Bill Mills Director of Strategic Initiatives Florida Prosperity Partnership Bank On xxxxxxxx Regional Meeting May 12, 2011

Consequences of Unbanked $8 billion in fees to alternative servicers (includes pay day loan fees) Average charge for cashing paycheck-$40. $1000-$2000 annually for check cashing services Low wage worker who never utilized mainstream financial services over 40 year full time work history would spend $40,000 on check cashing services If the $40,000 had been regularly invested in savings bonds, would have $360,000 at retirement!

What are the consequences of these statistics to low wage workers? Aren’t always aware of the benefits available to them Are vulnerable to predatory lenders and alternative financial services: – The “unbanked” pay 1-10% of salary for check cashing services – “Pay day” loans cost workers 50 to 400% interest – Paid tax preparation can cost 25%+ of total refund – Unable to accumulate assets through savings without relationship with bank or credit union.

Why is all of this important to us? According to Consumer Federation of America, a low wage worker (or anyone utilizing pay day loan services) that has a $500. SAVINGS ACCOUNT with a Bank or Credit Union is EIGHT TIMES less likely to utilize a pay day loan or cash advance service.

National proportions of unbanked and underbanked households An estimated 7.7 percent of households, about 9 mm with at least 17 mm adults, are unbanked. An estimated 17.9 percent of households, about 21 mm with about 43 mm adults, are underbanked. Taken together, at least 25.6 percent of U.S. households, close to 30 mm households with about 60 mm adults, are unbanked or underbanked. FDIC National Survey of Unbanked and Underbanked Households

Unbanked households by region and state FDIC National Survey of Unbanked and Underbanked Households

7.0% of all households in Florida (an estimated 527,000 households) are unbanked. 18.2% of households with an annual income of $30,000 or less are unbanked. 24.2% of Black, 8.5% of Hispanic and 6.0% of other minority households are unbanked. 16.8% of all households (an estimated 1,270,000 households) are underbanked. In addition, 4.8% of households (an estimated 364,000 households) may be underbanked, but their use of alternative financial services is unknown. 21.7% of households with an annual income of $30,000 or less are underbanked. 27.1% of Black, 20.4% of Hispanic and 12.7% of other minority households are underbanked. Un and Under Banked in Florida FDIC National Survey of Unbanked and Underbanked Households

Characteristics of Unbanked Households more likely to be unbanked than the population as a whole are those: – With a black, Hispanic non-black, or American Indian/Alaskan householder; or – Where Spanish is the only language spoken at home; or – With a householder that is a foreign-born noncitizen; or – That are family households with an unmarried female or male family householder; or – Earning less than $30,000; or – With a householder holding less than a high school degree; or – With a householder under age 45. FDIC National Survey of Unbanked and Underbanked Households

Reasons previously banked households are unbanked FDIC National Survey of Unbanked and Underbanked Households

Unbanked households’ reasons for wanting to open an account FDIC National Survey of Unbanked and Underbanked Households

Unbanked households’ likelihood of opening account FDIC National Survey of Unbanked and Underbanked Households

Characteristics of underbanked households Households more likely to be underbanked than the population as a whole are those: – With a black, American Indian/Alaskan, or Hispanic non-black householder; or – That are family households with an unmarried female or male householder; or – Earning up to $50,000; or – With a householder holding less than a college degree; or – With a householder under age 55. FDIC National Survey of Unbanked and Underbanked Households

Underbanked households use of alternative financial services Underbanked households account for 19.4 percent of all banked households. By definition, all underbanked households have used an AFS at least once or twice a year. Among underbanked households: – 81 percent use non-bank money orders. – 30 percent use non-bank check cashing services. – 16 percent use payday lending. – 16 percent use pawn shops. – 13 percent use rent-to-own services. – 13 percent have used refund anticipation loans during the past 5 years. FDIC National Survey of Unbanked and Underbanked Households

Implications and conclusions Significant proportions of U.S. households are unbanked or underbanked. Lower-income and minority populations are disproportionately represented among both groups. The proportions vary widely across regions, states and large MSAs. Many unbanked households have found it not cost effective to have a bank account, and many underbanked households use transactional AFS due to convenience and cost. About half of unbanked households were previously banked and over a quarter of those households became unbanked during the year before the survey was taken. Taken together, these results suggest there are significant opportunities for banks to offer financial products specifically tailored to the needs of LMI households. FDIC National Survey of Unbanked and Underbanked Households

The Bank On Model A Bank On campaign is driven by partnerships – State wide asset building coalition – State and Municipal governments – Community-based organizations – Financial institutions and regulators – Regional and local Asset Building Coalitions or VITA Sites Innovative solutions are created to reach un- and under-banked individuals, including: – Developing safe, affordable financial products; – Creating pathways and supports to assist targeted populations to utilize these products; and – Conducting outreach campaigns to inform the public about these opportunities.

Benefits of Successful Programs Financial institutions receive increased access to the untapped market of the un- and under-banked Residents protect their income and assets and have more wealth-building opportunities Community groups have access to more asset-building opportunities for their clients Family financial stability= overall city economic vitality Financial services can become a part of larger community asset-building strategies.

Partnerships are a vital ingredient – No one entity can do it alone Florida Prosperity Partnership – Through its state network brings partners together – Coordinates state wide approach to Bank on Initiative Local/State Government roles: – Elected official serves as champion – Convener of stakeholders – Uses bully pulpit to engage financial institutions and community organizations Community organization roles: – Engages residents through direct outreach and referral – Acts as a primary service provider or convener for financial education – VITA sites offer connections to accounts – Assists with data tracking Financial institution roles: – Provides insight and expertise into development and provision of appropriate financial products – Participates in outreach and marketing – Collects and tracks data for evaluative purposes

So What Are The Next Steps? Project Team (Steering Committee): Diverse set of local and regional stakeholders-need buy in of “core group”-Who else do we need??

And…..Working Committees Bank Products Marketing Financial Education Account Tracking and Measuring

What Else? Identification of target populations-who do you want to reach? Identification of target neighborhoods-where is the most need and concentration of the unbanked and underbanked?

What do we need from the financial institutions? Bank Products – Checking Account – Savings Account

And Don’t Forget Financial Education Curriculum Volunteers to be trained to provide the training

And What Else? What about Second Chance accounts? Development of curriculum recognized by financial institutions Training for Branch Staff

QUESTIONS??? THANK YOU