Bank On Everyone is Welcome. Consequences of Unbanked $8 billion in fees to alternative servicers (includes pay day loan fees) Average charge for cashing

Bank OnEveryone is Welcome

Consequences of Unbanked

•$8 billion in fees to alternative servicers (includes pay day loan fees)

•Average charge for cashing paycheck-$40($1000-$2000 annually for check cashing services)

•Low wage worker who never utilized mainstream financial services over 40 year full time work history would spend $40,000 on check cashing services

•If the $40,000 had been regularly invested in savings bonds, would have $360,000 at retirement!

COMMUNITY & ECONOMIC DEVELOPMENT

Why is all of this important to us?

• According to Consumer Federation of America, a low wage worker (or anyone utilizing pay day loan services) that has a $500 SAVINGS ACCOUNT with a Bank or Credit Union is EIGHT TIMES less likely to utilize a pay day loan or cash advance service


What are the consequences of these statistics to low wage workers?

• Aren’t always aware of the benefits available to them• Are vulnerable to predatory lenders and alternative

financial services:– The “unbanked” pay 1-10% of salary for check

cashing services– “Pay day” loans cost workers 50 to 400% interest – Paid tax preparation can cost 25%+ of total refund– Unable to accumulate assets through savings

without relationship with a financial institution


National proportions of unbanked and underbanked households

FDIC National Survey of Unbanked and Underbanked Households

• An estimated 7.7 percent of households, about 9 mm with at least 17 mm adults, are unbanked

• An estimated 17.9 percent of households, about 21 mm with about 43 mm adults, are underbanked

• Taken together, at least 25.6 percent of U.S. households, close to 30 mm households with about 60 mm adults, are unbanked or underbanked

Banked, but Underbanked

Status Unknown*

4.1%

Unbanked7.7%

Banked, but Not

Underbanked70.3%

Underbanked17.9%

Notes: Percentages are based on 118.6 million U.S. households. Percentages do not always sum to 100 because of the rounding of household weights to represent the population totals.* These households are banked, but there is not enough information to determine if they are underbanked.


Unbanked householdsby region and state


Alabama• 11.6% of all households in Alabama (an estimated 222,000 households) are

unbanked.– 24.0% of households with an annual income of $30,000 or less are

unbanked – 25.7% of Black households are unbanked

• 20.2% of all households (an estimated 386,000 households) are underbanked. In addition, 5.7% of households (an estimated 109,000 households) may be underbanked, but their use of alternative financial services is unknown. – 27.4% of households with an annual income of $30,000 or less are

underbanked– 39.7% of Black households are underbankedFDIC National Survey of Unbanked and Underbanked Households

Birmingham MSA

• 10.1% of all households in the Birmingham-Hoover, AL MSA (an estimated 52,000 households) are unbanked.

• 17.9% of all households (an estimated 93,000 households) are underbanked. In addition, 8.8% of households (an estimated 46,000 households) may be underbanked, but their use of alternative financial services is unknown.


•7.0% of all households in Florida (an estimated 527,000 households) are unbanked.

• 18.2% of households with an annual income of $30,000 or less are unbanked

• 24.2% of Black, 8.5% of Hispanic and 6.0% of other minority households are unbanked

•16.8% of all households (an estimated 1,270,000 households) are underbanked. In addition, 4.8% of households (an estimated 364,000 households) may be underbanked, but their use of alternative financial services is unknown.

• 21.7% of households with an annual income of $30,000 or less are underbanked

• 27.1% of Black, 20.4% of Hispanic and 12.7% of other minority households are underbanked


Florida

TAMPA-ST. PETERSBURG-CLEARWATER, MSA

• 4.7% of all households in the Tampa-St. Petersburg-Clearwater, FL MSA (an estimated 55,000 households) are unbanked. – 3.3% of households with an annual income of $15-30,000 are

unbanked• 19.0% of all households (an estimated 223,000 households) are

underbanked. In addition, 4.1% of households (an estimated 48,000 households) may be underbanked, but their use of alternative financial services is unknown. – 19.7% of households with an annual income of $15-30,000

are underbanked.FDIC National Survey of Unbanked and Underbanked Households

MIAMI-FORT LAUDERDALE-MIAMI BEACHMSA

•8.4% of all households in the Miami-Fort Lauderdale-Miami Beach, FL MSA (an estimated 186,000 households) are unbanked.

•20.7% of households with an annual income of $30,000 or less are unbanked •24.1% of Black and 8.4% of Hispanic households are unbanked

•13.0% of all households (an estimated 286,000 households) are underbanked. In addition, 6.7% of households (an estimated 147,000 households) may be underbanked, but their use of alternative financial services is unknown.

