FDIC Report Says Unbanked, Underbanked On Rise

What's Next In Payments®
5:35 PM EST September 13th, 2012

The Federal Deposit Insurance Corporation has released its biennial report on unbanked and underbanked households in the U.S., and has noted a simple trend – both are on the rise.

Combined, 28.5 percent of U.S. households qualify as unbanked or underbanked, with the latter group growing much faster than the former. The FDIC’s numbers come from the U.S. Census Bureau, and compare household numbers from 2009 to 2011.

PYMNTS.com dives deep into the numbers to highlight what you need to know about this growing segment of the U.S. population.

According to the FDIC report, about 20 percent of U.S. households are underbanked, meaning they have either a checking or savings account but also rely on an alternative service. This represents a 14 percent increase from 2009, and brings the total to around 51 million U.S. adults. It is far more common for adults to have a checking account but no savings account than vice versa.

The report showed that the unbanked population is smaller and growing more slowly than its underbanked counterpart, but is increasing nonetheless. The unbanked population has no type of bank account and relies on AFS or cash to make transactions. One in 12 U.S. households, or 8.2 percent, are classified as unbanked, totaling around 17 million adults.

Alternative Financial Services (AFS)
About a full quarter of all households, including all underbanked and 65 percent of unbanked houses used AFS in the past year. Examples of AFS products include non-bank money orders, non-bank check cashing and non-bank remittances, while AFS credit products include pay loans, pawn shops and rent-to-own stores. Interestingly, about 30 percent of all unbanked households say they don’t use any AFS and rely primarily on cash.

Income Is Key
This isn’t shocking, but the less income a household has, the more likely they are to abstain from using any traditional banking services. Among households with less than $15 thousand in yearly income, 17.4 percent were unbanked while 21.6 percent were underbanked. The number of unbanked decreases as income increases, but, interestingly, households between $15 and $50 thousand were slightly more likely to be underbanked.

To read the FDIC’s full report, click here.

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