Bank On – Financial Inclusion for Individuals, Banks and Credit Unions

Bank On is a fairly simple concept that now has over 3.8 million accounts across the United States. It offers certified bank or credit union accounts that have none of the fees that have driven many people away from bank accounts.

Bank On accounts offer low costs, no overdraft fees, robust transaction capabilities such as a debit or prepaid card, and online bill payment. The program is sponsored by the Cities for Financial Empowerment Fund (CFE Fund) which helps cities and mayors provide large-scale, high-quality financial empowerment services, often by providing government payments through bank accounts, so recipients must open an account to receive payment.

“Let’s get people into the banking system because it offers fundamentally stabilizing financial tools,” said Jonathan Mintz, president and CEO of the Cities for Financial Empowerment Fund. “A lot of our other stabilization efforts are crippled if people are outside the financial system.”

Bank On was born out of an FDIC pilot program aimed at getting more than 36 million unbanked people nationwide to open and use bank accounts. The CFE Fund realized that an effective program needed to work with banks and credit unions and develop a single national standard for a safe bank account.

It’s been a hit with financial institutions — Bank On-certified accounts are available at more than 200 financial institutions and just under half of branches nationwide, Mintz said, and the financial institutions offering them represent 56% of the total. American market.

Getting unbanked people to open an account can be very direct – just asking them to have a bank account to receive public funds.

“At the local level, in youth summer employment programs or other work programs where the government pays people salaries and the population has a high degree of unbanked people, when they sign up for programs and pay, you tell them that direct deposit is how they get paid. and give them a list of approved accounts. People say yes,” Mintz explained.

Some states are beginning to require direct deposit to a bank account for unemployment benefits, instead of mailing checks or cards to recipients. For stimulus payments during the pandemic, the IRS said it could disburse quickly to bank accounts, but checks could take several months to print and send, another incentive to open an account.

Since many banks and credit unions have Bank On-compliant accounts, government agencies don’t have to direct people to specific institutions — they can offer them a list to choose from. Many offer online account opening.

The Bank On program doesn’t work with fintech companies because they’re unregulated and VCs can change the rules at any time, Mintz said.

“Where are the consumer protections, where are the stress tests? We refer people to regulated financial institutions. We don’t think access to banking is just about giving people the best transactional product, we think it’s about getting connected.

Certification is free and some financial institutions are approaching the CFE Fund to be accredited – 30 more are in the process of being approved, he said.

Bank On builds on Dodd Frank’s Reg E which requires banks to obtain a user’s approval for overdraft fees. In secure bank accounts, if someone tries to make a payment and does not have the funds, the payment is simply stopped without incurring an NSF fee.

The FDIC promotes secure accounts through #Getbanked campaigns “focused on areas where research finds significant numbers of Black and Hispanic households are unbanked. The objective of this targeted campaign is to encourage unbanked consumers to consider opening a checking account. Many banks offer a variety of accounts, including low cost accounts. Last year, the FDIC launched this campaign in Atlanta and Houston.

“Through a series of digital, audio, and video advertisements in English and Spanish, the FDIC hopes to reach unbanked consumers, especially during tax season, when they can benefit from fast, direct deposit of their reimbursement,” the FDIC said. said in a statement.

In addition to new accounts signing up due to advertising, the Fund is working with three dozen cities and counties that have completely changed the way they pay their summer employees, Mintz added.

“We assume that no one can be fooled with these accounts. FIs won’t be disadvantaged by people overspending with money they don’t have, and customers won’t end up with a bunch of accrued charges because they tried to buy a coffee and they were missing a dollar. The account structure facilitated positive relationships between banks and people who wanted to join the mainstream banking system that benefited the middle and upper classes but were excluded.

Banks and credit unions have a ton of technology they can deploy to educate customers and help them save with budgeting and savings buckets, he said.

Mintz said the FDIC campaign is the reason the number of Bank On accounts has skyrocketed. And they’re reaching people who didn’t have a bank account before. Federal Bank of St. Louis, which follows the Bank On program, said 82% of new accounts are created by people who are new to the financial institution. Secured accounts perform 64 million debit transactions per month, he added.

“These are heavily used accounts with account holders making deposits and operating online. We are creating a robust marketplace of truly affordable trading accounts.

The banks tell the Fund that they are good customers – some take out loans and start businesses.

“Many financial institutions are pleasantly surprised that an account they thought was a benefit turns out to be a benefit. Credit unions are dealing with aging members, so new members are driving the If these accounts lost money, we wouldn’t be where we are today.

“Even without a bank account, unbanked people conduct transactions, often costly, outside the banking system,” he said. “They have bills to pay – many are earning money or receiving benefits and they should be able to use that money effectively.”

About Georgia Duvall

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