When confronted with the realization that low-income populations by and large do not utilize traditional banking systems, many commentators assume that a lack of physical access to such institutions is to blame. However, according to policy analysts, access to such services is equitably distributed across neighborhoods of varying incomes. Thus, in combatting high rates of the “unbanked” – or those without banking accounts – policymakers and practitioners may consider other avenues for connecting low-income communities to mainstream financial services through mobile banking and other mobile technologies.
In fact, spatial access to banking among low-income residents was never a serious issue to begin with. According to a report published by the Brookings Institute, “low-income neighborhoods have about as much access to bank and credit union branches as middle- and higher-income neighborhoods.” Yet, according to a 2009 F.D.I.C. survey, the percentage of the unbanked is on the rise at a steady rate.
Again, this complicates the picture. Undoubtedly, non-bank financial services like check-cashing and payday lending cost many communities millions of dollars a year. According to a study by MassINC, these communities lose a “combined $72 million lost to check cashing,refund anticipation loans, and EITC associated economic activity.” Yet, the Financial Service Centers of America (FISCA), a trade organization representing the alternative financial services industry, argues that in order to have a non-interest bearing account, customers must maintain a minimum balance of $155.49 to avoid a fee and pay an average monthly service fee of $2.26.
However, a look at the available banking options adds some explanation to these averages. The Policy and Technology Lab (PTLab) at the Cambridge Housing Authority conducted research on how public housing residents bank. With a list of every bank and credit union in Cambridge, the PTLab was able to identify a diversity of banking options, many of which include no-fee, no-minimum balance options (with certain restrictions). For example, Eastern Bank offers a free checking option with a $25 minimum to open:
However, the range of these services is somewhat biased towards benefiting middle- and upper-income residents. For example, a quick look at Eastern Bank’s checking account services shows a Premier Checking account which requires a $25,000.00 balance to maintain. Thus, the FISCA averages skew the diversity of options available in mainstream banking, which provide reasonable low-risk services for low-income communities. Regardless, it is important to understand that many non-bank, alternative financial services are beneficial to many folks, especially those who purposefully avoid banking:
|Cambridge Banks||Eastern Bank|
|Account Name||Free Checking||eZ Checking||Economy Savings||Statement Savings and Passbook Savings|
|Minimum Balance to Open||$25||$50||$10||$10|
|Monthly Fees||$0||$10||$1||$3 or $2 with direct deposit|
|Waiving the Monthly Fee||N/A||Yes – if enrolled in eStatements & make 15 purchases or maintain monthly balance of $1,500||No||Minimum daily blanace of $250|
|Online Bill Pay||X||X||X||X|
Returning to the theme of technology and access, the New York Times published a piece on how some who want mainstream financial services are entirely shut out of the system. One Michigander stated that because of a bad credit report, he was unable to access these services for years:
The costs of not having a bank account for seven years — the longest amount of time that a negative report remains in the databases — can quickly add up. David Korzeniowski, 23, said an employee at a bank in Lansing, Mich., had told him that an overdrawn account reported to ChexSystems very likely scuttled his chances of a checking account until 2016.
Thus, the complexity of access and banking is considerable when determining research questions and policy solutions. One promising avenue is that of mobile technology, and how public agencies can use this technology to improve financial literacy. According to a report by the Federal Reserve Bank of Boston:
The relatively high prevalence of mobile phone and smartphone use among younger generations, minorities, and those with low levels of income—groups that are prone to be unbanked or underbanked— makes mobile phones a potential platform for expanding financial access and inclusion.
With that said, public agencies should consider how to better promote themselves and access to services through mobile technology. One simple means would be to update websites for public agencies such that they’re mobile-friendly. This technology, called responsive design, enables websites to automatically respond to the screen resolution of the user and reorganize content so that it is legible and navigable. The strategy adopts a single stylesheet containing various settings for a number of potential environments. Considering the prevalence of mobile devices among low-income communities, responsiveness in web design is a must for adequate outreach. For example, the Cambridge Housing Authority is including this feature in re-designing its website because many of its residents only browse on a mobile device according to surveys.
With the Affordable Care Act’s required phase-in of state health exchanges, public health departments should consider the mobile-friendliness of their exchange websites. As of now, the Massachusetts Health Connector is not mobile-friendly, making an already complicated system more difficult to navigate.