Five implications are evident from the results of the most recent “unbanked/underbanked” survey performed by the Federal Deposit Insurance Corp. (FDIC), including that mobile banking holds “real promise” for deepening ties between the unbanked and financial institutions, the agency said in a teleconference Wednesday.
The teleconference focused on the results of the 2017 biennial National Survey of Unbanked and Underbanked Households, released last month. Among other things, the survey results showed that the national unbanked rate had fallen to 6.5%, the lowest recorded since the agency began conducting the survey in 2009 and the third straight period, it said, the percentage has declined.
In Wednesday’s webinar, the agency expanded on the results by reporting the five implications of the results, including the declining rate. Those are:
- MOBILE BANKING – Mobile banking holds real promise for deepening the connection between underbanked households and their banks while increasing the safety and convenience of bill payments. About two in five underbanked households pay some bills in a typical month with cash or nonbank money orders, the agency said. Among these households, about 40% already use mobile banking to access their bank account, But only about 25% use mobile bill pay or mobile person to-person payments. “Encouraging and facilitating use of mobile bill pay and mobile person-to-person payments by these households may enable them to conduct a greater share of their basic financial transactions within the banking system,” the agency said.
- SMALL-DOLLAR CREDIT – New underwriting technologies could help expand access to small-dollar credit for banked consumers, including consumers with little or no credit history. The FDIC said 13% of households have unmet demand for mainstream small-dollar credit. It added that 90% are banked, and more than 80% have been banked for 12 months or longer. It added that almost all banked households with unmet demand receive income and pay bills using their bank accounts. “Account balances and transactions may provide information for banks to underwrite small-dollar credit to some of these households,” the agency said.
- CREDIT HISTORY – About 20% of households likely have little or no recent credit history. The agency said “the vast majority of these households” are banked and may not seek credit until a need arises. Helping those households establish and build a credit history may particularly benefit the households among certain groups that are disproportionately less likely to have mainstream credit. Those groups are:
- Black households
- Hispanic households
- Households headed by a working-age individual with a disability
- ACCESS TO BRANCHES – Physical access to bank branches remains important even as use of mobile banking and online banking has increased. The agency said financial institution branches continue to play an important role for banked households, with “the great majority of banked households” visiting a bank branch in the past 12 months, and more than one-third visiting 10 or more times. “Some population segments, such as rural households, disproportionately use bank tellers as their primary, and often only, method of account access,” the agency said. “Opportunities may also exist for branch staff to inform the unbanked about products and services that can help meet their financial needs.” The FDIC added that almost one in six unbanked households visited a bank branch in the past 12 months, and about seven in 10 of these households previously had a bank account.
- UNBANKED RATES – Although unbanked rates for some segments of the population have declined as economic conditions improved between 2011 and 2017, the rates still remain “substantially above” the national average. Those groups include black and Hispanic households. The agency also noted that, at the same time, unbanked rates for other population segments, such as households headed by a working-age individual with a disability, have remained high and stayed fairly constant between 2011 and 2017. “Understanding the evolution of unbanked rates for different population segments and adopting targeted strategies may help sustain increases in bank account ownership in future economic downturns and increase access for different population segments with high unbanked rates,” the agency said.