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Overview of the 2011 FDIC National Survey of Unbanked and Underbanked Households
Boston Alliance for Economic Inclusion December 6, 2012
Yazmin Osaki
1 Members of the Unbanked Study Team: Susan Burhouse, Sarah Campbell, David Chapman, Keith Ernst, Ryan Goodstein, Leneta Gregorie, Yazmin Osaki, Luke Reynolds and Sherrie Rhine, and Eric Robbins.
Agenda
Background Banking Status Account Ownership Use of Alternative Financial Services Implications and Conclusions
2
Background Objectives and statutory mandate FDIC household survey
Administered in June 2011 as a supplement to the Census CPS to nearly 45,000 households (84% of CPS respondents)
Designed to yield estimates of the number of unbanked and underbanked households; their demographic characteristics, and the reasons why they are unbanked and underbanked
First survey administered in January 2009 and released in December 2009
FDIC bank survey Results scheduled to be released in 2012 3
4
FDIC Household Survey Highlights
Distribution of Household Banking Status: U.S.
5
Underbanked, 20.1
Unbanked, 8.2
Fully Banked, 68.8
Banked, but Underbanked
Status Unknown,* 2.9
Notes: Percentages are based on 120.4 million U.S. households. Percentages may not sum to 100 because of rounding. * These households are banked, but there is not enough information to determine if they are underbanked.
Distribution of Household Banking Status
6
68.877.6 79.6
20.114.1 14.7
8.2 4.9 4.22.9 3.41.5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
National Massachusetts Boston MSA
Banked, but Underbanked Status Unknown Unbanked Underbanked Fully Banked
2009-2011 Changes in Unbanked Rates
7
7.6
4.0 3.8
8.2
4.9
4.2
0
1
2
3
4
5
6
7
8
9
10
National Massachusetts Boston MSA
2009 2011
Perc
enta
ge o
f Hou
seho
lds
*
* Statistically significant difference
Revised Underbanked Definition
AFS Timing of Use
2009 2011 Non-Bank Money Orders Non-Bank Check Cashing Payday Lending Pawn Shops Rent-to-Own
Used at least once or twice a year
Used in the last
year
RALs Used in the last 5 years
Non-Bank Remittances Not included 8
2009-2011 Changes in AFS Use Among Banked Households
9 Note: For comparability purposes, the estimates include households that have an account, but used non-bank check cashing, non-bank money orders, payday loans, rent-to-own, and pawn shops in the last year. The estimates exclude non-bank remittances and refund anticipation loans because the 2009 survey did not ask about non-bank remittances and asked about the use of refund anticipation loans in the last five years as opposed to the last year.
* Statistically significant difference
10
Unbanked and Underbanked Rates by Demographic Groups
Banking Status of Select Groups
Percent Percent Percent Select Demographic Groups Unbanked Underbanked Fully Banked
All households 8.2 20.1 68.3 Blacks 21.4 33.9 41.6 Hispanics 20.1 28.6 48.7 Foreign-born noncitizens 22.2 28.9 45.8 Unemployed householder 22.5 28.0 47.5 Income below $15,000 28.2 21.6 47.6 Unmarried female family
households 19.1 29.5 48.4 Under age 24 householder 17.4 31.0 49.7
11
Unbanked Households by Region and State
12
Underbanked Households by Region and State
13
14
Household Demographic Composition by Banking
Status
Household Composition by Banking Status There are stark differences between the unbanked
and banked Along some dimensions, the underbanked seem
to be a blend of the unbanked and fully-banked populations: race, age, family type
b Along other dimensions, the underbanked seem much more similar to the fully-banked: employment and income
15
Household Type Distribution by Banking Status
16
Unmarried male family household,
3.6
