overview of the 2011 fdic national survey of unbanked and ......2012/12/06  · overview of the 2011...

Overview of the 2011 FDIC National Survey of Unbanked and Underbanked Households

Boston Alliance for Economic Inclusion December 6, 2012

Yazmin Osaki

1 Members of the Unbanked Study Team: Susan Burhouse, Sarah Campbell, David Chapman, Keith Ernst, Ryan Goodstein, Leneta Gregorie, Yazmin Osaki, Luke Reynolds and Sherrie Rhine, and Eric Robbins.

Agenda

Background Banking Status Account Ownership Use of Alternative Financial Services Implications and Conclusions

2

Background Objectives and statutory mandate FDIC household survey

Administered in June 2011 as a supplement to the Census CPS to nearly 45,000 households (84% of CPS respondents)

Designed to yield estimates of the number of unbanked and underbanked households; their demographic characteristics, and the reasons why they are unbanked and underbanked

First survey administered in January 2009 and released in December 2009

FDIC bank survey Results scheduled to be released in 2012 3

4

FDIC Household Survey Highlights

Distribution of Household Banking Status: U.S.

5

Underbanked, 20.1

Unbanked, 8.2

Fully Banked, 68.8

Banked, but Underbanked

Status Unknown,* 2.9

Notes: Percentages are based on 120.4 million U.S. households. Percentages may not sum to 100 because of rounding. * These households are banked, but there is not enough information to determine if they are underbanked.

Distribution of Household Banking Status

6

68.877.6 79.6

20.114.1 14.7

8.2 4.9 4.22.9 3.41.5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

National Massachusetts Boston MSA

Banked, but Underbanked Status Unknown Unbanked Underbanked Fully Banked

2009-2011 Changes in Unbanked Rates

7

7.6

4.0 3.8

8.2

4.9

4.2

0

1

2

3

4

5

6

7

8

9

10

National Massachusetts Boston MSA

2009 2011

Perc

enta

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f Hou

seho

lds

*

* Statistically significant difference

Revised Underbanked Definition

AFS Timing of Use

2009 2011 Non-Bank Money Orders Non-Bank Check Cashing Payday Lending Pawn Shops Rent-to-Own

Used at least once or twice a year

Used in the last

year

RALs Used in the last 5 years

Non-Bank Remittances Not included 8

2009-2011 Changes in AFS Use Among Banked Households

9 Note: For comparability purposes, the estimates include households that have an account, but used non-bank check cashing, non-bank money orders, payday loans, rent-to-own, and pawn shops in the last year. The estimates exclude non-bank remittances and refund anticipation loans because the 2009 survey did not ask about non-bank remittances and asked about the use of refund anticipation loans in the last five years as opposed to the last year.

* Statistically significant difference

10

Unbanked and Underbanked Rates by Demographic Groups

Banking Status of Select Groups

Percent Percent Percent Select Demographic Groups Unbanked Underbanked Fully Banked

All households 8.2 20.1 68.3 Blacks 21.4 33.9 41.6 Hispanics 20.1 28.6 48.7 Foreign-born noncitizens 22.2 28.9 45.8 Unemployed householder 22.5 28.0 47.5 Income below $15,000 28.2 21.6 47.6 Unmarried female family

households 19.1 29.5 48.4 Under age 24 householder 17.4 31.0 49.7

11

Unbanked Households by Region and State

12

Underbanked Households by Region and State

13

14

Household Demographic Composition by Banking

Status

Household Composition by Banking Status There are stark differences between the unbanked

and banked Along some dimensions, the underbanked seem

to be a blend of the unbanked and fully-banked populations: race, age, family type

b Along other dimensions, the underbanked seem much more similar to the fully-banked: employment and income

