An increase in the number of financial institutions offering Bank On-certified accounts may have contributed to the decline in unbanked households by lowering barriers to account ownership, according to new research by the Federal Reserve Bank of Kansas City.
The Bank On initiative was launched in 2015 to offer low-cost accounts to low-income individuals. In a recent report, Kansas City Fed Senior Economist Ying Lie Toh noted the number of financial institutions offering Bank On accounts had grown to more than 400 by 2023. The percentage of unbanked households declined from 7% to 4.2% in that same time frame, with the largest decreases among lower-income households.
“This finding suggests that the increase in availability of Bank On-certified accounts may have contributed to the decline in unbanked rate, particularly among lower-income households,” Toh wrote.
Toh added that many unbanked households still view “high or unpredictable” fees as a barrier to account ownership despite the fee limits for Bank On accounts. “One possible explanation for these results is that unbanked households may lack awareness of Bank On-certified accounts,” she wrote. “Another is that poverty poses further challenges to bank account ownership for some unbanked households, even when they can access Bank On-certified accounts.”
