Banking Status and Alternative Financial Services Steven Shepelwich - PowerPoint PPT Presentation

Banking Status and Alternative Financial Services Steven Shepelwich Senior Community Development Advisor steven.shepelwich@kc.frb.org / 800-333-1020 November 7, 2012

Overview  Provide background information on use of alternative financial services for discussion  Primary reference: 2011 FDIC National Survey of Unbanked and Underbanked Households  2 nd biennial survey  Partnered with US Census collecting responses from 45,000 households  Definitions:  Unbanked: No one in household has checking or savings account  Underbanked: Household has a checking and/or savings account and has used an alternative financial service in last 12 months

Banking Status Nationally National: Unbanked 8.2%, Underbanked 21.1% From the 2011 FDIC National Survey of Unbanked and Underbanked Households available at www.economicinclusion.gov

Banking Status in Oklahoma 80% 69% 70% 62% 60% 50% 40% 30% 23% 20% 20% 11% 8% 10% 4% 3% 0% Banked Underbanked Unbanked Underbanked Status Unknown US Oklahoma From the 2011 FDIC National Survey of Unbanked and Underbanked Households available at www.economicinclusion.gov

Unbanked Status by Year 12.0% 10.9% 10.0% 10.0% 8.2% 7.6% 8.0% 6.0% 4.0% 2.0% 0.0% 2009 2011 US Oklahoma From the 2011 FDIC National Survey of Unbanked and Underbanked Households available at www.economicinclusion.gov

Banked Status by Ethnicity Unbanked Underbanked White non-Black 6% White non-Black 22% non-Hispanic non-Hispanic 4% 16% American American Indian/Alaskan Indian/Alaskan 15% 27% Hispanic non- 38% 33% Hispanic non-Black Black 20% 29% 33% 29% Black Black 21% 34% 0% 20% 40% 60% 0% 10% 20% 30% 40% Unbanked Oklahoma Underbanked Oklahoma Unbanked US Underbanked US From the 2011 FDIC National Survey of Unbanked and Underbanked Households available at www.economicinclusion.gov

Reasons for Being Unbanked 33% Do not have enough money 33% 26% Do not need or want acount 16% 8% Can't open due to ID, credit, etc. 6% 7% Don't like/trust banks 8% 4% Fees or minimums too high 7% 0% 5% 10% 15% 20% 25% 30% 35% Never-Banked Previously Banked From the 2011 FDIC National Survey of Unbanked and Underbanked Households available at www.economicinclusion.gov

AFS Considered in the Survey – 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

Use of Alternative Financial Services 14% Used Credit AFS 37% 32% 39% Used Transaction AFS 94% 71% 43% Used Any AFS 100% 74% 0% 20% 40% 60% 80% 100% 120% All HH Underbanked Unbanked From the 2011 FDIC National Survey of Unbanked and Underbanked Households available at www.economicinclusion.gov

Timing of AFS Use Unknown, 2.9 Last 30 days, 12.0 Never Used, 54.3 Used in the Last Year, 25.4 Last 2-12 months, 13.4 Used Over a Year Ago, 17.4 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.

Use of Specific AFS Used in last 12 months Used, but not in last 12 months Never Used Unknown 2.6 Non-Bank Money Order 18.3 64.6 14.5 2.1 Non-Bank Check 7.7 5.5 84.6 Cashing 2.2 2.4 Non-Bank Remittance 3.7 91.7 2.6 2.9 Pawn Shop 4.5 89.9 1.7 2.9 2.5 Payday Loan 92.8 1.5 3.2 2.7 Rent-to-Own 92.6 2.5 1.2 2.8 Refund Anticipation 93.5 Loan 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage of All Households Notes: Percentages may not sum to 100 because of rounding. "Unknown" includes households whose specific AFS use is unknown and those who used one or more specific AFS with timing unknown.

Use of Specific AFS in Last 30 Days 35 32.1 Unbanked Underbanked 30 28.0 25.0 Percentage of Households 25 20 15 8.9 10 5.7 3.9 5 3.2 2.7 2.7 0.5 0 Non-Bank Non-Bank Non-Bank Payday Loan Pawn Shop Money Order Check Cashing Remittance Note: Percentages are based on 9.9 million unbanked households and 24.2 million underbanked hosueholds.

Characteristics of Heavy AFS Users • Among households that have used AFS in the last 30 day – 25.2 percent are unmarried female families – 29.1 percent are black and 23.5 percent are Hispanic – 44.4 percent live in the South • Among households that have used multiple AFS in the last year – 38.0 percent are younger than 35 – 29.7 percent are black and 24.3 percent are Hispanic – 26.8 percent are u nmarried female families

Prepaid Card Use 6% Never Banked 11% 19% Previously Banked 27% 12% Unbanked 18% 10% All Households 10% 0% 5% 10% 15% 20% 25% 30% 2009 2011 From the 2011 FDIC National Survey of Unbanked and Underbanked Households available at www.economicinclusion.gov

Additional Resources  FDIC National Survey of Unbanked and Underbanked Households: www.economicinclusion.gov  FDIC National Survey of Banks' Efforts to Serve the Unbanked and Underbanked: www.fdic.gov/unbankedsurveys/  A Study of the Unbanked and Underbanked Consumer in the 10 th Federal Reserve District: http://unbanked.kcfed.org  Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances: http://www.federalreserve.gov/econresdata/scf/scf_2010.htm