15

Household Type Distribution by Banking Status

16

Unmarried male family household,

3.6

Unmarried female family household,

9.1

Married couple, 52.2

Nonfamily household, 35.0

Unmarried female family household,

30.1

Nonfamily household, 40.1

Unmarried male family household,

8.2Married couple,

21.5

Unbanked Underbanked

Fully Banked

Unmarried male family household,

6.9

Nonfamily household, 29.9

Married couple, 44.1

Unmarried female family household,

19.0

Income Distribution by Banking Status

17

Unbanked Underbanked

Fully Banked

Less than $15K, 17.5

$15K-$30K, 23.3

$30K -$50K, 23.9

$50K -$75K, 17.1

At least $75K, 18.3

At least $75K, 1.3$50K -$75K, 4.4

$30K -$50K, 12.4

$15K-$30K, 26.1

Less than $15K, 55.8

$30K -$50K, 20.5

$50K -$75K, 20.2

At least $75K, 32.1

Less than $15K, 11.2

$15K-$30K, 15.9

Racial Distribution of Unbanked: U.S., MA, Boston

18

Black, 17.9%Hispanic,

31.4%

White, 39.9%

Other, 10.8%

Black, 34.7

Hispanic, 28

White, 33.7

Other, 3.6

Black, 16.9%

Hispanic, 28.6%

White, 35.1% Other,

19.5%

Massachusetts Boston MSA

National

Black, 15.4%

Hispanic, 12.2%

White, 68.6%

Other, 3.8%

Racial Distribution of Underbanked:US, MA, Boston

19

Black, 14.4%

Hispanic, 13.0%

White, 67.4%

Other, 5.2%

Black, 22.5

Hispanic, 16.2

White, 56.0

Other, 5.3

Massachusetts Boston MSA

National

HH Type Distribution of Unbanked: U.S., MA, Boston

20

Boston MSA Massachusetts

National

15 - 34, 16.9%

35 - 44, 10.4%

45 - 54, 35.1%

55 - 64, 15.6%

65 or older, 22.1%

15 - 34, 37.2

35 - 44, 20.2

45 - 54, 20.3

55 - 64, 12.2

65 or older, 10.1

Age Distribution of Unbanked: U.S., MA, Boston

21

Massachusetts Boston MSA

National 15 - 34, 34.0%

35 - 44, 14.0%

45 - 54, 24.6%

55 - 64, 9.2%

65 or older, 17.9%

22

Unbanked Households

Previous Banking Status

23

3.7

2.2

1.3

4.4

2.7

2.2

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

National Massachusetts Boston MSA

Previously Banked Never-Banked

Perc

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Main Reason Households are Unbanked

24

3.5

14.8

0.7

1.4

1.1

9.5

7.1

33.2

26.0

8.2

5.5

15.6

3.5

11.9

0.2

1.5

1.5

4.0

4.0

7.1

7.6

32.8

0 5 10 15 20 25 30 35

Do Not Know/ Refused

Other/ None of the Above

Banks do not offer the needed products or services

Banks do not have convenient hours or locations

Do not know how to open or manage an account

Previously had an account but the bank closed it

Bank account fees or minimum balance requirementsare too high

Don't like dealing with and/or don't trust banks

Can't open an account due to ID, credit, or bankinghistory problems

Do not need or want an account

Do not have enough money

Never-Banked

Previously Banked

Unbanked Households’ Likelihood of Opening Account

25

21.7

39.0

22.226.0

18.9

29.4

6.6

16.1

24.4

48.0

20.4

13.5

0

10

20

30

40

50

60

Very likely Somewhat likely Not too likely Not likely at all

Per

cent

age

of U

nban

ked

Hou

seho

lds

All Unbanked Previously Banked Never-Banked

Note: Percentages are based on 9.9 million unbanked households

Unbanked Households’ Reasons for Wanting to Open an Account

26

1.3

7.0

0.3

4.2

10.0

22.6

25.7

28.8

1.6

3.7

0.6

1.6

4.4

26.2

31.0

30.8

0 10 20 30 40 50 60

Unknown

Other

To send money to family and friends

To be able to apply for a loan or mortgage

To take advantage of direct deposit of paychecks

To save money for the future

To secure your money

To write checks and pay bills

Percentage of Unbanked Households

Never-Banked

Previously Banked

Note: Percentages are based on 5.3 million never-banked and 4.4 million previously-banked households.

Types of Bank Accounts Owned by US Households

27

Account Ownership: U.S.

28 Unbanked, 8.2

Banked but Unknown Type,

1.5

Checking and Savings

Accounts, 67.2

Savings Account Only,

2.0

Checking Account Only,

21.1

Notes: Percentages are based on 120.4 million U.S. households. Percentages may not sum to 100 because of rounding.

