The 2013 household survey results show that more than one in four households (27.7 percent) are either unbanked or underbanked, conducting some or all of their financial transactions outside of the mainstream banking system. Many of these households rely on alternative financial services (AFS) providers, while others use cash or other financial arrangements.
2013 Survey Results
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Key Findings and Implications from the 2013 Survey
Key Findings
- 7.7 percent of households in the United States were unbanked in 2013. This proportion represented nearly 9.6 million households composed of approximately 16.7 million adults and 8.7 million children.
- 20.0 percent of U.S. households were underbanked in 2013, meaning that they had a bank account but also used alternative financial services (AFS) outside of the banking system. Approximately 50.9 million adults and 16.6 million children lived in underbanked households.
- The unbanked rate has varied from 7.6 percent in 2009 to 8.2 percent in 2011 and 7.7 percent in 2013.
- The 0.5 percentage point decrease in the unbanked rate between 2011 and 2013 can be explained by differences in the economic conditions and demographic composition of households over this period.
- In particular, compared to 2011, households in 2013 had slightly higher levels of employment and income, and were slightly older and better educated. These characteristics are all associated with a higher likelihood of having a bank account.
- While relatively small proportions of U.S. households experienced major life events in the past year, households that transitioned in or out of the banking system were more likely to have experienced certain events:
- Among households that recently became unbanked, 34.1 percent experienced either a significant income loss or a job loss that they said contributed to the household becoming unbanked.
- Among households that recently became banked, 19.4 percent reported that a new job contributed to their opening a bank account.
- Nearly eight percent (7.9) of all households used prepaid cards in the last 12 months.
- Unbanked households had the highest rate of use: 22.3 percent of unbanked households used a prepaid card in the last 12 months, compared with 13.1 percent of underbanked households and 5.3 percent of fully banked households.
- A majority of prepaid card users were unbanked and underbanked households. More than half (55.0 percent) of the households that used prepaid cards in the last 12 months and two-thirds (66.6 percent) of the households that used prepaid cards in the last 30 days were unbanked or underbanked.
- Most banked households (71.1 percent) used multiple methods to access their bank accounts.
- Many households used bank tellers to access their bank account. Nearly four out of five households (78.8 percent) used a bank teller in the past 12 months, one in three (32.2 percent) used bank tellers as their primary method of account access, and 17.5 percent used bank tellers as their only method of account access.
- Use of online banking was also quite common. Over half (55.1 percent) of banked households accessed their account online in the past 12 months, and one in three (32.9 percent) used online banking as their primary means of account access. Underbanked households were less likely to have used online banking as their main banking method (26.6 percent) compared with fully banked households (35.1 percent).
- Among households that primarily used either online or mobile banking, use of additional methods was common. For example, households that primarily used online banking used a median of two additional methods to access their account while those that primarily relied on mobile banking used a median of three additional methods. One commonly used additional method was bank tellers, which were used by more than 70 percent of both groups.
- Overall, 23.2 percent of banked households used mobile banking in the last 12 months, and a greater share of underbanked households (29.2 percent) than fully banked households (21.7 percent) had used mobile banking.
- Among mobile banking users, underbanked households were considerably more likely (32.4 percent) than the fully banked (21.6 percent) to use mobile banking as their main banking method. In contrast, fully banked mobile banking users were significantly more likely (54.2 percent) to use online banking as their main banking method than the underbanked (38.1 percent).
- Monitoring of account balance or recent transactions was the most common mobile banking activity (86.0 percent of mobile banking users). Only a quarter (25.5 percent) of households that used mobile banking used it to deposit a check. Underbanked households were more likely (51.5 percent) to have used mobile text alerts than fully banked households (44.6 percent).
Implications
The 2013 survey results suggest implications for policymakers, financial institutions and other stakeholders who are working to improve access to mainstream financial services.
Interventions designed to help households maintain and renew their banking relationships through economic challenges may reduce unbanked rates over time.
Banking status is dynamic: many households cycle in and out of the banking system. For these households, financial life events, such as job loss, significant income loss, or a new job, appear to be important explanations for why they enter or exit the banking system.
Stakeholders might consider ways to cushion the impact of adverse financial shocks on a household’s ability or desire to maintain a bank account. In particular, opportunities may exist for forbearance of fees, flexible product design, or direct interventions. Interventions could include targeted outreach or financial education for recently unemployed households to encourage them to remain in the banking system, for example.
The most frequently reported reason recently banked households cited for opening an account was to receive direct deposits. This finding suggests that opportunities may exist for bringing newly employed consumers into the financial mainstream by educating them on the use of bank accounts and on personal financial management. Opportunities also may exist to reach out to employers that do not yet offer direct deposit to help them lower costs and help their employees better understand opportunities offered by the mainstream banking system.
Unbanked households are increasingly turning to general purpose reloadable prepaid cards to address their financial transaction needs and are generally obtaining them at non-bank locations. Opportunities may exist to meet these consumers’ needs within the banking system.
Prepaid card use is higher among unbanked households than other banking status groups, and has been growing rapidly. Although many unbanked prepaid card users, like other unbanked households, feel that they cannot have a bank account because they "do not have enough money to keep in an account or meet a minimum balance" or because "bank fees are too high or unpredictable," these households do have financial transaction needs. Many unbanked prepaid card users are using non-bank prepaid cards, instead of banking services, to make and receive payments. Banking products such as a low-cost, safe transaction account or a bank prepaid debit card that meets the specifications of the FDIC Safe Accounts Template could help meet these financial needs while building banking relationships.1
In addition, many prepaid card users have prior experience with banking services and are relatively more inclined to enter a banking relationship going forward. Specifically, unbanked prepaid card users are more likely than nonusers to have had a bank account in the past, and to say they are likely to open an account in the future. This implies that, relative to other unbanked households, unbanked prepaid card users may be particularly receptive to entering or rejoining the banking system.
Mobile banking has the potential to help expand economic inclusion. Mobile technologies provide the anytime, anyplace convenience that is highly valued by underserved consumers. The survey results show that mobile and smartphones are accessible to underserved populations, and that many underbanked households are already using mobile banking. Smartphones are more prevalent among underbanked households than among the fully banked. Underbanked households also are more likely than fully banked households to use mobile banking and more likely to use it as their primary banking channel.
Mobile technologies might also become useful tools for bringing unbanked households into the financial mainstream. While mobile phone ownership is less common among unbanked households than among the underbanked and fully banked, it is still sizable. Innovations such as mobile account opening could play a role in expanding access to banking for the unbanked.
In order for mobile banking to help promote economic inclusion, it is important that mobile banking offerings be designed and implemented in ways that are accessible and beneficial to the underserved. For example, to fully avail themselves of mobile banking opportunities, users must often have access to an online banking account. This could prevent underserved consumers who cannot or do not wish to use online banking from accessing and enjoying the benefits of mobile banking services.
Notably, the rise of mobile banking as a channel has not rendered other modes of banking unimportant, and non-mobile channels should continue to have a role in economic inclusion and outreach efforts. Other banking modes continue to be widely used by both underbanked and fully banked households. Traditional banking channels, such as branches, provide functions not commonly available through online and mobile banking. In particular, FDIC pilot studies have found that branch staff play an important role in making consumers aware of products, providing basic financial education, and growing their banking relationships. As banking technologies continue to evolve, it is important to continue tracking how households access banking services, and to assess opportunities to increase banking engagement with underserved consumers across all relevant channels.