More than one-quarter of American households are unbanked or underbanked and nearly 17 million people have no bank account, according to a survey conducted by the U.S. Census Bureau.
"The bottomline is that about 7.7 percent of U.S. households have no account in an insured financial institution and an additional 17.9 percent are underbanked, meaning they have an account but they utilize high-cost financial service providers," said Martin Gruenberg, vice chairman of the FDIC, which commissioned the survey.
(See the accompanying video for the complete interview.)
While half of the unbanked segment represent people who have never had an account, the other half represents people who have chosen to discontinue their bank accounts, he indicated. Rather than go to a FDIC-insured institution, they turn to money orders, cash-checking services and pawnshops.
"For those that have discontinued their account, cost really seems to be a factor as well as access to the insured institution," said Gruenberg. "For the other half, having enough money available to them to make it seem worthwhile to have an account, seemed to be a key finding of the survey."
The FDIC wants to encourage banks to compete for this market and offer low-cost products.
"The crucial thing that makes banks unique is the ability to offer a federally-insured savings account; no alternative provider can offer that," he said. "And for banks to think of innovative ways to give people access to savings accounts is really a crucial goal here."