Most personal finance coverage assumes that consumers have access to credit cards and checking and savings accounts, but that’s not always the case. In fact, research shows that millions of Americans are unbanked (without access to traditional bank products) or underbanked (with poor access to mainstream financial products). The statistics may surprise reporters and readers alike. Here are some stats to help jumpstart your coverage of underserved consumers in your community.
8 facts about unbanked, underbanked and underserved consumers
1. Consulting firm Accenture estimates that bringing unbanked adults and businesses into the formal banking sector could generate about $380 billion in new revenues for banks in emerging markets by 2020.
2. An estimated 9 million U.S. households (7 percent overall), which includes 15.6 million adults and 7.6 million children, were unbanked in 2015, according to the Federal Deposit Insurance Corporation (FDIC).
3. That same FDIC report shows that an additional 24.5 million U.S. households, including 51.1 million adults and 16.3 million children, were underbanked in 2015.
4. A June 2016 report from Pew Charitable Trust cites an even higher number of unbanked American adults: approximately 37 million.
5. Sixty percent of unbanked adults in Pew’s survey cited high or unpredictable overdraft fees as their reason for being unbanked.
6. The Center for Financial Service Innovation’s 2016 Financially Underserved Market Size Study found that financially underserved Americans spent approximately $141 billion in fees and interest during 2015 to borrow, spend, save and plan.
7. A 2015 report from the Consumer Financial Protection Bureau (CFPB) found that 26 million (one in 10) Americans are credit invisible, meaning they do not have any credit report (these people may or may not have bank accounts).
8. That same CFPB report shows that in low-income neighborhoods, almost 30 percent of the population is credit invisible; in upper-income neighborhoods, only 4 percent of the population is credit invisible.
• Explore the products unbanked people in your community use to transact. What are the fees and limitations associated with prepaid debit cards, check-cashing services and money transfer options? How quickly are funds available? CFSI runs a simulation called FinX (full disclosure: this writer participated in FinX on June 16 and was shocked when her $15 check was reduced to $10.50 after fees), but you could also visit service providers in your area and test out transactions yourself or shadow someone in your community to see what hurdles they face. Those who are used to direct deposit and mobile check deposit may be surprised by how much time and money it takes to cash a check without a bank account.
• Examine why people in your community are unbanked or underbanked. Do they distrust the traditional banking system? Or maybe they can’t easily get to a bank or credit union during business hours? Perhaps they can’t pass a background check? Do immigrants make up a disproportionate number of the unbanked in your region? Don’t assume that unbanked people are ignorant or lazy.
• Seek out the people or organizations in your community that aim to bring greater access to the unbanked. Are there credit unions offering fresh-start checking accounts or credit cards to people who’ve been shut out of traditional banking due to past mistakes? Or community programs (such as the Wharton School’s Building Bridges to Wealth in Philadelphia) providing financial education?