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Insider’s report
on payments

U.S. unbanked This concept may fit in emerging markets where bank

branches are scarce and poor people need ways to transact,
numbers falling but I don't see the case for it in the United States. Americans
who can't afford bank accounts—or basic expenses—aren't
going to be interested in converting what little cash they
By Patty Murphy have to volatile cryptocurrencies.
ProScribes Inc. As the FDIC noted in its report, a significant number of
Americans have no savings for unexpected expenses or
he percentage of Americans that don't use emergencies—35.8 percent of all households. Moreover,
banks hit an all-time low in 2019. While the 37 percent of households could not cover an emergency
numbers may inch up due to the economic fall- expense of $400 using only cash, savings or a credit
T out from COVID-19, at nearly 95 percent of all card they could pay in full following their next monthly
households, the U.S. banked population is strong. statement. Here's another telling data point from the FDIC
report: nearly one in five households (19.7 percent) don't
Only about 7.1 million households (5.4 percent of all have credit scores, which makes it even harder to obtain
households) in the United States were unbanked in 2019, credit for emergency expenses. The situation is even more
according How American Banks: Household Use of Banking dire among unbanked households: nearly three in four
and Financial Services, 2019 FDIC Survey, released in late (74 percent) have no savings for unexpected expenses or
2020 by the Federal Deposit Insurance Corp. That's the emergencies; 80.2 percent do not have credit scores.
lowest number since the FDIC began surveying consumers
on their banking practices in 2009. Back then, 7.6 percent P2P use highest among banked Americans
of households were unbanked, meaning no one in those
households had checking or savings accounts at federally Nonbank P2P services, like the PayPal unit Venmo, also
insured banks or credit unions. FDIC data indicates the get touted as banking alternatives for the unbanked.
unbanked population peaked in 2011, at 8.2 percent of But as the FDIC's survey revealed, fewer than one in 10
households. unbanked households (just 8.8 percent) use nonbank P2P
services, compared with nearly one in three (32.3 percent)
In a postscript to the report, the FDIC noted that while of banked households.
the data reflects what was going on in 2019, most of the
analysis was done n 2020. And the COVID-19 pandemic Meanwhile, a survey Venmo conducted of its users
may have thrown more Americans out of the banking suggested folks who use the service really like it (89
system. percent), and that nearly half (47 percent) would use their
Venmo app at merchant checkouts if they had the option.
The sad but very real fact is that being unbanked is
more about income than preferences. Some Americans Asked to rank the categories of items they would most
dislike banks enough to stay clear of them: 56.2 percent likely purchase using Venmo, the top vote getters were
of respondents said they had no interest in having clothing, shoes and accessories; restaurants and beverages;
bank accounts; just 24.8 percent were very or somewhat groceries; and food delivery.
interested, the FDIC reported. But socioeconomic
circumstances present the biggest obstacles; many folks I admit I'm a happy Venmo user. I use the app to pay small,
simply can't afford bank accounts. independent businesses, like the dog's veterinarian and
some artists I support. It's really no more of a hassle for me
Crypto currencies not the answer to send payment instructions from my phone than it is to
pull out a card while I'm at the POS, and there's no need
As senior editor for The Green Sheet, I often receive news to touch a POS device that countless others have touched.
of emerging technologies and payment form factors, Plus, it's a near instantaneous payment.
like cryptocurrencies, that could help move unbanked
consumers into the banking mainstream. One example is Users can tie prepaid debit cards to Venmo accounts,
crypto ATMs, which help consumers convert greenbacks which makes it a viable option for the unbanked.
into cryptocurrency, which they then can use to stash cash
and invest. Patti Murphy is senior editor at The Green Sheet and co-host of the
Merchant Sales Podcast. Follow her on Twitter @GS_PayMaven.
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