Friday, September 14, 2012

More People Have No Bank - Using Alternative Services

2011 FDIC National Survey of Unbanked and Underbanked Households

[From the] Executive Summary

Federal Deposit Insurance Corporation (FDIC)
September, 2012

Section 7 of the Federal Deposit Insurance Reform Conforming Amendments Act of 2005 (Pub. L. 109–173)  calls for the FDIC to conduct ongoing surveys, “on efforts by insured depository institutions to bring those individuals and families who have rarely, if ever, held a checking account, a savings account or other type of transaction or check cashing account at an insured depository institution [‘unbanked’] into the conventional finance system.”  Unbanked households are those that lack any kind of deposit account at an insured depository institution. Underbanked households hold a bank account, but also rely on alternative financial services (AFS) providers.  Fully banked households are those that have a bank account of any kind and have not recently relied on any of the AFS included in 
the survey.  What follows are key findings of the latest report by the FDIC

Key Findings

More than one in four households (28.3 percent) are either unbanked or underbanked, conducting some or all of their financial transactions outside of the mainstream banking system. Many of these households rely on AFS providers, while others use cash or other financial arrangements. 

• 8.2 percent of US households are unbanked. This represents 1 in 12 households in the nation, or nearly 10 million in total. Approximately 17 million adults live in unbanked households.

• The proportion of unbanked households increased slightly since the first survey. The estimated 0.6 percentage point increase represents an additional 821,000 unbanked households.
• 20.1 percent of US 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, although the proportions are not directly comparable because of differences in the two surveys.

• 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 types of AFS products. In all, 12 percent of households used AFS products in the last 30 days, including four in ten unbanked and underbanked households.

Financial Situation for Unbanked Worsened, Report Says
Ten million households, or one in 12, are unbanked, said the Federal Deposit Insurance Corporation (FDIC) in its National Survey of Unbanked and Underbanked Households, using 2011 data, the second survey of its kind.
The number of unbanked households increased since the FDIC’s first survey in 2009, growing 0.6 percentage points to 821,000.
Meanwhile, 20.1 percent of U.S. households are underbanked, meaning they have a checking and/or savings account but have used non-bank money orders, non-bank check cashing services, remittances, payday loans, pawn shops and other non-traditional banking means.
“It’s significant and positive that a respected public agency continues to track and study the issue of financial inclusion and, in this case, to note that the problem has, if anything, grown worse since its landmark 2009 study,” said Timothy Flacke, executive director of the nonprofit Doorways to Dreams (D2D) Fund, which makes financial products for low- and moderate-income consumers.
Flacke said the FDIC study highlights a basic fact, that “those who are disconnected from the financial system are at a significant disadvantage in trying to save and build financial security.”
The report says almost a third of U.S. households, 29.3 percent, do not have a savings account.
Flacke said that is one reason why his non-profit organization, based in Allston, Mass., supports the U.S. Savings Bond program, especially for those who are not connected or fully connected to the private financial system.
He said the FDIC study also highlights the need for innovation to make sure more people are included in the financial system.
That is reflected in the Treasury Department’s recent decision to run a public challenge, called MyMoneyAppUp, in partnership with D2D Fund and theCenter for Financial Services Information, to encourage new mobile technologies to increase financial access.
The challenge asked the public to submit ideas to help Americans “shape their financial futures” for cash prizes up to $10,000. Winners of the challenge will be announced Sept. 28.
“The lack of progress in increasing financial system participation between the 2009 and 2011 FDIC studies suggests new approaches are needed to increase financial inclusion,” Flacke said.

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