Should Policymakers Aim to Expand Access to Bank Accounts?

In a new Economic Commentary, Cleveland Fed researchers Paola Boel and Peter Zimmerman study the extent to which financial exclusion—defined as lack of bank account ownership—is a problem that needs addressing by policymakers in the United States.

The Federal Deposit Insurance Corporation Survey of Household Use of Banking and Financial Services reports that 5.4 percent of US households were unbanked in 2019. This means that approximately 7.1 million households had neither a checking nor a savings account at a bank or credit union.

The researchers use economic principles to discuss when financial exclusion can be seen as the outcome of an efficient market. They then study data and the existing academic and policy literature to assess whether frictions exist that prevent bank accounts from being allocated in an optimal way.

“We find that private market initiatives—such as financial education schemes or new online banks—or new technologies—such as prepaid cards—may already be helping mitigate, if not eliminate, such frictions,” say the researchers. “But if the frictions persist, intervention by authorities may be justified.”

Read more: Why Worry about Financial Exclusion?

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.455.4479