Access for All?

The 2013 FDIC National Survey of Unbanked and Underbanked Households was released yesterday, and the number of unbanked and underbanked households in the U.S. hasn’t budged much in the last two years (the total percentage has declined slightly, to just under 28 percent, since 2011). Just under eight percent are unbanked–almost 1 million households. Of these:

  • Almost half (46 percent) have had a bank account in the past.
  • Seventeen percent currently don’t have a bank account due in part to their credit history.

Not surprisingly, the unbanked are highly reliant on alternative financial products:

  • 27 percent of the unbanked used prepaid cards, compared to 12 percent of households overall. Two-thirds of those that used prepaid cards in the last 30 days are unbanked or underbanked.
  • More than half used money orders in the last 30 days, versus less than 10 percent of all households.
  • Thirty-nine percent used checking cashing services, compared to just three percent of all households.

The FDIC and and the Consumer Financial Protection Bureau have been pretty vocal about the fact that they want to decrease consumer use of alternative financial services. Will these regulators make a move to ensure that more Americans have access to a bank account? Last summer, New York Attorney General Eric Schneiderman convinced Capital One Financial Corp. to amend its use of ChexSystems, a database used by many banks to screen applicants for fraud and credit risk. A 2009 report from the FDIC found that almost 90 percent of banks use a credit-screening database like ChexSystems, and one-quarter reject an account application due to a negative result. Earlier this month, Richard Cordray addressed the CFPB’s areas of concern on the matter, which boil down the three areas:

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Consolidation isn’t killing community banking, but it is changing the landscape,and significant challenges remain.

The Bank Spot

An argument that I hear occasionally is that consolidation of the U.S. banking industry has put community banks on a path towards extinction. Two economists at the Federal Deposit Insurance Corp. have shot down this theory in a new research study whose findings are counterintuitive.

On the face of it, the industry’s consolidation over the past 30-plus years has been pretty dramatic. The FDIC says there were approximately 20,000 U.S. banks and thrifts in 1980, and this number had dropped to 6,812 by the end of 2013. A variety of factors have been at work. The biggest contributor, according to the study, was the voluntary closure of bank charters brought about by deregulation, including the advent of interstate banking. A lot of the “shrinkage” that occurred between the mid-1980s and mid-1990s wasn’t so much the disappearance of whole banks as it was the rationalization of multiple charters by the same…

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Will Banking Keep the USPS Afloat?

toyboatsI’m absolutely fascinated by the latest idea (though not an old one) that the United States Postal Service should offering banking services, but can’t help but think that this is more about keeping the USPS afloat than helping the unbanked. That doesn’t mean it won’t work, but banking ain’t easy, y’all. As Billy Beale, CEO of Union First Market Bankshares Corp., said at Bank Director’s Acquire or Be Acquired Conference last month: “Banking isn’t complicated. It’s complex.”

The USPS has been bleeding money for years, suffering from the dual challenges of keeping pace with an increasingly technological population relying less and less on traditional mail coupled with its obligation to contribute $5.6 billion to retiree health care benefits–a payment the agency failed to make last year. The USPS ended 2013 with a net loss of $5 billion, and has posted losses for 7 consecutive years.

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On Success & (Epic) Failure

My latest copy of Bank Director arrived in the mail Tuesday, and it has me reflecting on both success – and failure – in the banking world.

The 2012 Bank Performance Scorecard definitely highlights success, featuring a lot of “comeback banks” – and their CEOs are profoundly goal driven. Huntington Bancshares Stephen Steinour stated that his bank “wants to win”, and did so through focus on increased capital and growth in lending – Huntington landed at #2 of banks with $50 billion in assets and above. National Penn Bancshares, ranked #12 of banks $5 billion to $50 billion, raised new capital and strengthened its balance sheet in order to run a bank that is “clean, strong, and efficient”. Both banks were solidly profitable after posting huge losses in 2009. Will they perform even better in 2013?

Why is Georgia the #1 state for bank  failures?  The failure has been epic, with 79 bank  failures since the crisis began, $8.5 billion cost to the DIF, and dozens of directors facing FDIC lawsuits. While the collapse of the subprime mortgage market gets a lot of the blame, Georgia’s loose regulation set the stage. Will the remaining banks be stronger in the aftermath – or are there more failures on the horizon?

In the news:

Dodd-Frank likely isn’t going anywhere, Mr. Romney.
Happy Birthday, Dodd-Frank. Welcome to the Terrible Twos.
BofA, Citi and Wells Fargo offer the best online experience.