•15.9% of households with an annual income of $30,000 or less are underbanked •16.1% of Black and 15.6% of Hispanic households are underbanked


Orlando MSA

• 7.6% of all households in the Orlando, FL MSA (an estimated 65,000 households) are unbanked.



JACKSONVILLE MSA

• 4.6% of all households in the Jacksonville, FL MSA (an estimated 28,000 households) are unbanked.




Characteristics of Unbanked

• Households more likely to be unbanked than the population as a whole are those:– With a black, Hispanic non-black, or American Indian/Alaskan

householder– Where Spanish is the only language spoken at home– With a householder that is a foreign-born noncitizen– That are family households with an unmarried female or

male family householder– Earning less than $30,000– With a householder holding less than a high school degree– With a householder under age 45FDIC National Survey of Unbanked and Underbanked Households


Reasons previously banked households are unbanked


30.5

25.0

10.9

10.9

7.3

5.0

33.4

10.5

8.7

12.4

6.8

5.6

11.5

37.0

26.2

27.5

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

Do not have enough money

Cost

Do not want account

Culture/Comfort

Convenience

Do not write enough checks

Could not manage account

Inadequate services

Unbanked withinthe last year

Unbanked morethan a year ago

Percentage of Previously Banked Households


0.1

38.4

3.7

38.5

1.6

2.6

20.3

7.4

7.7

21.8

0.1

0.9

3.2

42.4

16.8

20.1

8.1

8.4

0.8

19.9

5.9

6.1

25.1

0 5 10 15 20 25 30 35 40 45

To write checks and paybills

To secure your money

To save money for thefuture

Other

To take advantage of directdeposit of paychecks

To be able to apply for aloan or mortgage

Unknown

To send money to familyand friends*

All Unbanked

Previously Banked

Never-Banked

Percentage of Unbanked Households That Are Very Likely to Open an Account

Notes: Percentages are based on all unbanked households that were "very likely" to open an account in the future (849 thousand households). Household respondents that did not report being "very likely" to open an account were not asked this question.* No never-banked respondent selected this reason for opening a bank account. It is believed that the universe proportion is only slightly greater than zero.

Unbanked households’reasons for wanting to open an account



Unbanked households’likelihood of opening account


9.9

19.8

41.1

16.1

26.0

33.2

4.8

15.4

51.7

20.320.8 21.5

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Very likely Somewhat likely Not too likely Not likely at all

All Unbanked Previously Banked Never-Banked

Percentage of Unbanked Households

Note: Percentages based on a total of 8.58 million unbanked households. Previously banked households that were in the process of opening an account were not asked questions about their future banking plans and are excluded from this tabulation.


Characteristics of underbanked households

Households more likely to be underbanked than the population as a whole are those: – With a black, American Indian/Alaskan, or

Hispanic non-black householder– That are family households with an unmarried

female or male householder– Earning up to $50,000– With a householder holding less than a college

degree– With a householder under age 55



Underbanked households use of alternative financial services

• Underbanked households account for 19.4 percent of all banked households

• By definition, all underbanked households have used an AFS at least once or twice a year

• Among underbanked households: – 81 percent use non-bank money orders– 30 percent use non-bank check cashing services– 16 percent use payday lending– 16 percent use pawn shops– 13 percent use rent-to-own services – 13 percent have used refund anticipation loans during the past 5 years



Implications and conclusions• Significant proportions of U.S. households are unbanked or

underbanked• Lower-income and minority populations are

disproportionately represented among both groups• The proportions vary widely across regions, states and large

MSAs • Many unbanked households have found it not cost effective to

have a bank account, and many underbanked households use transactional AFS due to convenience and cost

• About half of unbanked households were previously banked and over a quarter of those households became unbanked during the year before the survey was taken

• Taken together, these results suggest there are significant opportunities for banks to offer financial products specifically tailored to the needs of LMI households


Banking Needs of Americans with Disabilities

Demographics• 54 million people• 22 million families

Employment • 22.0 million working age• 7.6 million employed• 12.9% unemployed (4/09)

Geography• 15% in the Northeast• 31% in the South• 28% Midwest• 16% West

Ethnicity• 12.7% White• 17.5% Black/African American• 21.7 Native American• 6.3% Asian/Pacific Rim• 11.9% Other

-- Cornell 2008 Disability Status Report

Senior Banking Needs

• 15% of Seniors and disabled still receive Social Security benefits by paper check

• March, 2011, all new Social Security recipients, Veterans and Railroad pensions will only be available through direct deposit

• March, 2013, all beneficiaries will be converted to direct deposit

• Safety and funds availability are primary concerns to Seniors

Immigrant Banking Needs • In some countries banks are not safe, secure or trusted. Immigrants

will be concerned about FDIC insurance and about ready access to their funds.

