The Bank On initiative has been addressing the needs of the unbanked throughout the United States by certifying secure and certified bank and credit union accounts. These accounts are specifically designed from feedback from the unbanked and underbanked
populations that are left outside of the financial mainstream, whose needs and concerns have been neglected in the past.
Jonathan Mintz, president and CEO of Cities for Financial Empowerment Fund (CFE), a non-profit organisation that supports local and state government efforts to encourage financial empowerment programmes and opportunities into public services, outlined the
significant strides being made to bank the unbanked and underbanked populations in the US.
A 2021 survey conducted by the Federal Deposit Insurance Corporation (FDIC) revealed that 4.5% of US households, or 5.9 million people, remain unbanked and 14.1% of U.S. households, or 18.7 million people, remain underbanked. While this is the lowest rate
of the unbanked population since the survey first took place in 2009, there are millions of people in the US who are still outside of the financial mainstream.
The CFE is currently working in over 100 cities, counties, and states in the US alongside federal partners such as the FDIC, the US Department of the Treasury, and the Consumer Financial Protection Bureau (CFPB) and heads the Bank On programme.
Bank On works in partnerships with industry leaders like the American Bankers Association, federal regulators, and over one hundred Bank On coalitions made up of community partners around the country. These coalitions work towards ensuring local governments’
payments streams are accessible, and expanding the market of safe, affordable transactional accounts.
Bank On accounts were designed specifically for the unbanked and underbanked populations whose concerns about being banked were recorded in the FDIC’s
National Survey of Unbanked and Underbanked Households. The report found that the main reasons for which households cited they remain unbanked was not being able to meet minimum balance requirements, lack of trust in banks, and a desire for privacy by avoiding
banks.
Certified Bank On accounts have no minimum opening balance and no additional fees, including dormancy fees, closure frees, and overdraft fees. Now, Bank On has over 300 certified publicly available accounts available in every state in the US, in 53% of every
bank branch in the country, representing 60% of the US deposit market share and the majority of the American banking model.
Mintz reflects that there has been a massive growth in both the availability of the accounts and the demand for them which have been embraced by the financial industry in the US: “82% of people who open up Bank On certified accounts are new to the financial
institution, which is the best proxy we are going to get as to whether or not they are newly getting banked as opposed to just switching financial institutions.
“Our strategy is to ask ourselves ‘what is it that connects people to these good accounts?’, and the answer is not financial literacy. It’s not advertising. In our opinion, it is about connecting banking into the streams of government payments. People trust
when the government tells them that Bank On accounts are not a potentially predatory, fake bank service. We are not telling people that they are not smart enough to know that an account is a good idea, but instead: ‘we hear you, we know what you are
telling us you need, and we have got it for you.’ I think that this approach shows the kind of respect that people need and deserve and that resonates.”
The FDIC research revealed that the underbanked population in the US was overrepresented by people of colour. As a result, 60% of Bank On accounts were opened in branches in areas populated predominantly by people of colour, 46% in areas with a moderate
to low income, and the amount of people of colour registering for Bank On accounts increased.
Mintz expresses optimism on the impact of Bank On, citing the FDIC’s finding that the fear over fees decreased from 38% in 2019 to 29% in 2021, indicating that over a million households are finding accounts that address their needs. Additionally, in 2021,
the American Banker’s Association
found that 94.8% of low and moderate income households had access to branches in their neighborhood offering Bank On certified accounts, rising from 65.4% in 2015.
“I think it's important for people to understand that being banked isn't just an adjective - that being banked is a fundamental stabilising economic tool for people,” Mintz states.
Mintz repeats a familiar statistic for the unbanked, that they spend roughly $40,000 in banking fees over their lifetime, but he emphasised that there was more harm being done to the unbanked population. As an example, Mintz reflected on the
results of research the CFE previously conducted among their public counselling programmes in dozens of US cities. The findings determined that unbanked financial counselling clients
are half as likely to build their savings in a meaningful way and a third as likely to create a new credit score, even though they were working repeatedly with a professional financial counsellor. When clients got banked in course of this counselling, they
became eight times more likely to build savings than if they didn’t.
“I think when you see people who are repeatedly trying to improve their finances have their hands tied behind their back if they don't have a bank or credit union account, it underscores not just why banking is important, but why banking is actually fundamental
to all sorts of other social investments in improving people's conditions. I'm talking about workforce programmes, domestic violence programmes, foreclosure prevention programmes, and more. That's why we do this work.”
The FDIC research found that the number of unbanked households in the US decreased by 17%, from 5.4 to 4.5 million. The data reflected that 44% of people who opened accounts did in response to the stimulus payments.
Bank On worked with the FDIC and the IRS in a critical period while stimulus checks were being dealt out in the US at the height of the pandemic. While millions of Americans needed stimulus checks and were frightened about leaving their homes, the IRS notified
them that receiving direct deposits through an online, certified Bank On account was their safest and fasted option.
Mintz speaks enthusiastically about the impact of the data: “For us this was really exciting and unexpected news, especially in the middle of a pandemic. Usually when the economy is taking a downturn people retract and constrict their financial steps. Not
only were 1.2 million more households getting banked, but almost half of them said it was because of that opportunity. That really underscores the collective efforts of the IRS, the FDIC, and the Bank On movement. Our coalitions around the country are helping
to make those connections to this idea that if you have the right account, and government is comfortable pointing people to it, you can connect that account into payment streams and really make a difference at scale.”
Expanding on his estimation that the lack of financial literacy is not the main challenge for the unbanked, Mintz notes that half of unbanked people used to have a bank or credit union account, are aware that those in a higher income bracket have bank accounts,
and are likely working hard to maintain their non-traditional financial protocols.
“I think that saying that the unbanked ‘just don't know enough’ is an old-fashioned excuse to absolve responsibility for the fact that there have been so many surprise and unfair fees,” He continues.
“Bank On’s approach is to design an account that is safe, where a customer can’t get in trouble and where the financial institution also can't get in trouble.”
Mintz concludes that the main issue that people are unbanked is that they feel that they do not have control over their money, and that they do not trust the banking system. With initiatives such as Bank On, the needs of the people are being directly addressed.
For more information about the Bank On initiative from the Cities for Financial Empowerment Fund click here.