Account Ownership – Boston MSA

29

Unbanked, 4.2

Checking and Savings

Account, 77.3

Savings Account Only,

2.8

Checking Account Only,

15.0

Banked but Unknown Type,

0.7

Account Ownership by Income

30

65.9

83.5

91.995.7 97.9

37.4

56.3

69.8

80.5

89.3

0

10

20

30

40

50

60

70

80

90

100

Less than$15,000

Between$15,000 and

$30,000

Between$30,000 and

$50,000

Between$50,000 and

$75,000

At Least$75,000

Per

cent

age

of H

ouse

hold

s

Has Checking Account Has Savings Account

31

Use of Alternative Financial Services

AFS Considered in the Survey Households were asked if they had ever used the following

AFS and if so, whether they were used in the last year. For some AFS households were whether they had been used in the last 30 days

Transaction AFS:

Non-bank money orders Non-bank check-cashing services Non-bank remittances

Credit AFS: Payday lending Pawn shops Refund anticipation loans (RALs) Rent-to-own agreements

32

Timing of AFS Use

33

*

Unknown, 2.9

Used in the Last Year, 25.4

Never Used, 54.3

Used Over a Year Ago, 17.4

Last 2-12 months, 13.4

Last 30 days, 12.0

Notes: Percentages are based on 120.4 million U.S. households. Percentages may not sum to 100 because of rounding. *The AFS included in this measure are non-bank money orders, non-bank check cashing, non-bank remittances, payday loans, and pawn shops. Households were not asked whether they used rent-to-own agreements or RALs in the last 30 days.

*

Timing of AFS Use

34

Households’ Use of Transaction and Credit AFS in the Last Year

35

Transaction Only, 19.0

Transaction and Credit, 3.9

Credit Only, 2.1Did Not Use, 71.2

Unknown,* 3.9

Notes: Percentages are based on 120.4 million households. Percentages may not sum to 100 because of rounding.* "Unknown" includes: households were transaction products are used, but credit product use is unknown; households where credit products are used but transaction product use is unknown and households where there is no indication of any AFS use but some responses are missing.

Number of AFS Used in the Last 30 Days

36

57.3

47.9

84.4

34.2

27.4

9.1

6.2

16.2 8.5

2.6

3.9

2.2

0% 20% 40% 60% 80% 100%

Underbanked

Unbanked

All Households

Ban

king

Sta

tus

Percentage of Households

Used 0 AFS Used 1 AFS Used 2 or more AFS Unknown

Notes: The AFS included in this measure are non-bank money orders, non-bank check cashing, non-bank remittances, payday loans, and pawn shops. Households were not asked whether they used rent-to-own, or RALs in the last 30 days.

Number of Times Transaction AFS Used in the Last 30 Days

37

55.3

30.2

47.1

22.7

23.5

23.0

19.3

41.4

26.5

2.7

3.4

4.9

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Underbanked

Unbanked

All Households

Ban

king

Sta

tus

Percentage of Households

Used 1 time Used 2 times Used 3 or more times Unknown

Reasons Households Use AFS – Transaction Products

38

Non-bank Money Orders Non-bank Check Cashing

Notes: Percentages based on unbanked and underbanked households that have ever used each product. Percentages may not sum to 100 because of rounding.

Unbanked Underbanked

0.9

5.2

2.3

27.3

3.8

2.0

19.4

39.1

0.9

9.3

0.4

1.7

2.5

2.5

28.0

54.7

0 10 20 30 40 50 60

Don't Know/ Refused

Other

Do not trust banks

Don't have a bank account

The place feels more comfortable than a bank

Banks do not sell money orders

Banks charge more for money orders

The place to purchase money orders is moreconvenient

1.9

4.2

1.6

2.5

2.4

1.9

6.6

38.9

11.3

28.7

1.1

9.6

0.9

1.0

1.6

2.1

3.4

10.1

18.4

51.8

0 10 20 30 40 50 60

Don't Know/ Refused

Other

The place to cash checks asks for fewer IDs

Do not trust banks

Banks don't cash checks

Feel more comfortable than at a bank

Bank charges more to cash checks

Don't have a bank account

To get money faster

The place is more convenient

Reasons Households Use Non-bank Remittances

39

2.9

2.7

29.5

8.4

3.7

6.9

19.2

25.0

10.5

0.7

1.8

5.1

9.4

13.0

25.0

1.71.3

33.2

0 10 20 30 40 50 60

Don't Know/ Refused

Other

Do not trust banks

Don’t have a bank account

The place to give or send money feels morecomfortable than a bank

Banks don’t send money abroad

A bank charges more to send money abroad

The money gets there faster

The place to give or send money has moreconvenient hours or location

Underbanked

Unbanked

Notes: Percentages based on 1.2 million unbanked households and 4.4 million underbanked households that have ever used non-bank remittances. Percentages may not sum to 100 because of rounding.

