Results of FDIC Survey to Serve Unbanked and Underbanked Market

By Tim Holland

On Thursday February 5, the FDIC released the results of its first national survey of bank’s efforts to serve the so called “unbanked” and “underbanked” market place. Over the years there has been some criticism of the banking industry not offering banking products to the working poor and elderly living on minimal benefits and to reach out, in general to those who do not have regular bank accounts or check cashing arrangements within the federally insured banking system.

The bank survey, which was voluntary, was administered in 2008 to a nationally representative random sample of about 1,300 FDIC-insured banks and thrifts and had a 54% response rate. The following is a summary; as provide by the FDIC, of the results of the survey.

"Access to a basic bank account and to financial services is a starting point for economic opportunity," said Martin J. Gruenberg, FDIC Vice Chairman. "Unfortunately, millions of Americans lack access to insured financial institutions. The FDIC survey shows that most banks are aware that significant unbanked and underbanked populations exist in their areas, but more can be done to reach out to this significant market. Government and industry need to work together to increase these individuals' access to the mainstream banking system."

Among other key findings of the study are:

· While most banks offer basic checking accounts to all customers, few offer deposit, payment, credit and electronically based products that address the unique needs of unbanked and underbanked customers.

· Banks are concerned about the profitability of doing business with unbanked and underbanked individuals as well as perceived regulatory issues related to anti-money laundering laws and regulations.

Among the findings regarding banks' efforts to improve access through retail branch operations and strategies are:

· Over half of banks offer limited extended hours and foreign language capabilities at their retail branches.

· Almost two-thirds (64 percent) of banks report that they have modified their retail operations in the last five years to make the bank more appealing or convenient for unbanked and/or underbanked customers.

The study recommends defining a national shared government-industry goal to lower the number of unbanked and/or underbanked individuals and households in the U.S. and the creation of a national task force to provide oversight and guidance for the achievement of the shared goal to encourage banks to offer products and services designed to increase access of unbanked and/or underbanked individuals to the mainstream banking system.