Unmarried female family household,
9.1
Married couple, 52.2
Nonfamily household, 35.0
Unmarried female family household,
30.1
Nonfamily household, 40.1
Unmarried male family household,
8.2Married couple,
21.5
Unbanked Underbanked
Fully Banked
Unmarried male family household,
6.9
Nonfamily household, 29.9
Married couple, 44.1
Unmarried female family household,
19.0
Income Distribution by Banking Status
17
Unbanked Underbanked
Fully Banked
Less than $15K, 17.5
$15K-$30K, 23.3
$30K -$50K, 23.9
$50K -$75K, 17.1
At least $75K, 18.3
At least $75K, 1.3$50K -$75K, 4.4
$30K -$50K, 12.4
$15K-$30K, 26.1
Less than $15K, 55.8
$30K -$50K, 20.5
$50K -$75K, 20.2
At least $75K, 32.1
Less than $15K, 11.2
$15K-$30K, 15.9
Racial Distribution of Unbanked: U.S., MA, Boston
18
Black, 17.9%Hispanic,
31.4%
White, 39.9%
Other, 10.8%
Black, 34.7
Hispanic, 28
White, 33.7
Other, 3.6
Black, 16.9%
Hispanic, 28.6%
White, 35.1% Other,
19.5%
Massachusetts Boston MSA
National
Black, 15.4%
Hispanic, 12.2%
White, 68.6%
Other, 3.8%
Racial Distribution of Underbanked:US, MA, Boston
19
Black, 14.4%
Hispanic, 13.0%
White, 67.4%
Other, 5.2%
Black, 22.5
Hispanic, 16.2
White, 56.0
Other, 5.3
Massachusetts Boston MSA
National
HH Type Distribution of Unbanked: U.S., MA, Boston
20
Boston MSA Massachusetts
National
15 - 34, 16.9%
35 - 44, 10.4%
45 - 54, 35.1%
55 - 64, 15.6%
65 or older, 22.1%
15 - 34, 37.2
35 - 44, 20.2
45 - 54, 20.3
55 - 64, 12.2
65 or older, 10.1
Age Distribution of Unbanked: U.S., MA, Boston
21
Massachusetts Boston MSA
National 15 - 34, 34.0%
35 - 44, 14.0%
45 - 54, 24.6%
55 - 64, 9.2%
65 or older, 17.9%
22
Unbanked Households
Previous Banking Status
23
3.7
2.2
1.3
4.4
2.7
2.2
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
National Massachusetts Boston MSA
Previously Banked Never-Banked
Perc
enta
ge o
f Hou
seho
lds
Main Reason Households are Unbanked
24
3.5
14.8
0.7
1.4
1.1
9.5
7.1
33.2
26.0
8.2
5.5
15.6
3.5
11.9
0.2
1.5
1.5
4.0
4.0
7.1
7.6
32.8
0 5 10 15 20 25 30 35
Do Not Know/ Refused
Other/ None of the Above
Banks do not offer the needed products or services
Banks do not have convenient hours or locations
Do not know how to open or manage an account
Previously had an account but the bank closed it
Bank account fees or minimum balance requirementsare too high
Don't like dealing with and/or don't trust banks
Can't open an account due to ID, credit, or bankinghistory problems
Do not need or want an account
Do not have enough money
Never-Banked
Previously Banked
Unbanked Households’ Likelihood of Opening Account
25
21.7
39.0
22.226.0
18.9
29.4
6.6
16.1
24.4
48.0
20.4
13.5
0
10
20
30
40
50
60
Very likely Somewhat likely Not too likely Not likely at all
Per
cent
age
of U
nban
ked
Hou
seho
lds
All Unbanked Previously Banked Never-Banked
Note: Percentages are based on 9.9 million unbanked households
Unbanked Households’ Reasons for Wanting to Open an Account
26
1.3
7.0
0.3
4.2
10.0
22.6
25.7
28.8
1.6
3.7
0.6
1.6
4.4
26.2
31.0
30.8
0 10 20 30 40 50 60
Unknown
Other
To send money to family and friends
To be able to apply for a loan or mortgage
To take advantage of direct deposit of paychecks
To save money for the future
To secure your money
To write checks and pay bills
Percentage of Unbanked Households
Never-Banked
Previously Banked
Note: Percentages are based on 5.3 million never-banked and 4.4 million previously-banked households.
Types of Bank Accounts Owned by US Households
27
Account Ownership: U.S.
28 Unbanked, 8.2
Banked but Unknown Type,
1.5
Checking and Savings
Accounts, 67.2
Savings Account Only,
2.0
Checking Account Only,
21.1
Notes: Percentages are based on 120.4 million U.S. households. Percentages may not sum to 100 because of rounding.
