Building Better Bank Ons

One of the fundamental determinants for achieving economic security is the manner in which families access financial services. Unfortunately, millions of households manage their money without a connection to a basic bank account. These unbanked families fend for themselves in a complex and expensive marketplace of products and services. The subsequent drain of savings and resources makes the path toward economic security all the more arduous. There ought to be another way. People should be able to access high-quality and low-cost financial products as a matter of course.

My colleague Anne Stuhldreher proposed that local officials work with financial institutions to increase the supply of starter bank accounts which could provide easy and affordable ways to deposit paychecks, pay bills, and save. The idea was to create an alternative to more costly payday lenders and check cashers, and bring more families into the financial mainstream. City leaders in San Francisco took up the challenge. In 2005, they began working with local community organizations, a coalition of banks and credit unions, and the Federal Reserve of San Francisco to design such a program. Bank On San Francisco was born.

The idea caught on, following San Francisco‘s lead, Bank On coalitions have emerged across the country. They have featured a range of organizations such as other municipalities, regional Federal Reserve Banks, non-profit community groups, and different types of financial institutions. The models, products, and providers have varied, and so likely have the results.

As much as these coalitions should be applauded, we should continue to elevate the primary objectives of these efforts and ask tough questions about impact and effectiveness. This work is not easy; typically it involves a high level of collaboration among a wide range of actors and institutions. But there is an opportunity to learn from the experience and begin identifying and sharing a set of best practices. The paper we are releasing today does just that.

Anne teamed up with her collaborator, Leigh Phillips, who has managed Bank On San Francisco from its inception, to take an honest look at the Bank On experience. Together they identify guideposts that outline an accessible starting point for communities to engage with banks and credit unions to increase financial stability across the country. These lessons apply differently to a variety of stakeholders, and serve to guide and strengthen future efforts. It is their hope, and mine, that this paper furthers the important conversation about how to effectively connect unbanked households to essential financial services.

You can read the full paper here.