In 19 days, a new GTE Federal Credit Union branch opens in the heart of Midtown, a St. Petersburg neighborhood that's been scrapping to attract basic consumer services for years.
The credit union opens across the street from Sweetbay Supermarket-anchored Tangerine Plaza, a key part of this urban renewal effort. Years ago, SunTrust committed to build a bank branch in Midtown, but the land it bought remains vacant.
Earlier this year, the Tampa-based GTE credit union heard that St. Petersburg was looking anew for a financial institution for Midtown. GTE stepped up quickly. With the city handing over land for $1, a branch debuts on Dec. 22. St. Petersburg Mayor Rick Baker will open the first account.
What SunTrust chose not to do for years, the credit union did in months. I mention this because a new government study was released Wednesday that shows who uses and who does not use banking services. The study, the FDIC National Survey of Unbanked and Underbanked Households, found that 25.6 percent of all households in the United States and 23.8 percent in Florida are "unbanked" (do not use banks) or "underbanked" (have checking or savings accounts but rely on other financial services) and that those households are disproportionately low-income and/or minority.
Well, well. A big survey finds people with less money and more minorities tend not to deal with banks. Is there anyone out there who did not know this already? FDIC Chairman Sheila Bair claims getting more people to use federally insured institutions provides households with an "important first step toward achieving financial security." So understanding who does not use banks is a first step.
Cheers for Chairman Bair's good, if wonky, intentions. But here are three reasons banks won't attract this segment of the population.
1. Banks have never been anxious to reach out to the unbanked or underbanked because banks do not consider them profitable customers. There's an old line in banking — 20 percent of bank customers generate 80 percent of the profits. They are wealthy customers — not the unbanked.
"Banks really are not interested in the unbanked," says Red Gillen, banking analyst for Boston's Celent research firm. There is one exception: Overdraft fees which hit lower-income customers more often and earn banks billions. But such practices now face congressional wrath and will become less profitable in the future.
2. People who do not use banks do so for a reason. Some live paycheck to paycheck or lack funds to put into checking and savings accounts. Others, especially blacks (in Florida, 51.3 percent are unbanked or underbanked), tend to distrust banks more than other financial providers.
3. Today's best innovations aimed at providing services to the unbanked and underbanked come not from banks but from other financial and non-financial companies, especially Walmart. The giant retailer offers its Walmart Moneycard, for example, a pre-paid and reloadable Visa debit card that can supply most banking payment services without the need for a checking account.
Yet even these products face criticism for stiffing the unbanked with hidden fees.
Gillen got it right: "It is expensive to be poor."
Contact Robert Trigaux at firstname.lastname@example.org.