 | The examples and perspective in this article may not represent a worldwide view of the subject.(September 2012) |
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 ]
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 are American-born while a growing number are immigrants where the two groups have low income as a commonality and lack the minimum balance 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 Matricula 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]
| State | Percent |
|---|---|
| Alabama | 7.6 |
| Alaska | 3.4 |
| Arizona | 4.0 |
| Arkansas | 7.1 |
| California | 5.6 |
| Colorado | 3.3 |
| Connecticut | 8.4 |
| Delaware | 2.8 |
| Florida | 3.8 |
| Georgia | 7.4 |
| Hawaii | 3.0 |
| Idaho | 4.0 |
| Illinois | 6.6 |
| Indiana | 4.5 |
| Iowa | 2.6 |
| Kansas | 5.5 |
| Kentucky | 6.5 |
| Louisiana | 11.4 |
| Maine | 2.3 |
| Maryland | 3.8 |
| Massachusetts | 3.7 |
| Michigan | 5.7 |
| Minnesota | 2.8 |
| Mississippi | 12.8 |
| Missouri | 6.2 |
| Montana | 4.0 |
| Nebraska | 6.5 |
| Nevada | 6.3 |
| New Hampshire | 0.5 |
| New Jersey | 4.0 |
| New Mexico | 8.7 |
| New York | 5.6 |
| North Carolina | 3.4 |
| North Dakota | 4.9 |
| Ohio | 4.6 |
| Oklahoma | 8.8 |
| Oregon | 3.8 |
| Pennsylvania | 4.0 |
| Rhode Island | 4.4 |
| South Carolina | 5.2 |
| South Dakota | 4.9 |
| Tennessee | 8.1 |
| Texas | 7.7 |
| Utah | 0.8 |
| Vermont | 0.7 |
| Virginia | 4.4 |
| Washington | 4.6 |
| West Virginia | 4.7 |
| Wisconsin | 2.9 |
| Wyoming | 3.6 |
| United States overall | 5.4 |
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]
The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks. The FDIC was created by the Banking Act of 1933, enacted during the Great Depression to restore trust in the American banking system. More than one-third of banks failed in the years before the FDIC's creation, and bank runs were common. The insurance limit was initially US$2,500 per ownership category, and this has been increased several times over the years. Since the enactment of the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010, the FDIC insures deposits in member banks up to $250,000 per ownership category. FDIC insurance is backed by the full faith and credit of the government of the United States, and according to the FDIC, "since its start in 1933 no depositor has ever lost a penny of FDIC-insured funds".
In the United States, banking had begun by the 1780s, along with the country's founding. It has developed into a highly influential and complex system of banking and financial services. Anchored by New York City and Wall Street, it is centered on various financial services, such as private banking, asset management, and deposit security.
A direct deposit, in banking, is a deposit of money by a payer directly into a payee's bank account. Direct deposits are most commonly made by businesses in the payment of salaries and wages and for the payment of suppliers' accounts, but the facility can be used for payments for any purpose, such as payment of bills, taxes, and other government charges.
A payday loan is a short-term unsecured loan, often characterized by high interest rates.
A savings and loan association (S&L), or thrift institution, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans. The terms "S&L" and "thrift" are mainly used in the United States; similar institutions in the United Kingdom, Ireland and some Commonwealth countries include building societies and trustee savings banks. They are often mutually held, meaning that the depositors and borrowers are members with voting rights, and have the ability to direct the financial and managerial goals of the organization like the members of a credit union or the policyholders of a mutual insurance company. While it is possible for an S&L to be a joint-stock company, and even publicly traded, in such instances it is no longer truly a mutual association, and depositors and borrowers no longer have membership rights and managerial control. By law, thrifts can have no more than 20 percent of their lending in commercial loans—their focus on mortgage and consumer loans makes them particularly vulnerable to housing downturns such as the deep one the U.S. experienced in 2007.
The Community Reinvestment Act is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.
In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. This process turns the promise of payment into the actual movement of money from one account to another. Clearing houses were formed to facilitate such transactions among banks.
Community development bank (CDB) or Community Development Financial Institution (CDFI) is a development bank or credit union that focus on serving people who have been locked out of the traditional financial systems such as the unbanked or underbanked in deprived local communities. They emphasize the long term development of communities and provide loans such as micro-finance or venture capital.
