FDIC Study: Most Banks Fail to Target 'Underbanked' Households

Woman at ATMIn its first study of “underbanked” households, the Federal Deposit Insurance Corp. found that only a quarter of 1,300 banks surveyed directly marketed their services to individuals who are under-served or not served at all by banking services in their community.
The study of the so-called “unbanked and/or underbanked” was commissionered under the FDIC Reform Acto of 2005. The FDIC, the agency entrusted with insuring U.S. bank deposits, had estimated that up to 10 percent of American families are unbanked – don’t even have a checking or savings account – and that a substantial share of the population may be underbanked, or is not being fully served by banks as others in their communities.
The study’s results, released this week, seemed to go beyond the FDIC’s estimates: 73 percent of banks are aware that significant “unbanked and/or underbanked populations” are in their market areas, but less than 18 percent of banks identify expanding services to this sector as a priority in their business strategy.
And only a quarter (25 percent) of the banks use targeted marketing to reach unbanked and/or underbanked individuals.
The FDIC’s recommendation is to form a national task force of banking representatives and government regulators to establish of goal for lowering the number of the unserved or underserved individuals.
“In addition, the FDIC intends to continue to pursue related initiatives underway that are designed to encourage banks to serve these markets by sharing information on best practices through the general examination process, meetings and conferences,” the FDIC said.
The bank survey was voluntary and consisted of mail-in survey questionnaires sent to a “random stratified” sample of about 1,300 banks.
When asked to rank in order the challenges banks face in serving or targeting unbanked and/or underbanked individuals, the banks listed “profitability issues” first, followed by “regulatory barriers” and “fraud concerns.”
The survey also found that banks provide limited check cashing opportunities for non-customers who may be unbanked and/or underbanked. And those individuals that also carry blemished account or credit histories often face challenges to opening new accounts.
Here are some other survey highlights:

  •  63 percent of banks provide financial education materials to underserved or unserved residents, often in the form of brochures and pamphlets.
  •  37 percent of banks participate in financial education or outreach efforts with other organizations to expand services.
  • About half (53 percent) of banks teach financial literacy and education sessions targeted at unbanked and/or underbanked individuals.
  • When asked what is the most effective way of educating or reaching out to unbanked and/or underbanked customers, banks identified: “providing financial education sessions” as most effective.See today’s Featured Credit Card Offers

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