The U.S. has achieved its lowest level of unbanked and underbanked households since the Federal Deposit Insurance Corp. (FDIC) began tracking those rates in 2009. However, 5.9 million families still lack many of the essential services provided by a bank. Additionally, more than 14% are underbanked, having limited access to banking services.
A recent webinar hosted by the FDIC featuring speakers from both the agency and representatives of organizations working with the Connecticut Association for Human Services (CAHS) outlined the scale of the problem and offered insight regarding what banks can do to better serve those communities.
Alexis Luna, a community affairs specialist for the FDIC, noted that “the Connecticut unbanked population stood at 4.4% in 2021, according to a recent survey.” While he described that as a remarkable improvement over the 8.4% reported in 2019, he noted there was still cause for concern.
“The percentage has increased considerably when it comes to minority households,” Luna said. “Right now, it stands at 12.1% and 27.3% for unbanked and under banked households respectively, according to the latest 2022 Prosperity Now poll. So, there’s some areas of opportunity there for us.”
Luna invited those who tuned into the webinar to help Connecticut close banking gaps through the use of the hashtag #getbanked and to work with the FDIC to become listed as part of their Get Banked campaign and Bank On by Cities for Financial Empowerment Fund, which helps low- and moderate-income households improve financial stability and empower savings.
“CAHS has been at the center of the fight to eliminate poverty in Connecticut for over 100 years,” said Sabrina Acosta, the program manager at CAHS. “We have always sought to empower and equip families in Connecticut with the tools and resources to achieve economic success. Our mission is, simply put, to eliminate poverty in Connecticut.”
Acosta is responsible for overseeing both Bank On and the Connecticut Money School – the latter provides free financial literacy and capability workshops statewide, as well as coaching on finances and advice on ways to achieve financial goals. She urged bankers to remember that their services build trust with clients who are unbanked or underbanked, particularly those referred through Connecticut Returning Citizens (CRC) program which helps recently released former prisoners re-integrate into society.
“Our goal here is to address the barriers and break the stigma,” Acosta said.
Acosta also pointed out that the CAHS administered the Volunteer Income Tax Assistance program that provided more than 10,000 taxpayers with help on their taxes. The program earned over $18 million in refunds and credits for those assisted in filing.
“Our asset building programs aren’t focused on short-term solutions,” Acosta said. “Rather, they focus on providing individuals and families with the knowledge and skills to move from poverty to prosperity.”
Dwight Davis, the programing coordinator for CRC’s Returning Citizens and Justice Involved Individual Program, said that the individuals he works with are particularly in need of assistance with banking.
“People who have been incarcerated experience a 69% drop in credit scores,” Davis said. “That results in both pre- and post-incarceration debts impacting returning citizen’s access to housing, employment and financial products. Statistics show that this can increase the likelihood of recidivism by 15 to 20%.”
Davis observed that his clients are frequent targets of identity theft, owing to their increased susceptibility to scams after being kept from accessing banking services for extended periods of time.
David Rothstein, a senior principal at the Cities for Financial Empowerment Fund, noted that “It’s very expensive to be unbanked.”
“A lot of people tell us that they’re losing 10 to 20% of their monthly income to check cashing and other fees that are out there,” Rothstein said. “We know that Bank On can make a difference because people are paying a lot of money for these services.”
Rothstein also highlighted efforts to reform the federal Community Reinvestment Act, which encourages banks to provide more services to low- and middle-income households. Banks can earn credits for providing that support to communities in need.
“The Bank On market is really robust,” Rothstein added. “We know from the reporting institutions that these accounts are really popular, more than 2.2 million were opened in 2020, and that’s with a very limited subset of reporting institutions. We also know that 82% of the accounts that were opened were completely new customers to financial institutions, which is really exciting. That tells us that these people didn’t have checking or savings accounts with that bank or credit union before opening the account.”
Rothstein reported that these accounts have seen continuous activity and were not simply taking the introductory offers and leaving, which he said some banks feared. The data showed there are just as many advantages to the banks as there are to their new customers when these underserved populations are reached, he added.
