Unbanked hit new state low with covid-19

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When the pandemic lockdown forced banks to close or reduce in-branch services, it fueled a substantial evolution in the banking sector by pushing the sector to rely more on digital channels so customers could access accounts and borrow money. .

Technological innovations and increased digitization have brought significant impacts to the banking sector, including the establishment of new loan programs, shifts in consumer preferences and changes in depositor behaviour.

There was another important change in the same period – this one in an entirely different direction. Unbanked Arkansans — those without a bank account — followed a national trend, opening new accounts in record numbers.

Unbanked households in Arkansas have essentially halved in the past five years, falling to a new low of 3.4% in 2021, according to the Federal Deposit Insurance Corp. That was below the national average of 4.5%.

“I’ve been tracking unbanked and underbanked numbers for years…and last year was the biggest drop I’ve ever seen,” said Darrin Williams, chief executive officer of Arkansas-based Southern Bancorp Inc., which focuses on providing banking services to underprivileged and underprivileged communities in the Mississippi Delta region.

Since 2017, there have been steady improvements in Arkansas and the US.

Central Arkansas and the Little Rock metro area recorded 2.8% of unbanked households last year, down from 7.2% in 2017 and down from 5.1% in 2019. The FDIC releases the data every two years. free.

Northwest Arkansas and the Fayetteville metro area were first reported last year with 3.5% of unbanked households.

“During the pandemic, consumers opened bank accounts to quickly and securely access emergency funds and other benefits,” FDIC Acting Chairman Martin J. Gruenberg said in a statement. “Secure and affordable bank accounts provide a way to bring more Americans into the banking system and will continue to play an important role in promoting economic integration for all Americans.”

Indeed, federal incentive payments led many consumers to open bank accounts to get their hands on the checks faster, according to Williams, who said bank customers received their money much faster than those waiting for paper checks.

While not all attributable to pandemic stimulus controls, Southern opened 7,000 new accounts in 2021.

However, slower progress has been made in reaching the underbank or households that have working bank accounts but are not making full and effective use of the services available.

Just over 14%, or 18 million American households, underused their bank accounts last year. Arkansas recorded even lower numbers, with 15.1% of households in the state registered by the FDIC as understaffed.

“You can’t really plant a victory flag for the population we’re targeting,” said Charity Hallman, Arkansas senior vice president for community and economic development for Hope Credit Union. “It’s great that the condition is improving. It’s nice to see Arkansas moving forward, but there is work to be done.”

Based in Jackson, Miss., Hope focuses on providing banking and credit services for women and people of color. That demographic is still being left behind, according to Hallman.

According to the FDIC data, minority communities and low-income people, who earn less than $30,000 a year, face greater banking problems than their white counterparts.

Unbanked and underbanked rates remain higher among minorities. Last year, 2.1% of white households did not have a bank account, compared to 11.3% of black households and 9.3% of Hispanic households.

While this gap is significant, it is significantly smaller than just two years earlier when the unbanked rate in 2019 among white households was 2.5%, compared to 13.8% and 12.2% among black and Hispanic households. households,” the FDIC report said.

In 2021, 9.3% of white households were underbanked, compared to 24.7% of black households and 24.1% of Hispanic households.

Minorities and residents of rural communities “still use some predatory, alternative tools” such as money orders to pay bills or rely on payday lenders to cash a check, Williams said.

“Getting people to use the resource appropriately is the next step and there has been a disconnect,” he added. “There are still people paying higher interest and higher fees because they don’t use their account properly, which is really an educational issue.”

At Hope, Hallman notes that more education is needed, but the problem is even deeper as lenders continue to offer higher and crippling loan products and rates in poorer areas. In fact, she said many banks require a minimum deposit to open an account, a practice that limits minority participation.

“That makes it harder for them to build credit history, it makes them more susceptible to scams, and they’re not set up to be successful in the long run,” she said. “The best way for black companies to build is to give them access to credit.”

Both Hope and Southern Bancorp have used investments from the US Treasury to expand their local branch networks and create more entry points in minority and underprivileged communities.

For example, Hope plans to use the $92.6 million in Treasury funding to raise $1 billion to invest in Arkansas, Alabama, Louisiana, Mississippi and Tennessee to support more than 150,000 home buyers, businesses and families. The long-term strategy would lead to more settlements in communities that traditional lenders fail to reach.

“We’re opening locations where it’s a predominantly black community and we tailor our products to their needs,” Hallman said. “We build thoughtful projects that address the economic needs of that community.”

In Southern, the bank is preparing to open a branch at the Little Rock Police Department’s 12th Street Substation, which will provide space for retail operations and community services. It will be the only branch bank within a few miles serving neighborhoods and businesses in the city center. Southern received about $250 million in treasury funds to better serve that type of community in the bank’s service area, Williams said.

“The number of accounts we open every year is increasing due to our expansion into areas traditionally not served by banks and our mission is really to go after people who don’t and under-bank,” Williams added. .

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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