FDIC: Share of ‘Unbanked’ Continues Downward Trend

The share of the population that is unbanked continued falling in 2015, reaching 7 percent — the lowest share yet recorded in the FDIC’s biennial survey of unbanked and underbanked households released today. The reduction in the unbanked was also seen across many population segments and demographics that have historically been less likely to use mainstream financial services, including blacks, Hispanics, the disabled and low-income households.

Half of the ongoing decline in unbanked status can be attributed to economic improvements, the FDIC said. As people become employed or grow their assets, they often enter or return to the banking system. Major contributing factors to unbanked status include not having enough money to justify opening an account — more than one-third of the unbanked said this was the main reason — as well as income volatility.

Meanwhile, the share of households that were “underbanked” — those that have a bank account but have also used nonbank, alternative financial services such as check cashers — remained steady at 19.9 percent. Continuing a growing trend from previous surveys, more than a quarter of unbanked and 15 percent of underbanked households relied on prepaid cards in 2015, versus about 7 percent of fully banked households.

The survey indicated that prepaid card users often use the cards as a substitute for a bank account; unbanked households that had previously had a bank account were 22 percentage points more likely to use them than those who had never had a bank account. Indeed, 12.6 percent of unbanked households used a prepaid card as an emergency savings vehicle.

The survey, conducted every two years since 2009 by the FDIC and U.S. Census Bureau, found that 46.5 percent of unbanked households were previously served by a bank, consistent with previous survey results. About a quarter of these said they were likely to re-open a bank account in the next year, down 10 points from 2013.