---------- Forwarded message ----------
Date: Tue, 3 Beb 98 16:23:25 EDT
From: "Robert.Green" <[EMAIL PROTECTED]>
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED]
Subject: unbanked US households
Just read "Financial Access in the 21st Century," the proceedings of a forum
on Feb. 11, 1997. Copies $15, Comptroller of the Currency, P.O. Box 70004,
Chicago, IL 60673-0004. Info. www.occ.treas.gov/pubs1.htm.
The forum focused on access for unbanked households in the U.S. Most talk
concerned deposits and payment services such as deposits, check cashing, and
the electronic transfer of govt. benefits.
6-22% of U.S. households are unbanked. These households tend to be poor, not
well educated, young, and minority. Some general reasons put forth for their
lack of permanent relationship with an insured depository institution by:
1. No financial savings at the end of each month;
2. Dislike fees, especially account fees:
a. Deposit and checking balances are too low to avoid fees;
b. Tend to bounce checks;
3. Want to keep finances private to avoid:
a. Attempts to enforce child support payments
b. Avoid debt collectors
c. Avoid immigration officials
d. Avoid taxes
4. Feel uncomfortable with banks:
a. Fear judgement by teller;
b. Cannot speak the language of the teller
5. Do not like that banks often will not give cash for a check immediately
unless the deposit account has a balance high enough to cover the amount of
the check;
6. May have bad credit records or other past bad experiences with banks;
7. Dislike inconvenient banking hours;
8. Fear for personal security upon exit from ATM or bank;
9. Cost to get transport to a bank branch;
10. Culture and govt. assistance programs that do not promote savings;
11. Demands by friends and family for excess cash;
12. May be illiterate:
a. Have trouble to fill out forms
b. Have a hard time managing a checking account;
13. Do not have:
a. Permanent residence/mailing address
b. Identification.
Disincentives for banks to reach this segment include:
1. Need to brand high-cost/high-price products aimed at low-income
households so as not to seem unfair;
2. Lack of concern due to small size of the market segment;
3. Lack of staff trained to help customers:
a. Must help fill out forms
b. Must reassure that the deposit or bill payment is recorded
4. Losses.
Examples of financial institutions that reach these households are
check-cashing outlets and wire transfer services, and grocery stores and
drugstores that cash checks, make money orders, and provide bill-payment
services.
A lot of talk focused on the fact that U.S. government benefits must be
transferred electronically through accounts in financial institutions
beginning in 1999. Many of the recipients do not yet have an account, and
this creates both a regulation-based and profit-based incentive to devise a
way to get accounts to these households. The mandate forces someone to bear
the cost of reaching these households. It will be interesting to see whether
the mandate will force households to use banks and bear the costs that seem
to block access now with existing technology, or whether someone will come
up with a technology that will attract these households due its providing
them access at a lower cost. Also interesting will be the effects on
savings, whether households will just withdraw the entire transfer as cash
or whether they will leave part on deposit.
Mark Schreiner <[EMAIL PROTECTED]>
