More banks are joining an effort to reduce the number people who lack sufficient banking services.
Three institutions — Dart Bank in Mason, Mich.; KeyCorp in Cleveland; First Commonwealth Financial in Indiana, Pa.; and First National Bank of Nebraska in Omaha — have joined Bank On, a certification program that outlines criteria that bank accounts must include to be considered safe for consumers.
Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and U.S. Bancorp had already obtained certification, which is meant to encourage banks to work with local groups or coalitions to increase the number of people who use traditional financial services.
Bank On, which is run by the nonprofit Cities for Financial Empowerment Fund, is another effort to reach the nearly 27% of Americans who are either unbanked or underbanked, based on data from the Federal Deposit Insurance Corp. About 7% are completely unbanked.
Other notable initiatives include offering small-dollar loans and providing financial education to middle and high school students. A number of banks across the country, for instance, have modeled educational efforts on the federal government’s Money Smart program.
The goal for some participants is for products certified by Bank On to become an industry standard.
“It’s important to be able to create and maintain a product … that is sustainable on an ongoing basis,” said Naomi Gendler Camper, managing director of JPMorgan Chase’s office of nonprofit engagement. “It doesn’t necessarily need to be a big profit maker, but that balance of sustainability is really important.”
Bank On creates a set of consumer-friendly standards. Qualifying banks must either waive monthly fees or feature a $5 cap. Accounts cannot have overdraft fees and must include free online bill pay and ATM access.
Some participating banks had to tweak their existing accounts or create new offerings to specifically quality for certification, said Jonathan Mintz, the fund’s CEO. Certified accounts cater to young adults just getting started or people who were burned in the past by things such as overdraft fees, he said.
“This is not a charity account,” Mintz said. “This is an account that’s meeting a really strong demand.”
Dart Bank is offering its certified product to people on probation or parole. Dart, in conjunction with Lansing, Mich., has so far opened a handful of accounts, said Sally Rae, the $378 million-asset institution’s community bank administrator.
The bank began working with Lansing two and a half months ago. The city oversees an empowerment center that coaches consumers on finances while monitoring account activity.
About 6% of Michigan’s population is unbanked, while another 19.8% are underbanked, based on FDIC data.
“We feel that we need to try to help people re-establish themselves financially,” Rae said.
Participants also hope that having consumer-friendly deposit products will open up discussions about loans.
First Commonwealth is hoping its work will encourage more people to turn to banks instead of payday lenders, said Evan Zuverink, the $6.8 billion-asset company’s community lending manager.
“We’re trying to help folks realize and see” better choices, Zuverink said.
In Pennsylvania, less than 5% of the population is unbanked; roughly 18.8% are underbanked.
For Bank On's participants, the goal is to get more banks involved.
“There’s now a critical mass of everybody having an account with key features,” Camper said. “Once you get a certain percent of the market, everybody else is going to follow.”
An increase in account openings will provide more data for participants — and others — to track. The fund has partnered with the Federal Reserve of St. Louis to make aggregate data on the certified accounts publicly available.
“You can cross reference ZIP code data with low- and moderate-income information” to find out about account openings, Mintz said. “It’s about time there was real data here.”