The proportion of Americans who avoid a standard banking relationship is on the rise, according to data from the Federal Deposit Insurance Corporation (FDIC), and as these individuals flock to alternative services, banks are advised to consider ways to profit from this growing crowd.
The 2011 FDIC National Survey of Unbanked and Underbanked Households found that 8.2 percent of U.S. households — or about 10 million — are unbanked.
Most commonly, households reported they didn’t have a bank account because they didn’t have enough money to open and fund one, with 32.7 percent of respondents saying this is the case and 21 percent saying they don't need or want an account.
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Furthermore, the survey found that another 20.1 percent of U.S. households are underbanked. This category refers to those who have a checking or savings account but rely on alternative financial services.
Millions of Americans are managing their financial transactions by relying on options such as money orders, check cashing services, payday loans and rent-to-own agreements.
Individuals often avoid banks because they are concerned about costs and fees. Yet many of these alternative services also carry significant costs.
Meanwhile banks are complaining about regulations increasingly squeezing their profits and are making moves to discourage the unbanked or underbanked, such as raising fees or eliminating free checking, according to CNNMoney.
Bloomberg says the agency released this report in conjunction with a conference to explore ways banks could profit by serving this population.
“Insured financial institutions have an important chance to grow their customer base by expanding opportunities that bring the unbanked and underbanked into mainstream banking,” Martin Gruenberg, the FDIC's acting chairman, told Bloomberg.
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