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Speeches & Testimony

Remarks by Martin J. Gruenberg, Chairman, Federal Deposit Insurance Corporation to the FDIC 16th Annual Bank Research Conference; Arlington, VA

September 8, 2016

On-Demand Video


First, let me begin by welcoming you to the FDIC’s 16th Annual Banking Conference.  Each year, this event provides an important opportunity for the FDIC’s researchers and analysts to engage with and learn from leading scholars.  

Research has long been a core function of the agency, informing the FDIC from its earliest days.

In 1934, the FDIC’s Board established the Division of Research and Statistics.  As recounted in that year’s annual report, the division was staffed by a manager; six research assistants and technicians; and 20 calculating machine operators, clerks, and stenographers.

In its first year, this modest unit developed uniform data on the condition of 93 percent of licensed commercial banks in the United States, conducted a study of depositor losses from 1865 to 1934, and analyzed efforts to stabilize the banking system.  As you may recall, 1933 was not a particularly good year for banking, with an estimated 4,000 bank failures.  So I can imagine that this research was greatly appreciated.

Research and analysis is more important than ever to the effectiveness of the FDIC.  The present-day Division of Insurance and Research (DIR) works with the other divisions and offices to help carry out our mission to maintain financial stability and public confidence in the nation’s financial system. 

During the recent crisis, research was vital to carrying out the FDIC’s mission.   Accurate information and careful analysis are the foundation of sound decision-making.  Fair to say, we regularly turned to DIR for both during the crisis.

Today, research continues to play a key role as the FDIC seeks to address significant challenges to the U.S. financial system.  One example is the FDIC’s work to expand access to, and use of, mainstream financial institutions by unbanked and underbanked households in the U.S. 

Increasing households’ access to safe, secure, and affordable banking services improves their ability to build assets and create wealth, makes them less susceptible to discriminatory or predatory lending practices, and can provide a financial safety net against unforeseen circumstances. 

Through a banking relationship, consumers can take an important step toward full participation in our economy.  To take advantage of economic opportunities, households need to be able to securely receive and safeguard funds, make payments, and build and access credit.  By providing financial products and services that meet these needs, banks help U.S. households pay their bills, finance necessities like homes and cars, and save for the future.

Also, when households find that the banking system treats them fairly and helps meet their needs, public confidence in the banking system grows stronger.  As a result, informing and supporting efforts to expand economic inclusion in the banking system is a key component of the FDIC’s work.

Unbanked and Underbanked Survey

In October, we will release results from the 2015 FDIC National Survey of Unbanked and Underbanked Households.

Through this survey, the FDIC provides detailed national, state, and local data to inform understanding of this issue and support economic inclusion efforts.  We regularly hear from a wide variety of stakeholders, including banks, community-based organizations, and government officials, that the survey’s data have informed their efforts to better serve those outside the financial mainstream.

The FDIC first conducted the survey in 2009.  It is conducted every other year, making this its fourth iteration.  To ensure high-quality information, the survey is conducted in person and by phone by the U.S. Census Bureau.

The survey measures the share of households that are unbanked, meaning no one in the household has a bank account.

It also examines the extent to which households with a bank account look outside the banking system to meet transaction or credit needs.  To this end, we define underbanked households as those with an account that also use nonbank, alternative financial service providers. 

In addition to measuring the proportion of the overall population that is unbanked and underbanked, the survey describes how experiences differ across demographic groups.  It also asks questions to gain insight into the needs and perceptions of unbanked and underbanked households.

This afternoon, I would like to share with you a preview of what we are learning from the 2015 survey.

Main findings

First, we see positive indications for consumers: The unbanked rate fell to 7.0 percent in 2015, the lowest level yet in the survey.  This represents a significant decline from the 7.7 percent unbanked rate reported in 2013 and from the 8.2 percent rate reported in 2011. (See Figure 1)  Moreover, the change from 2013 outpaces what one would expect even in light of improving economic conditions during the two-year period. 

Figure 1: U.S. Houshold Unbanked Rates, 2009 to 2015

In other encouraging signs, the changes are occurring broadly, across population segments, including among households that are most likely to be unbanked. (See Figure 2)

Figure 2: U.S. Houshold Unbanked Rates, 2013 to 2015

For example, unbanked rates among Black and Hispanic households fell about 10 percent.  For Black households, the unbanked rate dropped from 20.6 percent to 18.2 percent.  For Hispanic households, it fell from 17.9 percent to 16.2 percent.  Households with very low incomes, less than $15,000 per year, and households headed by individuals without any college education also saw their unbanked rates fall significantly.  Unbanked rates among very low-income households fell from 27.7 percent in 2013 to 25.6 percent in 2015, while rates among households without any college education declined from 15.0 percent to 13.7 percent.

Despite these positive changes, some populations either did not experience significant changes or actually saw an increase in unbanked rates.  Notably, unbanked rates for Asian households increased during the two-year period from 2.2 percent to 4.0 percent.1

Underbanked rates are similar to those found in the 2013 survey, with approximately one in five (19.9 percent) households identified as underbanked in 2015. 

