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Remember Passbooks? Where's Today's Honest, Basic Account?

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.

Related stories:

Hidden Fees Force Low-Income Customers Out of Banking: Pew

CFPB Probes Overdraft Practices

Why the Underbanked Have Taken to Prepaid Cards



(6) Comments



Comments (6)
I worked in Republic of Korea for many years through out the Nineties and Noughties. The presence of passbook printers in the foyers of banks right next to ATM's or Cash Dispensers was a common sight. Customers would take cash out of the ATM and then move over to the Passbook Printer.
A few years ago I was in the UK and visited the Head Office of Nationwide Building Society who had a purpose built machine in their foyer which was a combined ATM and Passbook Printer. The Passbook Savings Account is still alive and kicking thanks to Credit Union's and Building Society's. Arguably these types of financial institution are the best options for the un-banked, much the same as when Terminating Societies were first conceived in the 1700's in the UK followed by Permanent Societies in the 1800's. What can we learn from history?
Posted by glstafford | Sunday, March 25 2012 at 9:02PM ET
Wow!! There really are some true community bankers alive and well in the industry. Love to pursue this with all y'all in more detail in hopes that we dinosaurs can help to revive this hallmark account.
Posted by jim_wells | Friday, March 23 2012 at 10:49PM ET
Perhaps the new passbook is an online, triple entry accounting ledger -- where a third party has access for auditing.

With triple entry accounting, MF Global's actions would have been seen long before significants amounts were lost, as an example.

Here's an example of one such ledger used today -- the Bitcoin blockchain!
The blockchain is publicly visible -- it is open for anyone in the general public to audit. But because the transactions are pseudonymous, the accountholder's identity is not revealed.

Pretty neat, eh?
Posted by sgornick | Friday, March 23 2012 at 7:48PM ET
Our bank continues to satisfy customers' desires for traditional passbook savings vehicles, with nearly 17% of our total deposits in passbook accounts (holiday savings and day/deposit to day/withdrawal savings). As a mutual community bank with branches in urban as well as suburban communities, we serve a pretty diverse customer base and work hard to have the diversity of products/services they desire, including the traditional (almost nostalgic) passbook savings.
Posted by bagnolie | Friday, March 23 2012 at 3:15PM ET
I opened my first savings account way back in the early 1960s with a passbook from South Boston Savings. I deposited $5.00
I have never again felt as wealthy as I did at that moment :)
Posted by Paul C | Friday, March 23 2012 at 2:00PM ET
We still have passbooks (though in card form now to accommodate modern printers)...they make up 8.7% of our total deposits. We use them for Kid's Club accounts, Christmas Club, and they are utilized by many seniors for their "spending" money and are a favorite of local churches, groups and clubs to maintain their funds....
Posted by 35285619 | Friday, March 23 2012 at 1:24PM ET
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