Financial inclusion has been on the rise across all demographics and geographies over the last two decades, according to a report published by the White House Council of Economic Advisors today. From 1989 to 2013, the percentage of U.S. households with bank accounts climbed from 86 percent to 93 percent, and the percentage of households in the bottom income quintile who had bank accounts increased from 56 percent to 79 percent. Among minorities — including Hispanics and non-whites — the number of banked households increased from 65 percent to 87 percent.
“Multiple factors likely have led to the increase in financial inclusion over time, potentially including growing financial capability, direct deposit (and increased use of direct deposit by government programs), and funds directed to community development institutions, among others,” the report said.
While financial inclusion is trending steadily upward overall, 20 percent of households with bank accounts are still considered to be “underbanked,” meaning that they may also rely on alternative financial services, like small-dollar loans, which often come with higher interest rates and fees. Meanwhile, unbanked customers — those without transactional bank accounts — face additional costs from check cashing fees, which can be anywhere from 1 to 5 percent. In 2013, roughly 5 percent of unbanked or underbanked households turned to payday loans, while 0.6 percent turned to auto title loans, the report said.
The report acknowledged that the rise of mobile technology and the rapid evolution of fintech over the past few years could play a role in furthering financial inclusion. It added, however, that “online lenders and other fintech innovations may not fit neatly into existing policymaking frameworks and could potentially benefit from…regulatory clarity.”