Account Ownership – Boston MSA
29
Unbanked, 4.2
Checking and Savings
Account, 77.3
Savings Account Only,
2.8
Checking Account Only,
15.0
Banked but Unknown Type,
0.7
Account Ownership by Income
30
65.9
83.5
91.995.7 97.9
37.4
56.3
69.8
80.5
89.3
0
10
20
30
40
50
60
70
80
90
100
Less than$15,000
Between$15,000 and
$30,000
Between$30,000 and
$50,000
Between$50,000 and
$75,000
At Least$75,000
Per
cent
age
of H
ouse
hold
s
Has Checking Account Has Savings Account
31
Use of Alternative Financial Services
AFS Considered in the Survey Households were asked if they had ever used the following
AFS and if so, whether they were used in the last year. For some AFS households were whether they had been used in the last 30 days
Transaction AFS:
Non-bank money orders Non-bank check-cashing services Non-bank remittances
Credit AFS: Payday lending Pawn shops Refund anticipation loans (RALs) Rent-to-own agreements
32
Timing of AFS Use
33
*
Unknown, 2.9
Used in the Last Year, 25.4
Never Used, 54.3
Used Over a Year Ago, 17.4
Last 2-12 months, 13.4
Last 30 days, 12.0
Notes: Percentages are based on 120.4 million U.S. households. Percentages may not sum to 100 because of rounding. *The AFS included in this measure are non-bank money orders, non-bank check cashing, non-bank remittances, payday loans, and pawn shops. Households were not asked whether they used rent-to-own agreements or RALs in the last 30 days.
*
Timing of AFS Use
34
Households’ Use of Transaction and Credit AFS in the Last Year
35
Transaction Only, 19.0
Transaction and Credit, 3.9
Credit Only, 2.1Did Not Use, 71.2
Unknown,* 3.9
Notes: Percentages are based on 120.4 million households. Percentages may not sum to 100 because of rounding.* "Unknown" includes: households were transaction products are used, but credit product use is unknown; households where credit products are used but transaction product use is unknown and households where there is no indication of any AFS use but some responses are missing.
Number of AFS Used in the Last 30 Days
36
57.3
47.9
84.4
34.2
27.4
9.1
6.2
16.2 8.5
2.6
3.9
2.2
0% 20% 40% 60% 80% 100%
Underbanked
Unbanked
All Households
Ban
king
Sta
tus
Percentage of Households
Used 0 AFS Used 1 AFS Used 2 or more AFS Unknown
Notes: The AFS included in this measure are non-bank money orders, non-bank check cashing, non-bank remittances, payday loans, and pawn shops. Households were not asked whether they used rent-to-own, or RALs in the last 30 days.
Number of Times Transaction AFS Used in the Last 30 Days
37
55.3
30.2
47.1
22.7
23.5
23.0
19.3
41.4
26.5
2.7
3.4
4.9
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Underbanked
Unbanked
All Households
Ban
king
Sta
tus
Percentage of Households
Used 1 time Used 2 times Used 3 or more times Unknown
Reasons Households Use AFS – Transaction Products
38
Non-bank Money Orders Non-bank Check Cashing
Notes: Percentages based on unbanked and underbanked households that have ever used each product. Percentages may not sum to 100 because of rounding.
Unbanked Underbanked
0.9
5.2
2.3
27.3
3.8
2.0
19.4
39.1
0.9
9.3
0.4
1.7
2.5
2.5
28.0
54.7
0 10 20 30 40 50 60
Don't Know/ Refused
Other
Do not trust banks
Don't have a bank account
The place feels more comfortable than a bank
Banks do not sell money orders
Banks charge more for money orders
The place to purchase money orders is moreconvenient
1.9
4.2
1.6
2.5
2.4
1.9
6.6
38.9
11.3
28.7
1.1
9.6
0.9
1.0
1.6
2.1
3.4
10.1
18.4
51.8
0 10 20 30 40 50 60
Don't Know/ Refused
Other
The place to cash checks asks for fewer IDs
Do not trust banks
Banks don't cash checks
Feel more comfortable than at a bank
Bank charges more to cash checks
Don't have a bank account
To get money faster
The place is more convenient
Reasons Households Use Non-bank Remittances
39
2.9
2.7
29.5
8.4
3.7
6.9
19.2
25.0
10.5
0.7
1.8
5.1
9.4
13.0
25.0
1.71.3
33.2
0 10 20 30 40 50 60
Don't Know/ Refused
Other
Do not trust banks
Don’t have a bank account
The place to give or send money feels morecomfortable than a bank
Banks don’t send money abroad
A bank charges more to send money abroad
The money gets there faster
The place to give or send money has moreconvenient hours or location
Underbanked
Unbanked
Notes: Percentages based on 1.2 million unbanked households and 4.4 million underbanked households that have ever used non-bank remittances. Percentages may not sum to 100 because of rounding.
