What percentage of people do not own a bank account? And how hard is it these days to survive without one? The importance of these questions is growing as more American establishments are declining to accept cash payments. Retailers and eateries that don’t take cash turn away customers without bank accounts.
According to the most recent figures, a sizable portion of the population remains “unbanked”—about 6 million Americans, or roughly the population of Wisconsin. Furthermore, over a billion people do not own a bank account outside the United States.
Many stores feature signs that exclaim how inclusive and friendly they are, right next to them is another sign that says, “No cash accepted.” This implies that those without bank accounts are not welcome.
Why do Americans lack bank accounts?
The Federal Deposit Insurance Corporation (FDIC) asks people without bank accounts why they don’t have one and polls households regarding their interactions with the banking system. Individuals can reply with more than one response. For more than 40% of respondents, the most common cause in 2021 was insufficient funds to cover the minimum balance.
This is in line with evidence that indicates a lower likelihood of bank account ownership among impoverished households. According to FDIC, over 25% of people with annual incomes under $15,000 do not have a bank account. Nearly all respondents with annual incomes over $75,000 have some kind of bank account.
The second and third most often given responses indicate that some people have doubts about banks. A third of those who responded to the survey stated they “don’t trust banks,” and another third agreed that “avoiding a bank affords more privacy.”
The expenditures associated with dealing with a bank completed the top five factors. A quarter or more of the respondents thought that bank account fees were excessively high, and a similar percentage thought that fees were too erratic.
Even though rich and middle-class people don’t pay for bank accounts upfront, those who cannot keep a minimum amount may incur expensive fees.
According to a recent Bankrate poll, basic monthly service rates are within the $5–$15 range. Also, banks get $4 to $5 every time a customer uses an ATM to take out cash or needs a service like cashier’s checks. Overdraft fees might amount to approximately $25 for each overdrawn account.
Unbanked in the United States
The FDIC refers to individuals without bank accounts as “the unbanked,” while “the underbanked” are those who have bank accounts but primarily rely on other services such as check-cashing shops.
American households have 19 million underbanked and nearly 6 million unbanked, according to the most recent FDIC data. With an average household consisting of 2.5 individuals, this implies that more than 15 million people are living in houses without a bank link and 48 million more in homes with a shaky relationship.
Adding the two numbers together, The Conversation found that about one in five Americans had little to no ties to banks or other financial organisations. This may prevent people from accessing cash-free retailers, eateries, transit, and healthcare services.
The FDIC estimates of the unbanked population are probably not accurate. Additional questions about banking and not banking have been included in a survey that is distributed to respondents at home. This implies that it is missing undocumented immigrants, homeless persons, and temporary residents without a fixed address.
These individuals most likely lack access to banking, as opening a bank account requires providing a government-issued tax identification number and a verified address. There are millions more people in the cash-only economy than the FDIC forecasts, considering that about 2.5 million migrants entered the US from Mexico in 2023 alone.
Finding the global tally
Although the number of people with bank accounts is comparatively high in the United States, the situation is different in other countries. The World Bank has produced a database that displays the proportion of the populace in each nation with access to financial services. In contrast to the FDIC, the World Bank defines “banked” as including everyone who sends and receives money via a smartphone as having a bank account.
World Bank estimates show over 25% of adults worldwide lack access to a bank or mobile phone account. However, that varies greatly by area. While only over half of people in the Middle East and North Africa have a bank account, practically everyone in nations that utilise the Euro has one.
In countries like Brazil and India, there has been great success in integrating a vast majority of people into the banking grid. Brazil’s decentralised payment system called the Pix, which helps people pay using their phones, has been lauded internationally. Though 34% of Brazilians don’t have a bank account, Pix has been a grand success.
In India, the Unified Payment Interface has integrated the formal economy into the banking system. Granting millions access to some form of banking.
An economy with greater inclusivity
Many of us pay without giving it much thought—swiping our credit cards, tapping our phones, or inserting our debit cards. Nonetheless, the number of unbanked individuals is at least 6 million in the United States and about 1.5 billion globally.
The unbanked must resort to payment options like prepaid debit cards when establishments stop taking cash. These prepaid cards are pricey, though. One of the biggest American stores, Walmart, for instance, provides a reloadable basic debit card. The card costs $1 to purchase, and there are fees of $6 a month plus an additional $3 for each cash load at a Walmart cashier. It’s a high price to pay at least $10 to set up a debit card for a few purchases.
The next time you see a “no cash accepted” sign in a storefront or restaurant window, you’re essentially looking at a business that is shutting off a large number of underbanked and unbanked individuals. A straightforward solution to guarantee that everyone can participate financially in the modern economy is to mandate that all firms accept cash.
The number of people without a bank account is significant, with about 6 million unbanked Americans and over 1.5 billion globally. The reasons for not having a bank account vary from insufficient funds to concerns about privacy and high fees.
The unbanked and underbanked face challenges accessing cash-free services and may have to resort to expensive prepaid debit cards. To ensure inclusivity in the modern economy, it is essential to consider making it mandatory for all businesses to accept cash as a viable payment method.