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 5% of U.S. households (approximately 12 million adults) are “unbanked,” without a checking or savings account.
- Almost 11% of U.S. households (approximately 24 million adults) are underbanked, meaning they still use some fringe financial services.
- Nearly 34% of unbanked and 45% of underbanked households earn less than $30,000 per year.
- Nationally, 48% of Black households and 42% of Hispanic households are unbanked or underbanked, compared to less than 14% 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 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.