In the United States and around the world, economic security and access to financial services are key pillars of households’ well- being. Yet, a recent FDIC survey of 40,998 households estimates that 34 million households in the United States are unbanked or underbanked, lacking access to basic financial tools and resources that can help them save for the future, weather life’s emergencies, and accumulate wealth for retirement and other purposes (FDIC 2014b). These challenges are especially difficult for many minority households. The FDIC survey found 54% of black and 46% of Hispanic households to be unbanked or underbanked, well above the national average of 28%.
To help tackle this disparity in the financial services sector, the Filene Research Institute has collaborated with Visa to help depository institutions expand their reach to underserved households through a new Reaching Minority Households (RMH) incubator program (see Filene 2015 and Visa 2015). The program seeks to identify, test, and replicate programs serving minority groups in the United States and Canada. Filene is already collaborating with over 40 credit unions in a separate incubator program called Accessible Financial Services (AFS), which tests the following products focused on serving low- to moderate- income communities:
- Employer-sponsored small-dollar loans. After employers partner with credit unions/community banks, these loans are offered at the loan recipients’ employers, with repayment deducted from employees’ paychecks.
- Borrow and save. These small loans require recipients to maintain a fraction of the loan amount as increased savings.
- Pay yourself back. Under this product, borrowers agree to continue to make “payments” after their loans have been paid off, with the “payments” taking the form of automated transfers from their checking accounts to their savings accounts.
- The trust card. A lower-interest credit card for borrowers who commit to financial counseling and speedier repayment of principal.
- Nonprime auto loans. An auto loan for members with challenged credit.