Editor’s note: This column was included in the Nov. 21 version of The Pulse, a weekly BankBeat newsletter sent to subscribers.
One of the first things I learned when I started covering community banking nearly 3 1/2 years ago was that bankers want to help as many customers as they can while introducing more people into the banking system.
The results of the recent FDIC biennial survey of unbanked households provide validation that the goal is being met. According to the survey, 96 percent of U.S. households were banked in 2023, leaving only 4 percent unbanked. That’s down from a record high of 8.2 percent in 2011.
The survey also revealed room for banks to onboard more customers. Single-parent, disabled, Black, Hispanic, less-educated and lower-income households were disproportionately unbanked, according to the FDIC. Two-thirds of unbanked households relied entirely on cash, while one-third used a combination of prepaid cards or nonbank online payment services. Another 14 percent of households were underbanked, meaning they had a bank or credit union account but mainly used nonbank products and services.
To reach more of the unbanked and underbanked, community bankers can rely on their strength as a trusted community institution while offering financial literacy programs. Also, training staff and working with other community groups can help foster trust for those currently shut out of the banking system.
Many community banks are already adept at reaching out to underserved communities. St. Cloud, Minn.-based Stearns Bank recently opened a loan and deposit production office inside HmongTown Marketplace in St. Paul. The branch offers culturally-nuanced financial services for the Hmong community. St. Louis-based Midwest BankCentre opened its first cashless bank in 2023 in an underserved area of the St. Louis metro. The branch was seen as especially needed as there were 35 payday lending businesses providing capital to consumers at upwards of 400 percent APR within a five-mile radius of the branch.
Midwest BankCentre also established an alternative to payday lending that removes credit score as the primary consideration to access bank credit. Instead, the product relies on income verification and longevity of employment history to underwrite and extend credit.
The FDIC survey also included indications that more consumers are accessing mobile banking. Nearly half of banked households in 2023 used mobile banking as the main way to access their accounts. That number has increased nearly ninefold during the past decade. The use of bank tellers has fallen more than 50 percent.
Banks have already established themselves as the primary method consumers access their financial services. Proactively looking to expand services to areas with a disproportionate number of unbanked or underbanked residents, and adjusting to mobile banking trends, will make the number of Americans with a bank account even higher.
