A privately funded antipoverty program backed by Mayor Michael Bloomberg is paying underbanked residents of New York to open savings accounts at four banks and four credit unions.
Carver Bancorp Inc., the nation's largest African and Caribbean American-owned banking company, said the test program is already producing results: It is cross-selling other financial services to 30% of the 245 participants who have opened initial savings accounts there.
Susan Ifill, the chief retail officer at Carver, said it is opening about 40 such accounts a month through the Opportunity NYC program.
The program, overseen by the city and funded by the Rockefeller Foundation, other nonprofits, and personal donations from the mayor, gives poor families monthly cash incentives to hold jobs, stay in school, and improve their financial standing.
In September it recruited the eight institutions to create no-fee accounts.
Participants, who are chosen from a lottery of New Yorkers living below the poverty line, can get $50 for opening one of the accounts, which charge no monthly fees and do not require minimum balances. Some of the accounts offer interest.
Opportunity NYC seeks to help about 5,000 families before the incentives end in September 2009.
Jonathan Mintz, the commissioner of the city's Department of Consumer Affairs, which organized the bank alliances, said they have proven a convenient way to disperse the funds while encouraging underbanked consumers to enter the financial mainstream.
"We knew that you were going to have lots of people signed into a program in which they would presumably be getting money every month" in incentives, he said in an interview last week. "We felt like it was a good confluence of circumstances."
The eight participating institutions — Carver, Bethex Federal Credit Union, Brooklyn Cooperative Federal Credit Union, Lower East Side People's Federal Credit Union, Union Settlement Federal Credit Union, Amalgamated Bank, Capital One Financial Corp.'s North Fork Bank, and M&T Bank — operate 26 branches in the city.
About 820 accounts have been opened for the program's 2,500 participating families, roughly 56% of whom are underbanked, Mr. Mintz said. For the banks, "this kind of gesture really bolstered credibility," particularly with immigrant communities who tend to distrust traditional financial institutions.
Ms. Ifill said Carver's participation cuts "right to the core of why we are in existence" as a banking company designed in part to cater to the needs of underbanked consumers. Carver has been met with "a lot of reluctance" from wary participants, she said, and its success has required "a lot of education and a lot of hand holding."
Mr. Mintz said he purposely avoided issuing Opportunity NYC funds on prepaid debit cards, in an effort to encourage participants to enter the mainstream banking system. (Participants who open accounts get an automated teller machine card too, he said.)
He hopes to expand the banking products offered in partnership with the city after the incentives expire. A third year will be used to evaluate the program. In addition to savings products, partner banks could offer credit cards and checking accounts, he said.
