Written by Madeleine March-Meenagh and Brian Rakovitis, CEDAM

Being banked is foundational to good financial health. Without a checking or savings account, “unbanked” households pay more in fees and interest for financial products than banked households— yearly they pay up to $3,000 per household, have limited access to credit, and lack protections for their money.

Prior to the pandemic, the nation’s household unbanked rate had decreased from 6.5% in 2017 to 5.4% in 2019. While a one percentage point decrease might not sound like a significant achievement, it means that within just two years, approximately 1.5 million more households were banked. Unfortunately, Michigan bucked national trends and went in the wrong direction—experiencing an increase in unbanked households from 5.6% to 5.7%. Had Michigan experienced the same national trend, as many as 50,000 households would have become banked during the same two-year period.  

As we enter a period of sustained economic hardship, Michigan should take action now to promote inclusive banking access. Our state’s approach should extend beyond getting folks to open accounts, and should incorporate an equity lens that advances targeted economic inclusion of low- and moderate- income (LMI) households. 

At first glance, the Michigan stats on unbanked households don’t seem that bad, but even a brief examination of the disaggregated data tells a much different story.  While statewide nearly 6 out of every 100 households are unbanked, the characteristics of those unbanked households reflect dramatic disparities by race, income, education, and homeownership. The takeaway is clear: race and income influence the barriers to banking a household experiences.  

Black households are 9x more likely to lack banking access than white households. 

Compared to the statewide average…

• Households with annual incomes below $30,000 are nearly 2x 
• Households with incomes under $15,000 are 5x
• When no one in a household has a high school diploma, the household is 3x 
• Non-homeowner households are 2.5x  

…more likely to be unbanked. 

When asked why individuals do not have a bank account, the top two reasons cited are 1) “don’t have enough money to meet minimum balance requirements” (48.9%), and 2) “don’t trust banks” (36.3%). However, whether or not someone is banked can’t be boiled down to resource disparities or personal choice. To effectively expand banking access, communities must recognize the industry’s history of exclusive practices that made banking unattainable for marginalized groups. 

Advancing a statewide initiative that promotes banking access and economic inclusion will require the development of private-public-nonprofit partnerships and subsequent coordination to address three major initiative dimensions: account design, education and outreach, and inclusion. 

• Account design– Sometimes it’s not the institution, but the account structure itself that precludes access. Modifying account design features can be an important step to removing barriers. Accounts that mandate no minimum balance, waive fees and accept alternative IDs (just to name a few) are feasible features already offered by many banks and credit unions. Examples of this work can be found in BankOn Coalitions across the country. Universal adoption of the BankOn Accounts Standards would significantly improve banking accessibility in Michigan.
• Education and outreach– Supporting education and outreach to unbanked households is essential to create a level of trust and understanding that will encourage households to become banked. Resourcing local organizations to bridge the gap between unbanked clients and financial institutions as they navigate banking options will increase the likelihood they become (and remain) banked. Reinforcing this client support with financial education, free tax services and resource navigation will promote additional financial security. 
• Inclusion– A statewide initiative that fails to address long standing patterns of inequality in our financial system will not be as effective as it could be and will only reinforce existing disparities. This will require working closely with unbanked households to co-design practices that support their needs as they transition into the banking mainstream. Inclusionary practices could include, but are not limited to: supporting LMI savings through match-saving and progressive incentives, offering materials in multiple languages, and activating local micro-influencers as trusted sources of information.  

Addressing the needs of unbanked households in Michigan is feasible, timely, and, most importantly, necessary. A statewide initiative that tackles account design, education and outreach, and inclusion has the potential to make banking accessible to thousands of Michigan households. Moreover, these changes are evidence-based and are relatively inexpensive to implement, which is all the more important given the current economic climate. As financial, public, and nonprofit institutions, we each have a role to play in creating a more inclusive banking environment that both considers the needs of our community members and corrects for ongoing injustice.

For more information about how your organization can support banking access, contact Brian Rakovitis.