from the Kansas Fed
— this post authored by Fumiko Hayashi and Sabrina Minhas
As the U.S. economy recovered from the Great Recession, more households entered the banking system. The national unbanked rate, measured as the share of U.S. households that do not have a checking or savings account, steadily declined from 8.2 percent in 2011 to 7.0 percent in 2015 (Burhouse and others 2016). Still, 9 million households were unbanked in 2015.
Understanding the characteristics of these households is critical in designing effective, tailored policies for financial inclusion. Policymakers and researchers often consider low income to be a defining characteristic of the unbanked. This broad characterization of households, however, may mask large differences in banking status within low-income groups. In particular, low-income households’ access to technology, educational attainment, or employment status may also play a role in determining their banking status.
In this article, we conduct a regression analysis to examine which household characteristics beyond income are associated with households’ probability of being unbanked. While low-income households have a higher probability of being unbanked on average, we find that the probability of being unbanked varies substantially within this group. Moreover, we find that multiple socioeconomic factors – such as education, age, race, and employment status – as well as technological factors contribute to a low-income household’s probability of being unbanked. Of the technological factors we examine, we find that lowincome households without internet access have a much higher probability of being unbanked than those with internet access. Our results suggest that policymakers who promote banking among the unbanked may want to design policies that target low-income households without internet access rather than all low-income households broadly.
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Source
https://www.kansascityfed.org/~/media/files/ publicat/econrev/ econrevarchive/2018/ 2q18hayashiminhas.pdf
