Yesterday, the Federal Deposit Insurance Corporation (FDIC) released the results of its "2011 National Survey of Unbanked and Underbanked Households." The FDIC conducts this survey every two years, in a partnership with the U.S. Bureau of the Census. Key findings from the survey:
- "8.2 percent of U.S. households are unbanked. This represents one in 12 households in the nation, or nearly 10 million in total. The proportion of unbanked households increased slightly since the 2009 survey. The estimated 0.6 percentage point increase represents an additional 821,000 unbanked households."
- "20.1 percent of U.S. households are underbanked. This represents one in five households, or 24 million households with 51 million adults. The 2011 underbanked rate in 2011 is higher than the 2009 rate of 18.2 percent..."
- "29.3 percent of households do not have a savings account, while about 10 percent do not have a checking account. About two-thirds of households have both checking and savings accounts."
- "One-quarter of households have used at least one AFS product in the last year, and almost one in ten households have used two or more AFS. In all, 12 percent of households used an AFS product in the last 30 days, including four in ten unbanked and underbanked households."
The survey included responses from about 45,000 households. The term "unbanked" refers to consumers who do not have a checking account nor a savings account. the term "underbanked" refers to consumers who have either a checking account or savings account, but not both. This is important because banks have targeted both unbanked and underbanked consumers with financial products and services-- typically prepaid cards and variations such as flexible spending health-care cards and payroll cards.
These prepaid cards, which often have numerous fees, and offer fewer rights for consumers than both credit cards and debit cards. Industry research has documented the perception by consumers, many of whom have bank accounts, that prepaid cards are a desirable method to avoid the expensive overdraft fees with debit cards. Some additional findings from the survey:
"The highest unbanked and underbanked rates are found among non-Asian minorities, lower-income households, younger households, and unemployed households. Close to half of all households in these groups are unbanked or underbanked compared to slightly more than one-quarter of all households... Among unbanked households, slightly more than half have never had a bank account. Relatively high proportions of Hispanic (14.7 percent) and foreign-born noncitizen households (18.9 percent) have never had an account. The most common reasons why households report they do not have bank accounts are that they feel they do not have enough money for an account, or they do not need or want one."
The specific banking rates by demographic groups:
|Demographic Group||UnBanked %||Underbanked %||Fully Banked %
|Households experiencing unemployment
|Lower income households (less than $15,000)
|Unmarried female head of households||19.1
|Households with people under age 24
By targeting unbanked and underbanked households, banks are trying to replace pay-day lenders and check cashing services, often referred to as "Alternative Financial Services" (AFS). The survey reported:
"AFS transaction products (i.e., non-bank money orders, non-bank check cashing, and non-bank remittances) are considerably more widely used than AFS credit products (i.e., payday loans, pawn shops, rent-to-own stores, and refund anticipation loans). In the last year, 23.3 percent of households used transaction AFS and 6.0 percent used AFS credit products. The relationship between household banking status and AFS use is complex. A non-trivial share of unbanked households (29.5 percent) do not use any of the AFS providers asked about in the survey, suggesting they rely primarily on cash. However, overall, unbanked households are more active AFS users than underbanked households."
Also, I found these survey results interesting:
"Having a bank account does not guarantee long-term participation in the banking system. Households can and do cycle in and out the banking system over time. For example, nearly half of unbanked households had an account in the past, and nearly half (48.2 percent) of these report that they are likely to join the banking system again in the future... Households with banking experience appear to have more positive perceptions of having an account and rely less on AFS. Unbanked households that previously had a relationship with a financial institution are more likely to see value in having a bank account than unbanked households without this relationship. Previously banked households are more likely to want to open an account in the future..."
Download the FDIC survey (Adobe PDF, 7.9 MBytes).