FDIC to Again Include “Underbanked” Households in Biannual Banking Survey
After the Federal Deposit Insurance Corporation (FDIC) changed their biannual national survey on consumers’ banking habits in 2019 under former chair Jelena McWilliams, eliminating information about households considered “underbanked,” three sources close to the matter now say the next version of the report will again provide data about these populations.
McWilliams said the FDIC eliminated the term because it is “inaccurate due to the intrinsic subjectivity of the definition and the evolution of the financial services system,” according to American Banker. She noted that the agency’s definition of the term has been inconsistent, using five different definitions of underbanked in six reports.
“Underbanked” typically refers to consumers who may have a bank account but frequently use nonbank financial services like payday lenders and money orders. “Unbanked” means no one in the household had a checking or savings account at a bank or credit union. In 2019, an estimated 5.4 percent of households were considered unbanked, or approximately 7.1 million households. This is compared to 94.6 percent of households that were “banked,” meaning at least one member of the household had a checking or savings account.
The term has become more interesting to banks due to increased use of crypto services among those considered underbanked. McWilliams said that the increased popularity of fintechs like Venmo and PayPal changes the understanding of the term. Senator Sherrod Brown (D-Ohio), who wrote a letter to Chairman McWilliams in December 2020 expressing his concerns about removing data on the underbanked population, applauded the agency for restoring the term.
“Many Americans have a relationship with a bank but do not get all the banking services they need,” he said. “Including the underbanked as part of their survey will help the FDIC ensure that the banking system serves the American people.”
An agency official said that reinstating the underbanked analysis would give necessary context to the public’s use of the banking system. Another FDIC spokesperson said that “underbanked measurements shed light on opportunities for banks to serve households that have joined the banking system, but still use products and services from nonbank providers.”