Access to Financial Products and Services
While many financial institutions offer basic checking accounts to all customers, many banks do not offer savings, payment, credit and electronically based products that address the unique needs of unbanked and underbanked customers. As a result, many unbanked consumers utilize check cashers, paday loans, and other costly products.
One of the reasons such products are not available is that banks are concerned about the profitability of doing business with unbanked and underbanked individuals. For instance, many of those who are unbanked have bad or no credit histories, have unstable incomes and cannot afford account fees, do not have proper identification such as social security numbers to open an account, and/or mistrust banking institutions.
Access to innovative financial products such as low monthly fee accounts, checkless checking accounts, second chance accounts, free money orders and/or utility payment options and the acceptance of alternative types of identification can increase participation in the traditional financial service industry for underbanked and unbanked individuals.
One of the reasons such products are not available is that banks are concerned about the profitability of doing business with unbanked and underbanked individuals. For instance, many of those who are unbanked have bad or no credit histories, have unstable incomes and cannot afford account fees, do not have proper identification such as social security numbers to open an account, and/or mistrust banking institutions.
Access to innovative financial products such as low monthly fee accounts, checkless checking accounts, second chance accounts, free money orders and/or utility payment options and the acceptance of alternative types of identification can increase participation in the traditional financial service industry for underbanked and unbanked individuals.
Resources:
CFSI Underbanked Consumer Study (February 2009)
Description: This study offers and evaluates information regarding market segment size, financial product use, desired marketing and communication approaches, financial service experiences, and demographic trends of the U.S. underbanked population—based on the financial needs, behaviors, and attitudes of the underbanked.
The Federal Reserve Bank of San Francisco - Bank On
Description: The Federal Reserve Bank of San Francisco has an overview, case studies, and resources related to the Bank on San Francisco program.
"Converting Basic Financial Services Fees into Prosperity: An Untapped Opportunity for Consumers and Banks" (September 2008)
Description: Fees generated frombasic financial services like overdraft protection and out-of-network ATM charges now add up to $58 billion in annual revenue for financial institutions. Yet, for as much money as is generated from these fees and for as controversial as they have become, very little is actually known about who relies on these fee-based services, which hinders the development of appropriate policy and market-based responses. Using data from a new survey of California households commissioned by the Annie E. Casey Foundation, The Brookings Institution, The Pew Charitable Trusts and the William J. Clinton Foundation, this paper examines the underlying market for four major basic banking fees.
Bank on San Francisco
Description: San Francisco was the first city in the country to launch a comprehensive initiative to bring its “unbanked” residents into the financial mainstream by helping people open low-cost starter accounts. Many other cities and some states have followed or modified the San Francisco model. This case study describes why and how Bank on San Francisco was started. It is written for individuals in other cities who may be considering similar initiatives.
CFSI's Innovators Showcase
Description: The Innovators Showcase includes success stories, case studies, and news briefs from top innovators who are transforming industry practice with "best-in-class" products and solutions for the underbanked market.
The FDIC’s National Bank and Household Unbanked and Underbanked Surveys
Description: In 2008, the FDIC conducted a nationwide survey of FDIC-insured depository institutions to assess their efforts to serve unbanked and underbanked individuals and families.
