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 4.5% of U.S. households (approximately 5.9 million adults) are “unbanked,” without a checking or savings account.
- Almost 14.1% of U.S. households (approximately 18.7 million adults) are underbanked, meaning they still use some fringe financial services.
- Nearly 29.2% of unbanked and 38.1% of underbanked households earn less than $30,000 per year.
- Nationally, 36% of Black households and 33.4% of Hispanic households are unbanked or underbanked, compared to less than 12% 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.
The CFE Fund and the Federal Reserve Bank of St. Louis partnered to create the Bank On National Data (BOND) Hub, which aggregates national Bank On account activity related to account openings, usage and consistency, and online access.
The latest BOND Hub report, The Bank On National Data Hub: Findings from 2021, provides an interactive look at findings from 2021 data collection featuring 28 reporting financial institutions. The report finds that to date, more than 14.1 million Bank On certified accounts have been opened by consumers across the county; customers have opened these accounts in 85% of US zip codes. Further, 80% of Bank On accounts opened in 2021 were opened by customers who were new to the financial institution, demonstrating that Bank On accounts are bringing new customers into financial institutions and the financial mainstream.
The CFE Fund recently submitted a comment letter to the U.S. Department of Treasury on the proposed revisions to the Community Development Financial Institution (CDFI) certification application. The letter is specifically supportive of the inclusion of an expanded question evaluating a financial institution applicant’s checking or share account features and its use of Bank On National Account Standards as a guide. It’s a clear recognition of the impact of the Bank On national movement and the critical importance of safe and affordable banking options to meeting the broader mission of the CDFI program.
The CFE Fund recently submitted a comment letter to the Federal Reserve Board, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) on their proposal to amend the regulations implementing the Community Reinvestment Act (CRA).
Citing experiences from the Bank On movement, as well as the FEC Public initiative, the CFE Fund supported the proposal for a new Retail Services and Products Test that would evaluate a bank’s branch availability, delivery systems, and the responsiveness of their products to the needs of low- and moderate-income communities; the CFE Fund also supported the highlighting of the Bank On National Account Standards as an example of a responsive deposit product. The CFE Fund suggested that the new Retail Services and Products Test 1) evaluates all large banks for the responsiveness of their deposit products; 2) enables “intermediate” sized banks to elect the Retail Services and Product Test; and 3) looks to the Federal Reserve Bank of St. Louis’ Bank On National Data Hub as an example of key metrics that examiners might use to assess financial institution account engagement.
Finally, the CFE Fund supported the agencies’ proposal to create a separate definition for activities that help individuals and families make informed decisions about managing income, savings, credit, and expenses that is distinct from other community development services, and suggested highlighting activities that produce measurable impacts such as banking access, credit score improvement, debt reduction, and savings increases.
Just eight months after the 100th account was Bank On certified, the Cities for Financial Empowerment Fund (CFE Fund) announced there are now 200 bank and credit union accounts nationally certified as meeting the Bank On National Account Standards. Banks and credit unions offering certified accounts comprise over 56% of the U.S. deposit market share, and 47% of all US bank branches offer a certified account. Over 3.8 million Bank On certified accounts were open and active in 2020, in 80% of US zip codes, according to the Federal Reserve Board of St. Louis’ Bank On National Data Hub.
“From federal payment streams like the stimulus and Child Tax Credit, to state and local programs like unemployment benefits or workforce development, the availability of a safe and affordable, no-overdraft-fee banking account to receive and use funds has never been greater,” said Jonathan Mintz, President and Chief Executive Officer of the Cities for Financial Empowerment Fund. “The Bank On movement has grown exponentially: in every state in the country, there are now more than 200 banks and credit unions, comprising more than half of the country’s deposit market share, that offer a Bank On certified account, and over 90 local Bank On coalitions working energetically to connect consumers to these products and the financial mainstream.”
Bank On works to ensure that everyone has access to safe and affordable financial products and services. The Bank On National Account Standards identify critical product features for appropriate bank or credit union accounts, making it easier for local coalitions across the country to connect consumers to accounts that meet their needs. Core account features include low costs, no overdraft fees, robust transaction capabilities such as a debit or prepaid card, and online bill pay. The CFE Fund recently announced a partnership with ChexSystems that reflects the greatly diminished risk factors in an account designed not to be overdrawn; ChexSystems is offering a new, Bank On-specific customer review strategy that will facilitate enrolling more customers into Bank On certified accounts.
The Federal Reserve Bank of St. Louis’ Bank On National Data Hub found that 80% of consumers opening Bank On certified accounts at reporting institutions were new banking customers. Additionally, Bank On is making banking more inclusive, with more Bank On branches available in areas with more people of color: close to 60 percent of Bank On certified accounts were opened by customers in areas with 50+ percent minority population. These accounts can expand access to safe and appropriate transactional accounts to the almost 36 million people outside of the mainstream financial system.
