WASHINGTON — A wide-ranging study released by the Federal Deposit Insurance Corp. Thursday said that institutions have more work to do serving the unbanked.
The 365-page report, the first of its kind commissioned by the federal government, said most banks know there are underserved consumers within their reach, and offer them basic financial education. Beyond that, however, the FDIC said, ample room for improvement exists.
"Relatively few banks have made it a priority to target these market segments," the FDIC said.
The report, which the agency completed with the help of outside consultants after it was authorized by the 2005 deposit insurance reform law, said 63% of the roughly 700 institutions surveyed offered basic financial education materials — such as brochures — to underserved populations. And 53% held financial literacy sessions for underbanked people.
(Of the industry's 25 largest banks, all but one participated in the survey.)
But the survey said that — though 73% of institutions knew about unreached populations in their region — more than 70% "have not identified" expanding services to this market segment "as a priority."
"Other than basic materials and education sessions and outreach, banks' efforts to reach out to unbanked and/or underbanked individuals are limited," the report said.
About one-quarter of the institutions target marketing to underserved individuals, and one-third try to serve underbanked populations through business customers that may employ underserved workers. Yet the report noted that only 14% of the institutions that work with business partners offer payroll cards, which help people gain access to their wages through a bank account.
The survey said less than one-quarter of institutions in the study had researched underserved consumers in their market areas and less than one-fifth had undertaken "other efforts to encourage" such people "to open an account."
As part of the report, the FDIC — which has taken the lead in pushing for more economic inclusion efforts by the industry — recommended that the government and the industry set joint goals for reducing the number of unbanked and underbanked households. The agency, which had asked 1,300 institutions to participate in the survey, also suggested the creation of a national task force on the issue and called for continued reporting on it.
The survey focused on industry efforts, but the deposit insurance reform law also called for a study of the magnitude of the unbanked population in the United States. A report on that study, for which the FDIC has engaged the Census Bureau, is also due out this year.
FDIC Vice Chairman Martin Gruenberg said in an interview that the first survey showed "a foundation of activity" by banks to reach the underserved and that "it's a foundation that can be built on to reach out more effectively."
"There's good news in the survey to the extent that banks are aware that there are unbanked populations in their service area, that they try to respond to the needs of that population through financial literacy, and basic banking accounts, and other kinds of services," he said. "But I think the survey also suggests that there is room for improvement in reaching out to people who lack access to insured financial institutions."
He added that, though banks have found classroom settings an effective venue for showing potential customers the benefits of a banking relationship, some institutions have not made use of this educational strategy.
"Many banks don't actually have strategies in place to target and reach out to those populations effectively," he said. "It's a market opportunity that … in many cases isn't being fully taken advantage of."
Though underbanked customers have access to basic accounts, he added, "in many cases they aren't really tailored to meet the needs of unbanked people — being able to accept direct deposit of payroll checks, for example, or low fees, which are particularly significant in regards to unbanked low- and moderate-income people."