Unbanked

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The unbanked are adults who do not have their own bank accounts. Along with the underbanked, they may rely on alternative financial services for their financial needs, where these are available.

Some reasons a person might not have a bank account include:^{[citation needed]}

• Lack of access via a nearby bank branch or mobile phone
• Minimum balance fees
• Distrust of the banking system, typically due to lack of transparency regarding fees and deposit timing^[1]
• No access to government-issued ID, which is required to open a bank account
• To avoid delinquent debts, such as creditors seizing the account in judgements, or the government collecting back taxes or child support

The unbanked are described by the Federal Deposit Insurance Corporation (FDIC) as those adults without an account at a bank or other financial institution and are considered to be outside the mainstream for one reason or another. The Federal Reserve estimated there are 55 million unbanked or underbanked adult Americans in 2018, which account for 22 percent of U.S. households.^[2][3]

One report found the nationwide rates to be 7.7% unbanked and 17.9% underbanked, with the most unbanked state Mississippi, at 16.4%. Places where over 20% of residents have no bank accounts include Miami, Florida; Detroit, Michigan; Laredo, Texas; Newark, New Jersey; Hialeah, Florida; Hidalgo County, Texas; The Bronx; and Cameron County, Texas. Many counties with fewer than 100,000 residents had even higher rates, including Starr County, Texas, at 32.7%. Some census tracts in Savannah, Georgia; Cleveland, Ohio; Nashville, Tennessee; and Atlanta, Georgia had over 40% unbanked residents.^[4]

The majority of the unbanked and underbanked individuals are American-born, with a growing number being immigrants. Both groups share low income as a common characteristic and lack the minimum balance required to open checking and savings accounts.^[5] According to Congressman Rubén Hinojosa, half of the unbanked had a bank account previously but are choosing not to have an account and opting to using the services of check cashers and payday lenders instead. Research has shown that immigrants who have experienced a banking crisis in their countries of origin are significantly less likely to have bank accounts in the U.S.,^[6] and researchers also found that lower rates of financial market participation tend to persist even for immigrants who have lived in the U.S. for several years.^[7] Attributes that contribute to these decisions, however, vary for each racial/ethnic group.^[8]

Governor Arnold Schwarzenegger started the Bank on California initiative to help the unbanked in 2008. Previously, in 2001, a financial education curriculum called Money Smart was launched by the FDIC to help the financially unsavvy.^[9] Economist Lisa Servon comments that lack of financial education as a reason for using services other than banks is often an inaccurate stereotype.^[1]

Prior to becoming the FDIC chair in 2006, Sheila Bair ran a research project for the Inter-American Development Bank at the University of Massachusetts Amherst to discover ways to help unbanked Latin American immigrants use the U.S. banking system. She found that the primary reason recent Latino immigrants often do not use banks to remit money is because they are undocumented. Around the same time, the Treasury Department put in place Section 326 regulations that allow banks and credit unions to accept identification from foreign governments at their own discretion.^[10] Banks like Mitchell Bank in Milwaukee have taken up the Treasury Department on their relaxing of identification standards. They have even "offered pamphlets on how to apply for a Wisconsin state ID and driver's license, and invited the Mexican consulate in Chicago to visit with a mobile unit that issues 'matricula' cards".^[11] In Chicago, the Consul General of Mexico, Carlos Sada, estimated that up to 25% of applicants of the Matrícula Consular ID apply in order use it to acquire U.S. bank accounts.^[12]

A U.S. federal law signed in 1996 contained a provision that required the federal government to make electronic payments by 1999. As a part of implementation of the provision, in 2008 the U.S. Treasury Department paired with Comerica Bank to offer the Direct Express Debit MasterCard prepaid debit card. The card is used to make payments to federal benefit recipients who do not have a bank account.^[13]

As of 2017, approximately 1.7 billion people remain unbanked in emerging economies.^{[where?][vague]} This number has decreased from 2.5 billion people in 2014. ^[15]

• De-banking
• Underbanked

• Choe, Christopher (2009). "Bringing in the Unbanked off the Fringe: The Bank on San Francisco Model and the Need for Public and Private Partnership" (PDF). Seattle Journal for Social Justice. 8 (1).
• World Bank Global Financial Inclusion Database: Measures how people in 148 countries - including the poor, women, and rural residents - save, borrow, make payments and manage risk
• More Americans Choosing the Unbanked Life According to National Survey (2012)
• 2017 FDIC National Survey of Unbanked and Underbanked Households with links to previous surveys