The Treasury Department's chief banking regulator said Wednesday the creation of new financial products will be key to shifting low-income households into the traditional banking system.
"Reloadable prepaid debit cards and bank accounts with only debit card access hold promise as a low-cost financial transaction tool," said Michael Barr, the Treasury's assistant secretary for financial institutions.
Barr said, in a speech before a conference held by the Corporation for Enterprise Development, it is possible for banks to make profits, and simultaneously offer affordable and safe accounts to low-income customers.
"Mobile applications, such as texting to convey account information or facilitate remote check deposits, are growing and expanding service offerings with the potential to reduce costs," he added.
Barr's remarks follow an announcement earlier this month that the Treasury is launching a pilot program that would allow some U.S. workers' tax refunds to be directly deposited into a low-cost bank account - a move that could benefit millions of unbanked Americans.
In trying to thwart risky financial decisions, the Obama administration has launched a series of initiatives and policy changes that aim to reduce taxpayer's use of high-interest payday and refund anticipation loans, among other high-risk alternative products.
Barr touted the new Consumer Financial Protection Bureau as an additional tool that will help "empower" Americans.
The Treasury has been working "aggressively" on the bureau, Barr said.
Officials are working on consolidating core authorities, and working to issue rules on fairness and regulatory guidelines for nonbank entities such as debt collectors, he said.