The Clearing House, together with the American Bankers Association, the Consumer Bankers Association, the Credit Union National Association, the Mid-Sized Bank Coalition of America, and the National Bankers Association published a paper, titled Delivering Financial Products and Services to the Unbanked and Underbanked in the United States – Challenges and Opportunities, that outlines reasons why U.S. households do not have bank accounts or use non-bank financial products or services, highlights specific products and services that have helped to address the challenges of the unbanked and underbanked, evaluates proposals for addressing these challenges, and identifies factors that should be taken into consideration when developing public policy to encourage the opening of bank accounts and reduce the utilization of high-cost non-bank financial products and services. 

The paper concludes that instead of establishing a large, duplicative and potentially expensive banking infrastructure to offer bank accounts through the Federal Reserve or the U.S. Postal Service (postal banking), there are more effective and less costly ways to address challenges associated with the unbanked and underbanked, including:

Verifiable Identification: Verifiable identification is unavailable to many unbanked individuals. Public policymakers should focus on this obstacle, as well as other factors that the private sector cannot address that contribute to the unbanked and underbanked challenge.

Encourage New Bank Accounts: When enrolling recipients in direct-payment government benefit programs, individuals should be encouraged to open basic, low-cost bank accounts.

Public/Private Partnerships: Public policy should encourage public/private partnerships to continue to innovate and meet the changing needs of households and individuals, including continuing to advance targeted financial education and messaging on ways in which a bank account can meet a household’s or an individual’s current needs.

Continue Successful Programs: The banking industry should continue its efforts to reduce the percentage of unbanked households by embracing approaches with a proven track record of success, such as the Bank On initiative, which promotes basic low-cost accounts.

Expand Broadband Access: Expanding broadband internet access to underserved areas would allow households to access essential services, including digital banking services. 

Areas Ripe for Study: Public policymakers should examine the factors that contributed to the sharp decline in the unbanked rate for Black and Hispanic households from 2015 to 2019, including the successful practices of Minority Depository Institutions and Community Development Financial Institutions, and the underlying reasons for observed racial disparities in unbanked rates. Additionally, obstacles to account opening, such as the lack of availability of verifiable identification in certain instances, or the inability of households to pass account-opening screenings required by regulation, should be studied.

The full paper can be accessed here.