Reaching Out to The Unbanked

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Millions of ATMless souls walk among us without service charges, personalized checks or even (Gasp!) PIN numbers. They are... The Unbanked. 

"Unbanked" is the term applied by the banking industry to some 10 million American families without accounts in a financial institution.

In a March 6, 2001 address to the National Community Reinvestment Coalition, Comptroller of the Currency John D. Hawke, Jr. stated that part of the reason so many Americans go unbanked is a lack of banking facilities in low-income neighborhoods.

"Affluent neighborhoods, where the median income was 120 percent or greater than the area median income, had three times as many bank offices per 10,000 residents as neighborhoods where the median income was 50 percent of area median income," stated Hawke.

Comptroller Hawke also recognizes that many people with easy access to banks still choose not to use them. "But the lack of physical access to banks cannot be the entire answer to the problem of the unbanked. Many of those who remain outside the banking system are there by choice," he said.

"According to a 1999 study by the U.S. Public Interest Group, the average minimum balance required to avoid
fees for checking accounts at large banks was $616," Comptroller Hawke said. "Given these realities, it’s no wonder that so many low- and moderate-income Americans choose not to conduct financial transactions at a bank."

However, Mr. Hawkes believes a new low-cost, high-tech solution developed by the Treasury Department called the Electronic Transfer Account (ETA) will be effective in bringing many of the nation's unbanked into financial mainstream. [See: What IS an ETA?, from Consumer Advocacy Guide Nicolette Parisi.]

"The ETA is a utilitarian, all-electronic account that, for a fee of no more than $3 a month -- allows recipients of many kind of Federal payments, including salaries and retirement benefits, to access their funds automatically through electronic funds transfer," Mr. Hawke said.

According the Mr. Hawke, ETA is already offered at over 600 banks and thousands of branches nationwide.

Hawkes hopes ETA will serve as an electronic gateway to other benefits of banking relationships. "I think, rather, that ETA’s greatest value is as a stepping stone -- for customers who use them to get a foothold into the financial mainstream and for financial institutions who use the ETA as a model to bring the benefits of a banking relationship within reach of others," Mr. Hawke said.

Emphasizing the present and future potential of technology-based solutions to the problem of the unbanked, Mr. Hawkes added "I believe that technology offers great potential for bringing the unbanked into the financial mainstream, with all of its benefits," Mr. Hawke said. "It also offers new possibilities for financial institutions to develop deeper and more profitable customer relationships."