Idaho residents less likely to be ‘unbanked’

Idaho residents are more likely than those of neighboring states to use at least some banking services, but residents of the state still use alternative services such as check cashing and payday loans, according to a recent survey by the Federal Deposit Insurance Corp.

The survey is performed every two years based on data from the previous year.

Idaho has a lower rate of unbanked people, 2.3 percent, than its surrounding states. While Washington and Utah also had very low rates, Oregon, Montana, and Wyoming fell between 3.4 and 5 percent, while Nevada was between 5 and 6.5 percent. Nationally, 6.5 percent of U.S. households are considered “unbanked,” the lowest level since the survey began in 2009, the FDIC said.

Moreover, the rate of the Idaho unbanked – that is, people who don’t use any financial products and services within the banking system – has consistently dropped, from 5.7 percent in 2011 to 2.3 percent for 2017, the FDIC said.

“Historically, Idaho banks have offered special services to meet the needs of low and moderate-income Idahoans,” said Trent Wright, president and CEO of the Idaho Bankers Association, in Boise. “Banks work with federal agencies, community groups and local government to develop successful ways to reach unbanked populations including off-premise financial education and outreach visits. In addition, most Idaho banks offer free, entry-level or low-balance basic savings accounts that are almost always a better value than check cashing outlets.”

In the future, Wright said he expects more people to do banking through their smartphones.

“New mobile technologies offer an opportunity to draw the unbanked and underbanked into the mainstream financial system,” he said. “Moreover, adoption of mobile phones is actually higher among minorities, the young, and the low-income, who are more likely to be unbanked.”

In contrast, Idaho has a larger percentage of residents considered “underbanked’– households that have a checking or savings account but also obtain financial products and services outside of the banking system – than Washington or Montana, but a lower percentage than Oregon, Nevada or Wyoming. However, that rate is also decreasing, from 23.1 percent in 2015 to 17.9 percent in 2017, the FDIC said. Nationally, the rate of underbanked households was 18.7 percent in 2017, down from 19.9 percent in 2015, according to the FDIC.

Idaho residents were also more likely than those of neighboring states (except Oregon) to use general purpose reloadable prepaid cards.

“Prepaid cards can also serve as a solution for unbanked Idahoans who may neither qualify for, nor manage, a traditional checking account for two reasons: they cost less than other types of accounts or services and, unlike checking accounts, most cannot be overdrawn or incur overdraft fees,” Wright said. “When issued by a bank, prepaid cards are an excellent opportunity for Idaho banks to build relationships with unbanked consumers.”

The Idaho Bankers Association supports regulation of prepaid cards that does not diminish their availability or usefulness to customers, he said. “Burdensome or unnecessary regulation will potentially limit the number of banks participating in the prepaid card market.”

Idaho residents were also less likely than those of any of the neighboring states to set aside money for unexpected expenses or emergencies, the FDIC found.

Banks have been criticized in recent months for increasing fees and minimum balance requirements, which makes it more difficult for low-income people to use traditional banks and instead drives them to alternative services. Substantially all of the unbanking improvement in the U.S. was because socioeconomic status improved, the FDIC said, noting that households that were low-income, less-educated, younger, black or Hispanic, working-age disabled, or volatile income were most likely to be unbanked.

Both the Office of the Comptroller of the Currency and the National Credit Union Association recently advised members to offer small-dollar loans to attract payday loan customers, but few have taken them up on it, other than U.S. Bank, which announced such a program in September.