Since 2010, Bank On Louisville, a financial inclusion initiative, has brought 22,500 people and $28 million into the banking system. Bank On is a nationwide program driven by local coalitions of city government and financial institutions that provide both money management education and easy access bank accounts tailored to the previously “unbanked”. There are now 57 Bank On coalitions across the United States and more than 24,100 bank branches offering their starter bank accounts.
Results & Impact
Nationwide, there are 57 Bank On coalitions. One of them, Bank On Louisville, has connected more than 22,500 people to the banking system. 65% of those users remain active, and the average balance is around $1,200. Altogether, $28 million has been brought into the banking system. In addition, over 20,000 people in Louisville have received financial education. Across the US, close to 9 million households remain unbanked, and these households tend to be among the poorest. The benefits of being banked include convenience, security and access to credit.
Cities for Financial Empowerment Fund, municipal or state government, local and national financial institutions, financial regulators
The Cities for Financial Empowerment (CFE) Fund sets the Bank On National Account Standards, a minimal set of criteria for bank accounts. These include having no overdraft or inactivity fees, a smaller than $25 opening deposit and at most a $5-10 monthly maintenance fee. Local coalitions of city government and financial institutions raise awareness of and provide access to these Bank On accounts. They also act according to local needs to provide money management education and clamp down on check cashers and payday lenders that extort people with extreme interest rates.
Across the USA, in every state except Hawaii
Cost & Value
Running since 2006
Consistent data collection has proven difficult. There are numerous reasons for this. For one, coalitions are locally driven, so there is variation in the type of data being collected and how it is collected. Then there is the fact that banks often consider that information proprietary, and it is not always easy for them to dig out the kind of data that Bank On are looking for. For example, they may know that a Bank On certified account has been opened, but they often either do not know or cannot for confidentiality reasons share information about the owner. Likewise, they may know that a certain percentage of those accounts ceases to be active, but they do not know if those people have fallen out of the system or if they have upgraded their accounts. The CFE fund is currently pushing to improve nationwide data collection and is in the process of launching a national data pilot.
There are now 57 Bank On coalitions and more than 24,100 branches offering Bank On accounts across the US, in every state except Hawaii.
In the space of seven years, Louisville, Kentucky, has brought more than 22,500 previously “unbanked” people from a population of 250,000 into the banking system—and with them $28 million.
The program is driven by local coalitions of city government and financial institutions that provide access to starter bank accounts tailored to the previously “unbanked.” According to local needs, they also provide money management education and clamp down on payday lenders.
Bank On certified accounts must meet a set of minimal, accessible criteria designed to encourage the “unbanked” to enter the banking system. The core features include having no overdraft or inactivity fees, a smaller than $25 opening deposit and at most a $5-10 monthly maintenance fee.
The CFE Fund sets these criteria in their Bank On National Account Standards, which they update every two years. These standards provide local Bank On coalitions with a benchmark for account partnerships with financial institutions. Those institutions can then apply free for national certification—something that brings benefits in both marketing and outreach.
Across the US there are now over 24,100 bank branches offering certified Bank On accounts.
It is not an act of charity from the banks—the arrangement is mutually beneficial. As the accounts do not have overdrafts, they are low risk, and in the case of Louisville the average savings were not insubstantial, averaging $1,200 in each account.
Moreover, financial institutions receive Community Reinvestment Act (CRA) credit for opening Bank On accounts in low income areas. The CRA act was introduced in 1977 to reduce discriminatory credit practices in low-income neighbourhoods, and federal regulatory agencies take CRA compliance into account when approving applications for new branches or for mergers and acquisitions.
Aside from increasing the supply of certified accounts, money management education is an essential component of the Bank On program. In Louisville this came in the form of several projects that have since been adopted by other Bank On coalitions.
Start Fresh, for example, is a workshop for people with negative banking histories who want to get information about second-chance or new checking accounts. It helps them think about their relationship with money, and how to make mainstream financial services work for them. At the end, participants get a certificate to let them open a new account at a partnering financial institution.
Start Smart, by contrast, is targeted at a younger audience—anyone over the age of 10 can take part. Participants find out the benefits of using mainstream financial services and are taught how to compare different account products. They leave with an understanding of all the basic tools of banking, including credit.
Information about payday lenders and cash checkers is also provided—the idea is that people can still choose to use them, but they will know the risks.
To date, more than 20,000 people in Louisville have engaged in some form of financial education through Bank On.
However, not all Bank On coalitions have collected data in the same way as in Louisville. For the CFE Fund this has meant that it cannot produce nationwide impact measurements for the Bank On initiative. They are currently addressing this with a national data pilot. Nonetheless, Bank On Louisville has shown what is possible—and once local governments have this data, they can use it to persuade companies to set up shop in low-income communities.
All in all, Bank On’s spread throughout the US has been driven by a number of factors, not least providing a template that all banks can refer to, mobilising coalitions of local institutions to drive change, and bringing all parties to the table by showing how financial inclusion can benefit everyone.
(Picture credit: Pixabay)