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Heterogeneous unbanked households: Which types of households are more (or less) likely to open a bank account?

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  • Hayashi, Fumiko
  • Routh, Aditi
  • Toh, Ying Lei

Abstract

Promoting bank account ownership is important because having a bank account is the foundation for households’ financial well-being. Unbanked households differ in their likelihood of opening a bank account, and understanding the factors associated with these differences can help policymakers and industry stakeholders to tailor financial inclusion strategies. This study examines which factors are associated with unbanked households that are more (or less) likely to open a bank account. We use data from the FDIC National Surveys of Unbanked and Underbanked Households and assess the likelihoods of opening a bank account for different groups of unbanked households divided based on their prior banking status and interest in having a bank account. Unbanked households that previously had a bank account and are interested in having a bank account are more likely to open an account. These households tend to be unemployed, more educated, and native born, to have access to digital technologies, to use alternative financial services, and to be unbanked because of unfavorable bank account features. In contrast, households that never had a bank account and are uninterested in a bank account are less likely to open an account. These households tend to be not in the labor force, less educated, of a racial minority, and foreign born, to lack access to digital technologies, and to rely heavily on cash. Moreover, they tend to distrust banks. Advancing financial inclusion for this group will require strategies to increase their trust in the financial services industry.

Suggested Citation

  • Hayashi, Fumiko & Routh, Aditi & Toh, Ying Lei, 2024. "Heterogeneous unbanked households: Which types of households are more (or less) likely to open a bank account?," Journal of Economics and Business, Elsevier, vol. 129(C).
  • Handle: RePEc:eee:jebusi:v:129:y:2024:i:c:s0148619523000498
    DOI: 10.1016/j.jeconbus.2023.106156
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    References listed on IDEAS

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    More about this item

    Keywords

    Unbanked; Financial inclusion; Nonbank financial services; Consumer choices;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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