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?
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