Reasons Households Use AFS – Credit Products
40
Payday Lenders Pawn Shops
Notes: Percentages based on unbanked and underbanked households that have ever used each product. Percentages may not sum to 100 because of rounding.
Unbanked Underbanked
0.3
4.1
2.2
3.1
10.1
12.8
26.8
40.6
1.0
9.3
2.4
0.6
10.0
19.2
15.6
41.8
0 5 10 15 20 25 30 35 40 45
Don't Know/ Refused
Other
More comfortable at a pawn shop than at abank
Do not trust banks
The pawn shop is more convenient
Banks don't have small loans
Don't qualify for a bank loan
Easier to get money from pawn shop thanqualify for bank loan
1.9
6.5
4.1
0.6
9.8
25.2
17.6
34.2
1.9
0.3
1.7
13.0
13.6
19.7
42.3
7.4
0 5 10 15 20 25 30 35 40 45
Don't Know/ Refused
Other
Do not trust banks
Payday loan service feels more comfortablethan a bank
The payday loan place is more convenient
Don't qualify for bank loan
Banks don't make small-dollar loans
Easier to get a payday loan than to qualify fora bank loan
Reasons Households Need AFS Credit Funds
41
3.4
7.5
0.1
0.9
1.6
4.3
9.5
19.1
53.6
4.3
13.8
0.6
2.5
2.2
4.7
11.8
17.1
43.0
0 10 20 30 40 50 60
Don't Know/ Refused
Other
For legal expenses
For medical, dental or death expenses
For school or childcare expenses
For special gifts or luxuries
For house or car repairs or to buy an appliance
To make up for job loss or decrease in income
For basic living expenses
Unbanked Underbanked
Notes: Percentages based on 1.6 million unbanked households and 5.6 million underbanked households that have ever used credit AFS. Percentages may not sum to 100 because of rounding.
Household Use of Prepaid Debit Cards
42
9.9
12.2
18.8
5.7
16.4
8.110.1
17.8
26.8
10.8
17.4
7.3
0
5
10
15
20
25
30
Allhouseholds
Unbanked PreviouslyBanked
Never-Banked
Underbanked Fully Banked
Per
cent
age
of H
ouse
hold
s
2009 2011
Household Use of Payroll Cards
43
3.0 3.25.0
1.5
4.22.73.2
5.5
8.5
2.9
5.3
2.5
0
5
10
15
20
25
30
Allhouseholds
Unbanked PreviouslyBanked
Never-Banked Underbanked Fully Banked
Perc
enta
ge o
f Hou
seho
lds
2009 2011
44
Implications
Implication 1 Understanding segments better might
increase the efficacy of economic inclusion strategies
E.g., unbanked Hispanic households use AFS
more actively than any other racial ethnic group (52% used AFS in the last 30 days), but 30% use no AFS
45
Implication 2 Having a bank account does not
guarantee long term participation in the banking system
Half of all unbanked households had an
account previously Nearly half (48.2 percent) of these report they are
likely to open another
Almost one-quarter of fully banked households used AFS in the past
46
Implication 3 Experience with banks appears to
have more positive perceptions of having an account and rely less on AFS
E.g., unbanked households that previously had
an account are more likely to see value in being in the banking system: More likely to open an account Less likely to say “I don’t want or need an account”
47
Implication 4 Banks might need to more clearly
demonstrate the value of an account to AFS users
AFS users perceived non-bank services to be
more convenient, faster, less expensive, or to present lower barriers to qualification
E.g., mobile technologies that allow remote deposit capture might alter check cashing equation
48
Summary Findings Opportunity to increase banking engagement
8.2 percent of households are unbanked (0.6 percentage point increase from 2009)
20.1 percent are underbanked
Opportunity to increase savings account ownership 29.3 percent of households do not have a savings account
(10.3 percent do not have a checking account)
A sizeable portion of households use AFS One quarter of households have used AFS in the last year (10
percent have used 2 or more AFS) 12 percent have used AFS in the last 30 days (40 percent of
unbanked and underbanked) 49
www.economicinclusion.gov
50
EI.GOV-BOSTON MSA
51
52
53
