According to the FDIC, 8.4 million U.S. households lacked a bank account as of 2017, putting America behind other rich countries. Minorities and the young are heavily overrepresented among the unbanked, so addressing this problem is a matter of both financial inclusion and equal opportunity. Fortunately, the FDIC can use its authority over an obscure banking charter to help, and it recently proposed to do just that. But if it goes ahead, it can expect stiff opposition from industry incumbents and their champions in Congress.
Many blame the unbanked problem on the recent decline in the number of U.S. banks. But that decline has been more than offset by the 24 percent growth of bank branch networks since 1995. Because the share of unbanked households is also often higher in urban areas, where bank branches are easiest to come by, than elsewhere, proximity to a bank office doesn’t seem to be a strong driver of account ownership. Instead, the unbanked themselves generally blame their predicament on either the high cost of keeping bank accounts or their distrust of ordinary banks or both.
Slimming down the ranks of the unbanked is therefore likely to necessitate a different kind of bank—one that inspires unbanked Americans’ confidence without busting their budgets. Many large commercial firms, such as retailers, grocery stores, online marketplaces, and other businesses that the unbanked regularly patronize would seem well-placed to fill such a gap. The hitch is that the 1956 Bank Holding Company Act (BHCA) generally forbids mingling commerce and banking, an American anomaly that subsequent financial legislation has only helped to entrench. While Congress got rid of the New Deal-era separation of banking and securities in 1999, it hasn’t yet seriously contemplated letting non-financial firms enter the business of banking.
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