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

Fumiko Hayashi, Aditi Routh and Ying Lei Toh

Journal of Economics and Business, 2024, vol. 129, issue C, No S0148619523000498

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.

Keywords: Unbanked; Financial inclusion; Nonbank financial services; Consumer choices (search for similar items in EconPapers)
JEL-codes: D12 G21 G23 G41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:129:y:2024:i:c:s0148619523000498

DOI: 10.1016/j.jeconbus.2023.106156

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