Regulators and advocacy groups have been steadily pushing traditional financial firms to bring low-income consumers into the banking system or do more to keep them there. But are banks the best option for everyone?

Not by a long shot, says Lisa Servon, a professor of urban policy and management at The New School in New York. She refutes the argument that the poor would flock to banks—and that they necessarily would be better off doing so—if bank products could only be made more accessible somehow.

Instead, bad experiences with bank overdraft fees, a relative lack of transparency and a de-emphasis on face-to-face relationships, among other factors, have led many of these individuals to actively exclude themselves, she says.

As part of her research, Servon spent four months as a teller at a check-cashing business in the South Bronx and three weeks working at a payday lender in Oakland, Calif. She found that people who use nonbank financial services like these haven't necessarily been locked out of the banking system.

During her weekly, eight-hour shifts at the check-cashing outlet, she observed an unusual closeness in the relationships her fellow tellers had with customers, and when she interviewed customers after her stint as a teller, she learned that many believed they saved money by avoiding banks and, thus, their fees for bounced checks or late payments.

"Poor people aren't stupid," Servon says. "They have pretty good reasons" for patronizing places like check cashers or payday loan outlets, despite the reputation these nonbank alternatives have for being predatory lenders.

As a result, Servon and others suggest, conversations around financial inclusion have become outdated and often misguided.

"The idea that banks somehow need to do something about the unbanked is mind-boggling," says Ron Shevlin, senior analyst at Aite Group, which also has done research in this area. "These are people who are choosing not to do business" with banks.

That may be just as well as far as the banks are concerned. Industry trends such as branch closures, punitive fee structures and a move to smartphone-based mobile services are putting traditional financial services providers widely out of step with the needs of many unbanked and underbanked consumers, according to Servon. To successfully serve these demographics, banks would have to significantly alter their business model. They would "have to be willing to innovate and to fail," Servon says.

That's a tall order for banks these days, given the pressure on margins and the heightened reputational and regulatory risks around products targeting low-income consumers. In any case, Servon notes, banks "never said they were social enterprises."

If regulators were serious enough about making the banking system more inclusive, they could perhaps set and enforce price controls on products for consumers below a certain income threshold. But as Shevlin points out, "nobody tells Mercedes-Benz you have to sell a car for $5,000 to people who cannot afford a car for $75,000." And it's easy to see how price controls in banking could backfire. Says Shevlin, "The people who can pay for the checking accounts will be charged even more. Then what happens? That will drive more people who are banked to become unbanked."

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