• Many send money back to family members in their home country. They may be interested in wire transfer costs.

• Some lack SSN’s and will be interested in knowing about alternative forms of ID (e.g. matricula consular cards).

• Because of language barriers, some may be uncomfortable writing checks. They will be especially interested in other options, like debit cards and online banking.

What is Bank On?

• The Bank On initiative is a collaborative effort started by the City of San Francisco and the Federal Reserve Bank of San Francisco about three years ago to address the needs of their city’s unbanked and underbanked households. The Bank On program has spread throughout the country and is based on a collaborative effort with local communities and their financial institutions, local governments, community based and nonprofit organizations.


The Bank On Model

• A Bank On campaign is driven by partnerships – State and Municipal governments– Community-based organizations– Financial institutions and regulators– State, Regional and local Asset Building Coalitions or VITA Sites

• Innovative solutions are created to reach un- and under-banked individuals, including:– Developing safe, affordable financial products– Creating pathways and supports to assist targeted populations to

utilize these products – Conducting outreach campaigns to inform the public about these

opportunities


Benefits of Successful Programs

• Financial institutions receive increased access to the untapped market of the un- and under-banked

• Residents protect their income and assets and have more wealth-building opportunities

• Community groups have access to more asset-building opportunities for their clients

• Family financial stability= overall city economic vitality• Financial services can become a part of larger

community asset-building strategies


Partnerships are a vital ingredient – No one entity can do it alone

• Local/State Government roles: – Elected official serves as champion – Convener of stakeholders– Uses bully pulpit to engage financial institutions and community organizations

• Community organization and prosperity campaign roles: – Engages residents through direct outreach and referral– Acts as a primary service provider or convener for financial education– VITA sites offer connections to accounts – Assists with data tracking

• Financial institution roles: – Provides insight and expertise into development and provision of appropriate financial

products– Participates in outreach and marketing– Collects and tracks data for evaluative purposes


What do we need from financial institutions?

• Basic Savings Account• Basic Checking Account

– Free or low cost– Product to fit the needs of your community’s

unbanked population– Second Chance Account


And…

• Account tracking and measurement• Commitment to financial education

opportunities• Work with employers who have a business

relationship with your credit union to bank their low wage workers

• Promote a “Bank On” culture for branch staff through training


Why should my financial institutionget involved?

• New customers that have received financial education

• Marketing opportunities throughout the community

• Financial stability for your community

The Bank On Cities CampaignCities with established Bank On programs:

• Evansville, IN

• Los Angeles, CA

• San Francisco, CA

• Savannah, GA

• Seattle, WA

• St. Petersburg, FL

• Marion County (Ocala), FL

• Jacksonville, FL

Alabama Programs in Planning Stage:• Birmingham

Florida Programs in Planning Stage:

• Central Florida (Orlando, Kissimmee area)

• South Florida (Broward, Dade, Miami)

• Lee County (Fort Myers)

• Tampa Bay

• Tallahassee

• Lakeland

• Tampa Bay

Everyone is Welcome

Orlando/Kissimmee area ∆

St. Petersburg ○

Tallahassee ∆ Jacksonville ○

Ocala ○

Lakeland ∆Tampa ∆

Fort Myers∆ Fort Lauderdale∆

Bank on Florida Communities

○ Communities with existing BOF Programs.

∆ Communities in Planning Stages of BOF Program.

Location Name/Company Contact Info:

St. Petersburg Gary Jones/City of St. Pete [email protected]

Marion County (Ocala) Krista Martin/ United Way of Marion [email protected]

Jacksonville Karen Landry/ War on Poverty [email protected]

Central FL (Orlando, Kissimmee)

Brittany Richards/ Heart of FL United Way [email protected]

Broward County (Fort Lauderdale)

Mary Lynn Lovejoy [email protected]

Lee County (Fort Myers) Roger Mercado/ United Way of Lee [email protected]

Tampa Bay Ellen Stoffer/ United Way of Tampa Bay [email protected]

Tallahassee Amanda Clements/ United Way of Big Bend [email protected]

Lakeland Scott Lonsberry, Rob Sansome/United Way of Central FL

[email protected]@aol.com

Contacts:

mailto:[email protected]










Questions ?

Contact Information:Bank On Florida:

Bill Mills407-797-6549

[email protected]

Bank On Alabama:Michael Milner

[email protected]



Documents

Bank On Everyone is Welcome. Consequences of Unbanked $8 billion in fees to alternative servicers (includes pay day loan fees) Average charge for cashing