The Unbanked and Underbanked: Measurement and Policy Considerations
Paper Session
Sunday, Jan. 4, 2026 10:15 AM - 12:15 PM (EST)
- Chair: Vegard M. Nygaard, RAND Corporation
Who Remains Unbanked in the United States and Why?
Abstract
This paper conducts a detailed exploration of the factors associated with unbanked status among U.S. households and how these relationships evolved between 2015 and 2019. Biennial FDIC household survey data on bank account ownership and household characteristics, combined with state-level variables, are examined with application of both fixed effects and multilevel modeling. The analysis finds that even as rising incomes drove a decline in the unbanked percentage of the population over this period, income remained the most significant differentiator, with strong associations with race and ethnicity also persisting. Unbanked status became more concentrated among single individuals and disabled individuals and less concentrated among younger households over this period, and less strongly related to unemployment spells. New factors identified by the analysis include lack of digital access and non-citizen immigrant status, both associated with significantly higher likelihood of being unbanked. Identified state-level relationships include an association between financial literacy measures and percent unbanked. Overall, the findings suggest that continuation of recent efforts by policymakers to bridge the digital divide in rural and urban areas and to enhance financial literacy could help expand financial inclusion. Another key takeaway is that unknown structural factors still pose a challenge to explaining who is unbanked, especially regarding gaps by race and ethnicity, underscoring a need to capture more granular data on the unbanked.Trust and Banking Status: Evidence from an Information Provision Experiment
Abstract
We developed and conducted a unique survey of unbanked and underbanked individuals in the US to explore the reasons behind their banking status and their level of trust in different financial institutions. Our findings reveal that concerns over trust, privacy, and costs drive unbanked and underbanked status. The design of our survey also allows us to identify the underlying factors contributing to trust and privacy concerns, which we find to be closely linked. Distrust arises from fears of bank failures and privacy issues, with the unbanked also citing the costs of banking services. Key privacy concerns include vulnerability to hackers and unauthorized data sharing. We find that respondents trust other institutions much more than banks, especially the postal service, technology companies, and the Federal Reserve. Additionally, our information provision experiment shows that increasing awareness of the Federal Reserve’s functions improves perceptions of the Fed.Defining Households That Are Underserved in Digital Payment Services
Abstract
U.S. households that lack digital means of making and receiving payments cannot participate fully in an increasingly digitized economy. Assessing the scope of this problem and addressing it requires a definition of households that are underserved in digital payments. Traditional definitions of households underserved in the banking system—those that are unbanked and those that are underbanked—are not suitable because they do not account for the ownership of nonbank transaction accounts that can be used to make and receive digital payments. In this paper, we define households underserved in digital payments by considering four key elements—access, use, safety, and affordability—and discuss how researchers may assess these elements to quantify the share of households underserved in digital payments.Discussant(s)
Scott Schuh
,
West Virginia University
Kenneth P. Brevoort
,
Federal Reserve Board
Emily Williams
,
Harvard Business School
Ryan Goodstein
,
Federal Deposit Insurance Corporation
JEL Classifications
- G2 - Financial Institutions and Services
- D1 - Household Behavior and Family Economics