why people become unbanked
the main reason for being unbanked according to the fdic study is cost those who are unbanked can t meet banks minimum requirement balances another way of looking at it traditional banks don t provide access to the financial services and products that unbanked populations need for instance someone living paycheck to paycheck with very low or volatile income may not be able to wait for a paycheck to clear at a bank so they turn to a check cashing service which will provide cash immediately albeit for a fee in neighborhoods that are bank deserts such alternative financial services are also likely more common and open longer hours in other words more accessible and convenient than arranging for transportation to and from bank branches during limited banking hours these high transaction costs e g time cost to visit bank branches inconvenient hours lack of clarity about fees and alternative products that provided a more compelling value proposition have all been identified as reasons why people are unbanked 5lack of trust in banking institutions can also come into play distrust was the second main reason cited in the fdic study for being unbanked not surprising given the history of lending discrimination experienced by blacks and latinx in the u s and the lingering inequities 9 for instance predominantly black and latinx neighborhoods have been targeted for predatory lending including subprime mortgages 1011 recent immigrants who experienced banking crises in their countries of origin may also lack trust in banks being unbanked is sometimes attributed to people s lack of financial literacy or knowledge of banking products but about half of unbanked people have previously held a bank account so they are familiar with banking services 512the three main reasons people are unbanked are not having enough money to meet minimum balance requirements privacy concerns and not trusting banks according to the fdic 13initiatives to help the unbankedvarious state and federal programs have been aimed at helping the unbanked gain access to banking services and financial literacy some such initiatives include former california gov arnold schwarzenegger s bank on california initiative and the fdic s money smart program 1415the u s treasury department s section 326 regulations which allow banks and credit unions to accept identification issued by foreign governments seek to help undocumented immigrants become banked 16 the treasury department also makes federal payments to unbanked federal benefits recipients using a mastercard prepaid debit card 17