Many banks offer services to people who are only marginally attached to the banking system. But banks could still do more and offer more to these individuals.
That's one conclusion of "2011 FDIC Survey of Banks' Efforts To Serve the Unbanked and Underbanked," a report about a recent Federal Deposit Insurance Corp. online survey of 567 banks' efforts to serve these populations.
Some of the key findings:
- Eighty-two percent of banks said they offered youth savings accounts.
- Seventy-two percent said they charged no monthly maintenance fee for a basic checking account with direct deposit.
- More than 50 percent said they accepted nontraditional forms of identification as an alternative to a Social Security number to open an account. Examples of nontraditional ID include a foreign passport, an ID from a foreign consulate or Individual Taxpayer ID Number.
- Forty percent of banks said they developed and actively marketed products and services that are customized to meet the needs of unbanked and underbanked consumers.
- Twenty-one percent said they offered a so-called second-chance account to people who can't qualify for a basic checking account.
Banks also reported obstacles they faced in offering products and services to underserved consumers. At the top of the list was fraud. Other challenges were underwriting issues, profitability, regulatory requirements, money-laundering risks, ID concerns, nonbank competition, consumers' lack of understanding of financial products and services, and lack of consumer demand for such services.
The report also identified five opportunities for banks to expand access to their services.
- Offer more basic low-cost checking accounts and savings accounts, including low-cost electronic, card-based transaction deposit accounts that don't allow overdraft or nonsufficient funds fees.
- Offer more transaction services to underserved households, including noncustomers. Examples of transaction services include money orders, check-cashing services, and domestic or international remittances.
- Improve marketing of small-dollar loans to better compete with payday lenders and pawnshops.
- Use partnerships with community organizations to promote checking accounts and savings accounts.
- Consider retail strategies, such as extended hours, that can help to build relationships with unbanked and underbanked consumers.
Is your bank doing enough to offer the right services to you? Are your bank fees too high?
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