Manuel Pastor remarks in the Los Angeles Times recently that it "might seem an inopportune time to steer banks in the direction of social justice." Inopportune for whom-banks or consumers? He goes on to show how exchanging high-cost check cashers for bank accounts makes sense for both parties.
Tomorrow Los Angeles will launch Bank on LA, becoming the latest of a dozen or so cities to start an effort to increase the supply of starter bank accounts that work for lower income consumers. They aim to help 10,000 Angelenos with accounts open them in the next two years.
Los Angeles has the largest number of residents without bank accounts in the nation, according to Scarborough Associates. These residents pay an average of $700 a year to cash their paychecks, according to the Pew Charitable Trusts. They also likely don't have a safe place to keep their money.
For banks, there's an opportunity to start viewing these consumers as a market to tap, rather than a group to keep out of their lobbies. By developing appropriate products that work for this markets, banks could have millions of more dollars revolving on their balance sheets.
Let's hope the LA effort can tap into the mutual interests of banks and consumers, and help them connect to both their benefit. A similar effort in San Francisco opened 24,000 accounts over two years. Their average balance was $975. Those are results you can bank on.