WASHINGTON — A smaller percentage of U.S. households were unbanked in 2013 compared with two years earlier, just as less traditional financial services products such as prepaid cards grew in usage among those without a bank account.
The Federal Deposit Insurance Corp.'s third biennial survey of unbanked and underbanked households showed that 7.7% of U.S. households had no account at an FDIC-insured institution last year, down from 8.2% in the 2011 results.
Underbanked households — defined as those that have an account but still use alternative financial services — held steady at about 20%. (The FDIC conducts the survey with the U.S. Census Bureau.)
The survey said the lower proportion of unbanked was due in part to improved job and wage conditions. The report also noted certain demographic factors, including a more than two percentage point drop in the unbanked rate for Hispanic households.
Credit union membership has also grown steadily in recent years, said Carrie Hunt, SVP of government affairs and general counsel for NAFCU, who noted that CU membership rose by 2.8 million in the 12 months that ended in September. "American consumers are seeing the value of credit unions and joining credit unions for their financial services, so certainly in the credit union space we think that's extremely positive."
But at the same time, the FDIC report highlighted parallels between the unbanked and the use of newer financial services channels. For example, in 2011, 17.8% of the unbanked said they have used prepaid debit cards, but that figure shot up to 27.1% in 2013. By comparison, prepaid card use rose just over two percentage points to 19.7% for the underbanked, and a point and a half to 8.9% for the fully banked.
Researchers who worked on the survey found that unbanked households appear to rely on prepaid cards for basic transaction needs generally associated with checking accounts.
"While some fully banked households used prepaid cards, unbanked and underbanked households accounted for a majority of prepaid card users," the report stated
NAFCU's Hunt said that the marked rise in prepaid card usage is both a sign that that product is a viable one, but also that it can successfully transition members into more traditional financial services products.
"It shows that consumers are looking for convenience, and I think prepaid cards provide one avenue of convenience," she said, adding that CUs can also provide convenience in other ways, such as shared branching and mobile banking. "I think the more avenues of access that credit unions are successful in implementing, there's more opportunity to reach additional members and to reach the unbanked."
The report also found that 68.1% of unbanked and 90.5% of underbanked households had access to mobile phones. Among the underbanked, 32.4% used mobile banking to access their services, versus just 21.6% for fully banked households. Banked households are more likely to visit tellers or use online banking.
At a meeting last week to discuss the results, an FDIC official reiterated the agency's view that mobile phones could help expand access to banking platforms.
"As mobile banking and other delivery channels emerge, it is key to think about opportunities to engage underserved consumers [with] all the relevant banking channels," Yazmin Osaki, a senior research associate at the FDIC, said at the meeting of the agency's advisory committee on economic inclusion.
Non-Asian minorities as well as lower-income, younger and unemployed households together made up the majority of the unbanked, the survey found. The percentage of Hispanic households that were unbanked dropped from 20.1% in 2011 to 17.9% in 2013, while the percentage of black households fell a little less than one percentage point to 20.5%. The percentage Asian and white households, respectively, were 2.2% and 3.6%.
Credit unions already do significant outreach to young and lower-income consumers, but Hunt stopped short of saying CUs should take this data as a sign that they need to reach out more to minority communities.
"All credit unions need to look at their fields of membership and do careful analysis as to who they're reaching and who they're not, and work in that regard," she said. "That's going to be very individualized for each credit union."
But household income represented the largest determining factor for whether a family was unbanked, with 27.7% of unbanked households reporting an annual income of $15,000 or less. When asked why a household lacked an account, the response, "Do not have enough money," was cited most frequently at 57.5%. A dislike for or mistrust of banks was the second most frequently given reason at 34.2%.
--Aaron Passman contributed to this report.