The CFE Fund and the Federal Reserve Bank of St. Louis partnered to create the Bank On National Data (BOND) Hub, which aggregates national Bank On account activity across three categories of metrics: Account Opening, Account Usage and Consistency, and Online Access.
The latest BOND Hub report, The Bank On National Data Hub: Findings from 2020, includes key takeaways from the 2020 data collection featuring 17 reporting financial institutions. The report found that 3.8 million accounts were open and active in 2020, representing about 80% of U.S. ZIP codes, and that 82% of Bank On accounts opened in 2020 – more than 4 out of 5 accounts – were opened by customers who were new to the financial institution.
Read the report now, and learn more about reporting your Bank On certified account data to the BOND HUB.
The CFE Fund’s Bank On National Conference was held virtually on November 15 and 16, 2021, and brought together almost 500 Bank On stakeholders including Bank On coalition leaders, financial institutions, regulatory agencies, local government officials, and other partners. The Conference was recorded, and all sessions can be viewed at our Bank On National Conference channel. Conference highlights included a keynote address from Federal Deposit Insurance Corporation Chairman Jelena McWilliams; sector leader conversations with CFE Fund CEO Jonathan Mintz and Acting Comptroller Michael Hsu of the Office of the Comptroller of the Currency, US Representative Ed Perlumutter (CO-07), American Bankers Association President Rob Nichols, and Brookings Institution Senior Fellow Aaron Klein; and sessions on banking integrations at true scale, racial equity and banking, and communicating to the unbanked.
The CFE Fund announced that there are now more than 100 bank and credit union accounts nationally certified as meeting the Bank On National Account Standards. Banks and credit unions offering certified accounts comprise over 50% of the U.S. deposit market share, and 40% of all US bank branches offer a certified account; nearly two million Bank On certified accounts were opened in 2019. With the certification of BMO Harris’ Smart Money™ Account, BOM Bank’s EZ Checking account, Rio Grande Credit Union’s Fresh Start Checking, US Eagle FCU’s Flex Checking account, and Wintrust Community Banks’ Money Smart Checking account, there are now 108 accounts certified as meeting Bank On National Account Standards. These accounts can expand access to safe and appropriate transactional accounts to the almost 36 million people outside of the mainstream financial system, and can be used to receive and manage the federal Child Tax Credit and other emergency payments.
The CFE Fund recently submitted a comment letter to the Federal Reserve Board on Community Reinvestment Act (CRA) modernization. Citing experiences from the Bank On movement, as well as the FECPublic initiative, the CFE Fund recommended that the CRA examination process should credit financial institutions’ provision of safe and affordable banking accounts and support for meaningful financial inclusion efforts.
Bank On Certified Accounts Help Hundreds of Thousands of Residents Receive Stimulus and Other Emergency Payments Safely and with Social Distance
The CFE Fund announced today that 60 financial institutions with over 28,000 branches across the entire country now offer accounts certified as meeting newly updated Bank On National Account Standards (2021-2022). These low cost, no-overdraft, no-surprise-fee bank and credit union accounts have been highlighted by the Federal Deposit Insurance Corporation and other federal agencies in connecting people to claiming or depositing their Economic Impact (stimulus) and other emergency payments, and were recently embraced by the American Bankers Association. Products certified as meeting these national Standards are already available in 99 of the largest 100 metro markets, and in 50 states and Washington, DC, at banks and credit unions that range in size from 2 branches to 5,500 branches; financial institutions with Bank On certified accounts already comprise over 45% of the national deposit market share.
Today at the American Banker’s Association’s Unconventional Convention, ABA President and CEO Rob Nichols urged their thousands of members to offer a Bank On certified product. As part of this partnership announcement, the ABA notes working with nearly all of the nation’s core service providers to make it easier than ever for thousands of banks to offer Bank On-certified accounts, significantly growing the market of safe and affordable accounts available to residents across the country. Banks and credit unions across the country can explore and apply for Bank On certification at www.joinbankon.org/certify, joining the 60+ institutions across the country that already provide their communities with a certified account.
The time is now – and it’s not too late – to open a safe banking account to get unemployment money and other benefits faster & safer than a check. Visit covidbanking.joinbankon.org for details on which #BankOn certified accounts that can be opened online!
During this time, a safe, affordable and productive banking account is more important than ever – and the data continues to show that Bank On accounts are attracting new customers to the financial mainstream. Building off the CFE Fund’s partnership with the Federal Reserve Bank of St. Louis and a pilot study in 2017 , the St. Louis Fed’s Bank On National Data (BOND) Hub has released its latest report.
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.
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.