Research from the Federal Deposit Insurance Corporation shows that there are many reasons consumers lack a basic transaction account: not enough money for the minimum balance; distrust of financial institutions; high or unpredictable fees; or identification, credit or banking history problems. Many Americans are driven to use expensive alternative financial services, including check cashers, payday lenders, and pawn shops that charge high fees for financial services that fail to help people get ahead. Without a checking account, families wind up paying too much for basic financial transactions and are hard pressed to build savings and assets.
- Close to 7% of U.S. households (approximately 14 million adults) are “unbanked,” without a checking or savings account.
- Almost 20% of U.S. households (approximately 50 million adults) are underbanked, meaning they still use some fringe financial services.
- Nearly 37% of unbanked and 45% of underbanked households earn less than $30,000 per year.
- Nationally, more than half of black households and 46% of Hispanic households are unbanked or underbanked, compared to less than 20% of white households.
Why do basic transaction accounts matter?
A basic transaction account is an important first step in establishing a mainstream banking relationship, depositing earnings securely, accessing credit, and saving for the future. Unbanked and underbanked individuals lose the cost savings and stabilizing benefits such an account provides, such as:
- Cost savings: The average unbanked person spends 5% of net income on unnecessary fees for alternative financial services. This can amount to $40,000 over a lifetime—a significant amount for those who can least afford it.
- Asset building: Without a bank account, a family lacks the ability to save reliably or automatically, or establish a banking relationship that can lead to accessing affordable credit for opportunities like a car, small business, or home mortgage.
- Public safety: Without a safe place to deposit their money, unbanked people are more likely to be victims of crime because they often carry large sums of cash with them or keep cash in their homes. Elderly, disabled, or undocumented immigrants can be particularly vulnerable.
- Financial stability: Research shows that being unbanked makes it harder to achieve financial goals like reducing debt and improving credit scores.
The CFE Fund works directly with national and regional financial institutions to encourage the widespread availability of safe, low cost transactional products.
One key challenge facing unbanked and underbanked individuals has been a lack of safe and appropriate accounts offered by mainstream financial institutions, particularly those without overdraft.
The CFE Fund has worked closely with the Bank On National Advisory Board and other key stakeholders to develop the Bank On National Account Standards. Inspired by the Federal Deposit Insurance Corporation’s Model Safe Accounts Template, these standards provide local programs with a benchmark for account partnerships with financial institutions, including their local partners. Financial institutions with accounts that meet these Standards can apply free for national certification here.
The CFE Fund provides grant opportunities to support the capacity of local Bank On coalitions, and pilots effective banking access strategies, including municipal integration opportunities.
Inserting safe and affordable bank and credit union accounts into the infrastructure of municipal social service programs to facilitate payments can help Bank On programs both reach and support their target population at scale.
Funded pilots include efforts to expand banking access through municipal summer youth employment programs, in rural communities, through public housing payments, through utility payments, and for people on parole. To read more, click here.
The CFE Fund’s Capacity Grant Fund supports local coalitions in adopting the Bank On National Account Standards and the Bank On Fellowship program provides leadership support to multiple cities’ coalition leadership. In addition, the CFE Fund provides technical assistance resources through its Bank On Coalition Playbook, sharing best practices and lessons learned for Bank On coalitions and the asset building field.
The CFE Fund gives voice to local coalition experiences by informing both federal regulatory policy and bank practices.
The CFE Fund works to catalyze and coordinate efforts among local coalitions to liaise with federal policy makers, regulators, financial institutions, local government, and the nonprofit community. By translating local opportunity and experience to a national voice, Bank On’s successes can be maximized.
The CFE Fund engages with a range of federal regulators, including the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the National Credit Union Administration and the US Department of the Treasury.
CFE Fund and Bank On
The CFE Fund’s mission is to leverage municipal engagement to improve the financial stability of households with low and moderate incomes by embedding financial empowerment strategies into local government infrastructure. As part of this work, the CFE Fund leads a national movement supporting local Bank On coalitions with strategic and financial support, as well as by liaising with national banking, regulatory, and nonprofit organization partners to expand banking access and connect it to municipal entities and services.
This report, Making the Case for Banking Access: Talking to Unbanked People About Bank Accounts, explores effective messages for communicating with those who are unbanked about the value of safe accounts. The CFE Fund commissioned strategic communications firm RALLY and polling research firm PSB to field a multi-city series of focus groups and surveys to uncover what types of messaging would most effectively move unbanked people to open accounts; a subset of the research focused on the financial attitudes, habits, and goals of unbanked people, as well as on Spanish-speaking unbanked people and how messages might best engage them to open accounts.
The CFE Fund’s 2019 Bank On National Conference in Washington, DC brought together key stakeholders from multiple sectors across the country: local Bank On coalition program leads and their community partners, Mayors, city administrators, tribal governments, financial institutions large and small, federal banking regulators, national nonprofit organizations, philanthropic partners, consumer advocates, and more.
The conference included a lunchtime conversation on exploring the municipal connection to Bank On with Mayor Keisha Lance Bottoms of the City of Atlanta, GA; Mayor Chokwe Antar Lumumba of the City of Jackson, MS; and Mayor Frank Scott Jr. of the City of Little Rock, AR. Conference topics also included early findings from a national research study on effective communication strategies for unbanked consumers; perspectives from high-level federal banking regulators on banking access; insights from financial institutions of all sizes on investing in Bank On certified products; and best practices on banking access connectivity and integration into community programs.
The CFE Fund supports local Bank On coalitions through best practices found in our Bank On Coalition Playbook. Chapters cover a range of topics; newly-released chapters include best practices for Programmatic Banking Access Integration, a handout for financial institutions on the benefits of Bank On National Account Certification, guidelines for Launching or Relaunching a Coalition, local Strategies for Navigating Financial Institution Partnerships and Account Certification, a Bank On Coalition Logic Model, a guide for using local Bank On data from the Bank On Data Pilot, and an annotated version of the 2019-2020 Bank On National Account Standards.
This press release announces that 28 banks and credit unions with over 21,300 branches now offer accounts meeting Bank On National Account Standards, newly updated for 2019-2020. Low-cost, low-fee, no-overdraft financial products that meet these national Standards are now already available across all 50 states and the District of Columbia at banks and credit unions that range in size from as many as 2 branches to as few as 5,500 branches.
In partnership with the Federal Reserve Bank of St. Louis, the Bank On Data pilot collected and measured quantitative data on 2017 Bank On certified account usage at four pilot financial institutions with certified accounts: Bank of America, JPMorgan Chase, U.S. Bank, and Wells Fargo. The pilot reveals the kinds of relevant account data that can be collected, how it might be collected, and what it might show; as well, this pilot highlights the benefits of a central reporting system for financial institutions with Bank On certified accounts and for their coalition partners across the country. Read the full report on this pilot here: The Present and Future of Bank On Account Data: Pilot Results and Prospective Data Collection.
Learn more about the National Bank On Data pilot and download the anonymized dataset here.
Capacity building grants support local coalitions in adopting Bank On National Account Standards and in ongoing operations of local Bank On initiatives.
Updated Standards include expanded allowable bill pay functionality, along with core features such as low-cost, low-fee, no-overdraft transaction capabilities.