I recently came across a cute online slideshow of vintage savings passbooks from "the days when [banking] was simpler, gentler."
It got me to thinking that remembering passbooks might be more than just an exercise in nostalgia. It might be a valuable reminder of the important functions played by these accounts and the philosophies of banks that offered them.
First, the passbook was an account that did no harm. Passbook holders put their money in and knew that there could be no surprises so long as they held their books. No hidden fees. No minimum balance requirements. No minimum deposit periods. No possibility of overdrafts or bounced checks.
The second important feature of the passbook was that immigrants, foreign-born nationals and others unfamiliar with the U.S. banking system could easily understand the use of this simple account. They could hand their money and their passbook to a teller and within minutes see the exact amount of their deposit reflected in an updated balance. The little passbook held the tangible proof of their wealth. It was evidence of having established a financial stake in this country. And it could be carried around as easily as cash.
Third, passbooks were the account that parents and grandparents used to introduce generations of children to the banking system and to inculcate the concept of personal thrift. Youngsters depositing money from birthday and holiday gifts, babysitting, lawn mowing and the like could see their wealth increase in direct proportion to their efforts. They too had established personal financial stakes in their futures.
So before moaning about so-called unbanked consumers and their supposed lack of financial literacy, bankers, federal financial regulators, lawmakers and others might consider that there once was a product that targeted this situation. A simple, straightforward, basic account that was easy to obtain and to maintain.
When banks replaced Main Street with Wall Street as their primary constituency and shifted their focus from long-term growth with depositors to quarterly profits for shareholders, eliminating passbooks must have seemed like a no-brainer.
In retrospect, eliminating the one account that served as the traditional entry point into the banking system for two large and continuously replenishing consumer groups – children and immigrants – may have been more like a brain-dead strategy.
And, it’s not simply a question of old technology versus new technology. Decades ago, HongkongBank used a COPUT (Customer-Operated Passbook Update Terminal) to serve its Asian depositors who prized tangible and portable evidence of their thrift.
So as I finished reading the online posting and looking at the pictures of old passbooks, I couldn’t help thinking that I never heard the term unbanked back when I had my passbook account. I hear it all the time now.
Jim Wells is president of Wellspring Consulting International, which focuses on expanding access to financial services for consumers who do not use traditional depository institutions.