Bank on DC - Everyone is Welcome
Bank on DC is the first comprehensive program in the District of Columbia to serve the "unbanked," those who live without access to mainstream financial institutions and are forced to rely on expensive check-cashing services. In October 2009, City Administrator Neil Albert, Deputy Mayor Valerie Santos, and DISB Commissioner Gennet Purcell challenged every local financial institution to partner with the City and help remove barriers that have historically kept the unbanked out of the financial mainstream. Over the next few months the City worked with local community organizations, banks, and credit unions to develop a program that would:
- Change bank products and policies to make sure everyone in DC has the opportunity to open low-cost, starter bank accounts;
- Raise awareness among consumers about the benefits of having an account;
- Provide quality financial education to District residents, to help them start saving for the future
- Engage with institutions to promote use direct deposit among their employees
Now, everyone in DC has the chance to open an account with the bank or credit union that works best for them, and to start saving for the future. Our goal is to open 10,000 new accounts and establish 10,000 direct deposits by the end of 2010, and put thousands of families on the road to financial security.
The Unbanked in DC
The District of Columbia is estimated to be home to roughly 37,000 unbanked households and 72,000 underbanked households, representing a total of 235,000 people who may or may not have bank accounts, and who frequently access checking and credit services through alternative financial services such as check cashers. Roughly 18 percent of African-American households and 27 percent of Latino households in DC have neither checking nor savings accounts. For more information about the unbanked and underbanked in DC click here.
With no access to mainstream financial services, unbanked DC residents are forced to turn to check-cashing companies, spending hundreds of dollars a year just to cash their checks and pay bills, and sending millions of dollars out of our community. Estimates suggest unbanked families spend approximately 5 percent of their annual incomes just to manage their basic finances. In the District, it was estimated that more than 1 million checks are cashed in the city each year. The average check value of $444 generated an average fee of 2-3 percent. Therefore, about $10-15 million are spent by low and middle income families on fees to access money they have earned.
Why Bank on DC
A bank account is the first step to financial security, and provides the necessary tools to climb the economic ladder. With no safe way to access and save money, unbanked DC residents are particularly vulnerable in times of crisis or emergency, and lack the necessary tools to save and build assets.
Unbanked District residents are concerned about the cost of having a bank account and are worried they may be denied an account because they have made financial mistakes in the past. Others believe that without a Social Security card they are not eligible for an account. Some think they do not make enough money to have a bank account, or are intimidated by a traditional banking environment.
To directly address these concerns, participating banks and credit unions agreed to the following baseline criteria:
- Offer a low cost product with no minimum balance requirement, no monthly maintenance fees, and no courtesy overdraft. The high minimum balances and fees of many accounts is a key factor keeping people out of the financial mainstream.
- Allow customers with a poor banking history to open "second chance" checking accounts and receive financial literacy training.
- Accept the Salvadoran Documento Unico de Identidad (DUI) and the Mexican Matricula and other Consular identification cards as primary ID. For many immigrants, the barrier to opening an account is having the proper documentation.
Increase the availability of products and services, such as affordable small dollar loans, remittance products, and SMS text message account alerts, that better suit the needs of the unbanked - Expand marketing and outreach strategies in targeted, low-income neighborhoods, and increase the visibility of appropriate products in the District of Columbia.
- Provide financial literacy training in the community and partner with local community-based organizations to transition customers ready to enter the financial mainstream.
The "Bank on" Movement
The "Bank on" concept was first piloted in San Francisco in 2006. Since then Bank on San Francisco has opened roughly 40,000 accounts, 80 percent of which are still currently open with an average balance of $980, saving San Franciscans roughly $20 million in fees. Now there are "Bank on" efforts are underway in 56 cities, 6 states, and 6 regions in the US. Bank on programs have received support from the National League of Cities, the William J. Clinton Foundation, the Annie E. Casey Foundation, United Way, PEW Charitable Trusts. To learn more about Bank on efforts at the national level, follow this link for more information.
Media Coverage
- Fenty Announces Plan to Provide Bank Accounts for 10,000 Residents, Deputy Mayor for Planning and Economic Development, April 2010
- DC launches Bank On to get residents to open accounts, Washington Business Journal, January 2010
- Bank On DC - Helping Underbanked Families Achieve Financial Stablity, Department of Insurance, Securities and Banking Special Feature, January 2010
- The 2009 FDIC National Survey of Unbanked and Underbanked Households: District of Columbia, FDIC December 2009
- Bank on DC Kick Off Event, Washington DC Economic Partnership, October 2009
- Unbanked' but No Longer Ignored: Regulators, Firms Take Aim At Payday-Lending Market, Washington Post, October 2009
For media inquiries, please contact bankon.dc@dc.gov
