FDIC Model Safe Accounts Pilot
On January 1, 2011, the FDIC launched the Model Safe Accounts Pilot. The pilot was a case study designed to evaluate the feasibility of financial institutions offering safe, low-cost transactional and savings accounts that are responsive to the needs of underserved consumers. This pilot reflects the FDIC's commitment to ensuring that all U.S. households have access to safe and affordable banking services.
Access to mainstream financial services at an insured institution provides consumers with a safe place to save, conduct basic financial transactions, build a credit history and access credit on favorable terms, and achieve financial security. Yet, according to the FDIC's landmark study, the FDIC Survey of Unbanked and Underbanked Households, more than one-quarter of U.S. households are underserved.
The nine financial institutions that participated in the pilot offered electronic deposit accounts that followed the FDIC Model Safe Accounts Template. A list of the pilot financial institutions is available at http://www.fdic.gov/consumers/template/banks.html.
Summary
The results of this one-year pilot suggest that opportunities exist for financial institutions to offer safe, low-cost transaction and savings accounts to underserved and low- and moderate-income (LMI) consumers. Undertaking this pilot was important to informing the FDIC's efforts on economic inclusion. Several major themes were drawn from this pilot:
- Safe Accounts performed on par with or better than other transaction and savings deposit accounts offered by the pilot banks.
- A large proportion of accountholders remained banked during the year, suggesting that consumers can maintain successful banking relationships using Safe Accounts.
- The relatively low overdraft risk, in combination with the high retention rates, indicate that Safe Accounts may have greater longevity and lower costs than other deposit accounts.
- Most of the pilot institutions reported that the cost of offering Safe Accounts were roughly the same if not lower because the pilot accounts do not have paper check-related costs.
- Most participating institutions reported that they learned valuable lessons from the pilot and were encouraged by their initial experience of offering safe, low-cost financial products that help meet the needs of underserved and LMI consumers.
- Financial institutions can consider offering Safe Accounts either as a way to reach new customers or to increase the use of financial products by existing customers.
Results
Each quarter the FDIC collected confidential data reports about the Safe Accounts program at each participating institution; data collected included the number of Safe Accounts opened and closed, and the average opening and monthly balances. While the information cannot be taken to represent the entire banking industry or consumers nationwide, the aggregate account information provides insights about the participants' experiences. Basic results from the pilot were positive:
- More than 3,500 Safe Accounts were opened during the one-year pilot specifically, 662 transaction accounts and 2,883 savings accounts.
- Account retention rates exceeded pilot institution expectations; 81 percent of transaction accounts and 95 percent of savings accounts remained open at the end of the pilot
Lessons Learned
The participating institutions shared a number of valuable lessons learned:
- Many pilot institutions trained their tellers and customer service representatives to offer Safe Accounts and provide basic financial education.
- Pilot institutions reported a relatively low risk of account overdrafts and fraudulent behavior.
- Many different business models emerged, suggesting that the FDIC Model Safe Accounts Template is flexible enough to be used in a variety of circumstances.
Challenges
The challenges institutions experienced during the pilot primarily focused on marketing and advertising, establishing a presence in new markets, and ensuring adequate staff training:
- Many institutions said they found it challenging to effectively market and advertise the Safe Accounts.
- Several banks spoke about the challenge of reaching potential customers in new markets where nonbank financial services providers compete for customers.
- A large portion of institutions described the importance of providing effective staff training on Safe Accounts.
Pilot Report
The full report is available at FDIC Model Safe Accounts Pilot: Final Report - PDF. (PDF Help)
Model Safe Accounts Template
The Safe Accounts opened during the pilot were designed around the FDIC Model Safe Accounts Template. The Template describes electronic, card-based accounts that limit acquisition and maintenance costs. Transaction accounts are checkless, allowing withdrawals only through automated teller machines, point-of-sale terminals, automated clearinghouse preauthorizations, and other automated means. There are no overdraft or non-sufficient funds fees associated with the transaction accounts. Safe Accounts are FDIC-insured and subject to applicable consumer protection laws, regulations, and guidance. A complete description of the features and fees associated with the FDIC Model Safe Accounts Template can be found at http://www.fdic.gov/consumers/template/template.pdf.
Resources
- A list of the participating pilot banks is available at http://www.fdic.gov/consumers/template/banks.html.
- Information on the FDIC Board Approval of the FDIC Model Safe Accounts Pilot is available at http://www.fdic.gov/news/news/press/2010/pr10183.html.
- The FDIC Model Safe Accounts Template is available at http://www.fdic.gov/consumers/template/template.pdf.
- The FDIC Survey of Unbanked and Underbanked Households is available at http://www.fdic.gov/householdsurvey/.
- FDIC Survey of Banks' Efforts to Serve the Unbanked and Underbanked is available at http://www.fdic.gov/unbankedsurveys/.
- Information on the FDIC Advisory Committee on Economic Inclusion is available at http://www.fdic.gov/about/comein/.
- Information and comments on the FDIC Proposed Templates for Safe, Low-Cost Transactional and Basic Savings Accounts are available at http://www.fdic.gov/consumers/template/background/.
- Information on the FDIC Small Dollar Loan Program is available at http://www.fdic.gov/smalldollarloans/.
- Information on all of the FDIC's economic inclusion initiatives is available at http://www.economicinclusion.gov/.