The Federal Reserve Bank of St. Louis is one of 12 regional Reserve Banks that, along with the Board of Governors in Washington, D.C., make up the United States' central bank. Missouri is the only state to have two main Federal Reserve Banks.
The Expedited Funds Availability Act was enacted in 1987 by the United States Congress for the purpose of standardizing hold periods on deposits made to commercial banks and to regulate institutions' use of deposit holds. It is also referred to as Regulation CC or Reg CC, after the Federal Reserve regulation that implements the act. The law is codified in Title 12, Chapter 41 of the US Code and Title 12, Part 229 of the Code of Federal Regulations.
The Green Dot Corporation is an American financial technology and bank holding company headquartered in Austin, Texas. It is the world's largest prepaid debit card company by market capitalization. Green Dot is also a payment platform company and is the technology platform used by Apple Cash, Uber, and Intuit. The company was founded in 1999 by Steve Streit as a prepaid debit card for teenagers to shop online. In 2001, the company pivoted to serving the "unbanked" and "underbanked" communities. In 2010, Green Dot Corporation went public with a valuation of $2 billion. Since its inception, Green Dot has acquired a number of companies in the mobile, financial, and tax industries including Loopt, AccountNow, AchieveCard, UniRush Financial Services, and Santa Barbara Tax Products Group.
Sheila Colleen Bair is an American former government official who was the 19th Chair of the U.S. Federal Deposit Insurance Corporation (FDIC) from 2006 to 2011, during which time she shortly after taking charge of the FDIC in June 2006 began warning of the potential systemic risks posed by the growing trend of subprime-mortgage-backed bonds, and then later assumed a prominent role in the government's response to the 2008 financial crisis. She was appointed to the post for a five-year term on June 26, 2006, by George W. Bush through July 8, 2011. She was subsequently the 28th president of Washington College in Chestertown, MD, the first female head of the college in its 234-year history, a position she held from 2015 until her resignation in 2017.
The underbanked is a characteristic describing people or organizations who do not have sufficient access to mainstream financial services and products typically offered by retail banks and thus often deprived of banking services such as credit cards or loans. The underbanked can be characterized by a strong reliance on non-traditional forms of finance and micro-finance often associated with disadvantaged and the poor, such as cheque cashers, loan sharks and pawnbrokers.
Financial inclusion is the availability and equality of opportunities to access financial services. It refers to a process by which individuals and businesses can access appropriate, affordable, and timely financial products and services which include banking, loan, equity, and insurance products. It is a path to enhance inclusiveness in economic growth by enabling the unbanked population to access the means for savings, investment, and insurance towards improving household income and reducing income inequality
Bank regulation in the United States is highly fragmented compared with other G10 countries, where most countries have only one bank regulator. In the U.S., banking is regulated at both the federal and state level. Depending on the type of charter a banking organization has and on its organizational structure, it may be subject to numerous federal and state banking regulations. Apart from the bank regulatory agencies the U.S. maintains separate securities, commodities, and insurance regulatory agencies at the federal and state level, unlike Japan and the United Kingdom. Bank examiners are generally employed to supervise banks and to ensure compliance with regulations.
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
The Temporary Liquidity Guarantee Program (TLGP) was a program administered by the Federal Deposit Insurance Corporation (FDIC) from 2008 to 2012 in the aftermath of the financial crisis of 2007–2008. The program sought to promote confidence in the US banking system by guaranteeing interbank loans and no-interest transaction accounts, such as checking accounts. It was announced through an Interim Rule on October 14, 2008.
Wachovia was a diversified financial services company based in Charlotte, North Carolina. Before its acquisition by Wells Fargo and Company in 2008, Wachovia was the fourth-largest bank holding company in the United States, based on total assets. Wachovia provided a broad range of banking, asset management, wealth management, and corporate and investment banking products and services. At its height, it was one of the largest providers of financial services in the United States, operating financial centers in 21 states and Washington, D.C., with locations from Connecticut to Florida and west to California. Wachovia provided global services through more than 40 offices around the world.
This article details the history of banking in the United States. Banking in the United States is regulated by both the federal and state governments.
Urban Partnership Bank was a Federal Deposit Insurance Corporation, full-service community development bank in the United States with $1.4 billion in assets. It was established on August 20, 2010 when it acquired the deposits and some of the assets of ShoreBank from the FDIC. It was headquartered in Chicago, Illinois. After chronic losses, it was acquired on Jan 30, 2019 by Providence Bank & Trust.