McWilliams: Innovation Needed to Bring Consumers Back to Financial Services Sector

In an op-ed published in American Banker today, FDIC Chairman Jelena McWilliams noted the importance of bringing underbanked and unbanked consumers into the regulated banking system. According to a recent FDIC survey, 8.4 million households in the U.S. lack a bank account, and one in five households are considered “credit invisibles,” because they lack a credit score.

“For several years, our regulatory framework had made banks reluctant to innovate and develop products that could attract more unbanked and underbanked consumers into the banking fold,” McWilliams noted. “As a result, those customers have looked elsewhere, turning to alternative credit sources outside of traditional banking channels.”

McWilliams recounted her own experience of being unbanked when she first immigrated to the United States from the former Yugoslavia as a young adult. With just $500 to her name and no credit history, she obtained a secured credit card shortly after arriving, which she noted was a critical first step on the road to financial success.

As technology continues to advance, she added that she sees opportunities to bring more unbanked and underbanked consumers back into the banking sector, particularly through mobile banking. FDIC data showed that underbanked households — those that had a bank account but still relied on alternative credit sources — were more frequent users of mobile banking services than fully banked households.

Watch Chairman McWilliams’ recent discussion with ABA President and CEO Rob Nichols during the ABA Annual Convention in New York.