By Corey CarlisleThe FDIC’s 2017 National Survey of Unbanked and Underbanked Households shows that the percentage of households that lack a banking relationship fell to 6.5 percent from 8.2 percent in 2011. While this downward trend is encouraging, it still means that approximately 8.4 million households remain unbanked—a figure that disproportionately includes low-income individuals, minorities and individuals with disabilities.
Led by the national nonprofit Cities for Financial Empowerment Fund, an initiative known as Bank On seeks to expand safe and affordable banking access. The initiative involves more than 90 local coalitions of financial institutions, regulatory agencies and community partners. Central to the Bank On movement are the first-ever Bank On National Account Standards and certification—a uniform benchmark for safe and affordable banking accounts—and partnerships with financial institutions and social service programs.
Until recently, efforts to collect data on certified accounts had been difficult, inconsistent and unreliable, which often put financial institutions in the position of having to satisfy divergent requests from different partners. In the past, financial institutions received data sharing requests on a branch-by-branch, coalition-by-coalition basis, and there was no national data to track Bank On’s impact. Financial institutions and Bank On coalitions were unable to report on account usage in a consistent and centralized way, thus missing proof points key to sustaining and growing mutual efforts.
Bank of America, JPMorgan Chase, U.S. Bank and Wells Fargo were the first among the 30-plus financial institutions with certified accounts. In 2017, these institutions banded together with the Federal Reserve Bank of St. Louis and CFE Fund to pilot a centralized data collection process for certified account usage and activity. The data collected was integral in making the market case for these accounts, as well as in helping coalitions understand how their work was affecting the newly-banked. Metrics included number of accounts open, frequency and volume of transactions and take-up of key account features.
For financial institutions, the pilot’s results helped quantify the market for and the performance of Bank On-certified products. And it was the first time metrics across participating financial institutions were standardized. The pilot also provided information on safe and affordable accounts and their usage in low-income ZIP codes. For example, one key finding was that 600,000 Bank On-certified accounts were newly opened at the four pilot banks alone in 2017, with 1.3 million certified accounts currently open and active at the time of the pilot. Perhaps most notably, 72 percent of accounts opened were new customers to these banks. In addition, account usage was also significant: there were 16 million debit transactions per month across pilot accounts, with an average value of more than $511 million each month.
These data points highlight a clear business case for offering Bank On-certified accounts as a way for financial institutions to both serve the unbanked and grow their businesses. Further, banks can use this information for Community Reinvestment Act examinations, which specifically call out improved access to financial services for low- and moderate income individuals, including products such as low-cost bank accounts.
This data also gives local coalitions easy access to information about their own activity and impact, supporting coalitions by allowing them to benchmark their progress, make the market case for certified accounts to potential financial institution partners, and share with stakeholders such as programmatic and philanthropic partners.
Because the pilot was so successful, financial institutions with a Bank On-certified account can now also report their data. The effort was given the President’s Award for System Leadership by the St. Louis Federal Reserve Board, as well as an honorable mention for the ABA Foundation’s 2019 Community Commitment Award for economic inclusion.