Reasons Households Use AFS – Credit Products

40

Payday Lenders Pawn Shops

Notes: Percentages based on unbanked and underbanked households that have ever used each product. Percentages may not sum to 100 because of rounding.

Unbanked Underbanked

0.3

4.1

2.2

3.1

10.1

12.8

26.8

40.6

1.0

9.3

2.4

0.6

10.0

19.2

15.6

41.8

0 5 10 15 20 25 30 35 40 45

Don't Know/ Refused

Other

More comfortable at a pawn shop than at abank

Do not trust banks

The pawn shop is more convenient

Banks don't have small loans

Don't qualify for a bank loan

Easier to get money from pawn shop thanqualify for bank loan

1.9

6.5

4.1

0.6

9.8

25.2

17.6

34.2

1.9

0.3

1.7

13.0

13.6

19.7

42.3

7.4

0 5 10 15 20 25 30 35 40 45

Don't Know/ Refused

Other

Do not trust banks

Payday loan service feels more comfortablethan a bank

The payday loan place is more convenient

Don't qualify for bank loan

Banks don't make small-dollar loans

Easier to get a payday loan than to qualify fora bank loan

Reasons Households Need AFS Credit Funds

41

3.4

7.5

0.1

0.9

1.6

4.3

9.5

19.1

53.6

4.3

13.8

0.6

2.5

2.2

4.7

11.8

17.1

43.0

0 10 20 30 40 50 60

Don't Know/ Refused

Other

For legal expenses

For medical, dental or death expenses

For school or childcare expenses

For special gifts or luxuries

For house or car repairs or to buy an appliance

To make up for job loss or decrease in income

For basic living expenses

Unbanked Underbanked

Notes: Percentages based on 1.6 million unbanked households and 5.6 million underbanked households that have ever used credit AFS. Percentages may not sum to 100 because of rounding.

Household Use of Prepaid Debit Cards

42

9.9

12.2

18.8

5.7

16.4

8.110.1

17.8

26.8

10.8

17.4

7.3

0

5

10

15

20

25

30

Allhouseholds

Unbanked PreviouslyBanked

Never-Banked

Underbanked Fully Banked

Per

cent

age

of H

ouse

hold

s

2009 2011

Household Use of Payroll Cards

43

3.0 3.25.0

1.5

4.22.73.2

5.5

8.5

2.9

5.3

2.5

0

5

10

15

20

25

30

Allhouseholds

Unbanked PreviouslyBanked

Never-Banked Underbanked Fully Banked

Perc

enta

ge o

f Hou

seho

lds

2009 2011

44

Implications

Implication 1 Understanding segments better might

increase the efficacy of economic inclusion strategies

E.g., unbanked Hispanic households use AFS

more actively than any other racial ethnic group (52% used AFS in the last 30 days), but 30% use no AFS

45

Implication 2 Having a bank account does not

guarantee long term participation in the banking system

Half of all unbanked households had an

account previously Nearly half (48.2 percent) of these report they are

likely to open another

Almost one-quarter of fully banked households used AFS in the past

46

Implication 3 Experience with banks appears to

have more positive perceptions of having an account and rely less on AFS

E.g., unbanked households that previously had

an account are more likely to see value in being in the banking system: More likely to open an account Less likely to say “I don’t want or need an account”

47

Implication 4 Banks might need to more clearly

demonstrate the value of an account to AFS users

AFS users perceived non-bank services to be

more convenient, faster, less expensive, or to present lower barriers to qualification

E.g., mobile technologies that allow remote deposit capture might alter check cashing equation

48

Summary Findings Opportunity to increase banking engagement

8.2 percent of households are unbanked (0.6 percentage point increase from 2009)

20.1 percent are underbanked

Opportunity to increase savings account ownership 29.3 percent of households do not have a savings account

(10.3 percent do not have a checking account)

A sizeable portion of households use AFS One quarter of households have used AFS in the last year (10

percent have used 2 or more AFS) 12 percent have used AFS in the last 30 days (40 percent of

unbanked and underbanked) 49

www.economicinclusion.gov

50

EI.GOV-BOSTON MSA

51

52

53

Thank you

54

Contacts Yazmin Osaki: yosaki@fdic.gov Susan Burhouse: sburhouse@fdic.gov