Mainstream Banking amongst Hispanic, Black and Asian Populations

Given the large number of unbanked and underbanked households throughout the United States, this study analyzes factors that might influence individuals to use alternate mainstream banking options. The FDIC has attempted to... [ view full abstract ]

Given the large number of unbanked and underbanked households throughout the United States, this study analyzes factors that might influence individuals to use alternate mainstream banking options. The FDIC has attempted to understand resistance to mainstream banking over the last few years. It has conducted the National Survey of Unbanked and Underbanked Households since 2009. Little research has attempted to garner information on personal financial circumstances and ability and willingness to use checking and savings accounts. Our findings from the FDIC’s 2013 Survey of Unbanked and Underbanked indicate that 20.5% of black households, 17.9% of Hispanic households, 3.6% of White households, and 2.2% of Asian households are unbanked. To be unbanked means that individuals do not have a checking or savings account. Additionally, we find that 33.1% of Black households, 28.5% of Hispanic households, 17.9% of Asian households and 15.9% of White households are underbanked. To be underbanked is to have a bank account while still using alternate financial services (check-cashing services, payday loans, tax refund anticipation loans, rent-to-own, money orders, pawn shops, etc.). Using a preliminary logistic regression analysis to help predict the probability of not having a checking/savings account and/or using fringe financial services, we find that income, education and race/ethnicity are significant in determining the probability of being unbanked/underbanked for Hispanic and Black households. Our next step is to try to find out why the other large minority group (Asian) does not encounter the same financial issues as Hispanics and Blacks.