the FDIC’s deposit and consumer protection division, said in an interview. luck During the recess of the Advisory Board meeting. “If you look at the last decade, what you have seen is innovation inside industry”.
Specifically, Ernst says the biggest difference is a relatively simple technological development: so-called secure accounts. originally start up After the FDIC piloted it with nine banks in 2011, the secure accounts followed a publicly available one. the model which leveraged banks’ more efficient back-end technology to provide low-income users with easy access to the accounts of interest. FDIC-insured accounts had no debit or sufficient funds fees, and had very low or no minimum deposit requirements. A year later 95% of newly created accounts were still in use.
In 2015, the non-profit Cities Financial Empowerment Fund start up Bank On standard inspired by FDIC pilot. The standard has been adopted by more than 470 banks and credit unions, including Chase, Wells Fargo, Bank of America and Citi. Last year 47,000 branches and approximately 100 state and local coalitions deposited more than $174 billion into 11 million accounts, four million of which were new.
“These accounts have been adopted in large numbers among the population,” says Ernst. “They’ve been popular in unbanked households before, but also in other households.”
Speaking of the potential impact of these accounts, the 94-page FDIC report found that the number one reason for being unbanked is not having enough money to meet the minimum balance. The third reason is that the fees are high. The second reason, which may not be solved with a new account, is that people do not trust banks.
Bank of America’s Zelle could fill Venmo’s void
Some tout cryptocurrency and buy-now-pay-later product technologies helping the unbanked, but the FDIC report found no evidence to support the claims. In fact, the only technology specifically mentioned as an area of opportunity in the unreleased FDIC documents is “banking system P2P transfers (eg Zelle).” Zelle is a product of Early Warning Services, owned by a consortium of US banks.
Although the survey found that non-banking services are pleasing PayPalVenmo and Cash App were used by 51% of banked households, while only 20% of unbanked households used the services. One theory of the disparity, discussed by FDIC officials at a press conference earlier this week, is that having a bank account is the most common way to get money into these services in the first place, a problem that Zelle, which owns the bank Zelle, could solve.
While Ernst sees the steady rise in the number of Americans in the bank as a victory for the free market, some lobby groups warn that progress could be undone by ill-conceived controls.
The Consumer Bankers Association, a nonprofit that represents banking interests, says regulations that lower rates, as does the CFPB. proposed overdraft rule it may be financially infeasible for banks to serve low-income neighborhoods. The nonprofit Community Reinvestment Coalition says an updated A version of the Community Reinvestment Act that requires banks to serve low-income communities could also increase access to banking.
“The long-term trend is that financial services are becoming more and more important in the lives of Americans,” says Ernst. “But these trends we’re seeing are not forgone effects.”