Taken together, 27.0 percent of households in U.S. today are unbanked or underbanked.  (See Figure 3)  For some populations segments, the combined rate is substantially higher.  Some 42.1 percent of households earning less than $30,000 per year were unbanked or underbanked.  For African American and Hispanic households, the corresponding rates were 49.3 percent and 45.5 percent.  Also, among households headed by a working-age individual with a disability, 46.0 percent were unbanked or underbanked.2

Figure 3: U.S. Houshold Combined Unbanked and Underbanked Rates, 2013 to 2015

So it is clear that even though the unbanked rate has declined, many U.S. households remain underserved by mainstream financial institutions.  In the survey we take several steps to try to understand why.

Reasons for being unbanked

Households cite a variety of reasons for being unbanked.  Some of the most common are high and unpredictable fees for bank accounts, a lack of trust in banks, or the feeling among households that they do not have enough money to justify an account. 

This year, for the first time, the survey asked consumers for their perception of how interested banks are in serving households like their own. 

The results reveal a divergence of perspectives between banked and unbanked households.  A majority of unbanked households reported that they believed that banks were not at all interested in serving households like theirs.  This level contrasts sharply with the four-in-five banked households who indicated banks were very or somewhat interested in serving households like their own.

Together, these results underscore the importance of building bridges between banks and underserved communities.  Consumers who do not trust banks or who view banks as uninterested in addressing their needs are less likely to consider banks as an option to meet their financial needs.

This finding is consistent with qualitative research we released earlier this year at a meeting of the FDIC’s Advisory Committee on Economic Inclusion.3 For that study, our researchers interviewed bank and nonprofit executives, and convened focus groups of unbanked, underbanked, and low- and moderate-income consumers.4 One of its key findings is that trust is crucial to building strong relationships with unbanked and underbanked consumers.

Effects of variable income

In addition to perceptions of banks, consumer choices are driven by their economic circumstances.  In our 2013 study of unbanked and underbanked consumers, we learned that many households enter and exit the banking system for job-related reasons. 

About one-third of those exiting the banking system in the past year reported that the transition was connected to a reduction in income or a job loss.  Similarly, about a third of those opening an account in the past year reported that the development was connected to a new job or to take advantage of direct deposit.

We continue to explore the reasons that households may be unbanked.  In the 2015 survey, we asked respondents how much their incomes fluctuated.  The answer was striking; a significant share of households, or about one in five, told us that their incomes fluctuate from month-to-month.  

Intuitively, it is easy to see that when income is not regular, families can face increased challenges managing their finances. 

To understand how these conditions affect banking choices specifically, the survey asked fully banked, unbanked, and underbanked households whether their income remained about the same, varied somewhat, or varied a lot from month-to-month. 

From the data, we see that households with variable incomes are more likely to be unbanked.  These patterns are evident at all income levels. 

For example, 4.0 percent of households with stable incomes earning between $30,000 and $50,000 annually were unbanked.  In that same income range, the unbanked rate more than doubled to 8.5 percent for households with incomes that varied a lot. 

Looked at another way, the contribution of income volatility to the likelihood that a household is unbanked can be about the same as one might associate with a substantial difference in income.  For example, households earning between $50,000 and $75,000 with highly variable incomes had an unbanked rate that was about the same as households with stable earnings of between $30,000 and $50,000.

These results suggest that it would be useful for banks to consider whether they can be more responsive to the needs of customers, or potential customers, experiencing variable income.  For example, banks could offer low-cost, safe, and transparent transaction accounts without overdraft fees and with low minimum balance requirements designed to improve the sustainability of banking relationships for consumers.  Such accounts would help households with variable incomes avoid the fees, such as overdraft fees, that prove challenging for them to understand or manage, and which may result in accounts being closed.

In 2011, the FDIC initiated a pilot with nine financial institutions to test the feasibility and effectiveness of offering such Safe Accounts.  In an April 2012 study,5 the FDIC reported that these accounts are sustainable for consumers and for the financial institutions that offer them.  

Since that pilot program was completed, a number of large institutions have developed a variety of Safe Account products.  According to our latest data, more than 80 percent of U.S. households live in a county with a full service branch of a financial institution that offers a Safe Account.  The FDIC, in consultation with its Committee on Economic Inclusion, is helping to facilitate the creation of partnerships around the country, such as Bank-On and Alliance for Economic Inclusion partnerships.  These state and local efforts bring together banks, nonprofits, and local governments with a focus on helping connect unbanked and underbanked consumers to these accounts.6

Financial services use

The unbanked and underbanked survey also seeks to better understand how consumers are managing their finances. 

A better understanding of unbanked and underbanked consumers’ use of financial products and services can provide insights that enable banks to better address consumer needs.

This year’s survey provides the most complete picture of financial choices to date.  It examines households’ use of a wide range of transaction and credit products from banks and alternative financial service providers. 

It also explores the extent to which households have potential credit needs that could be met by banks. 

Finally, it examines whether households are setting aside funds for emergencies and, when they are, asks where the money is stored.

On these latter points, the results provide a dramatic illustration of the consequences of being unbanked in the United States.  One in five (20.2 percent) unbanked households reported saving for unexpected expenses or emergencies in the past 12 months.  This was about one-third the rate of emergency saving among banked households. 

In addition, the survey shows an even bigger difference in how households save.  Some 67.8 percent of unbanked households reported keeping emergency savings “in the home, or with family or friends.”  This contrasts sharply with the 88.2 percent of fully banked households that deposited their emergency savings in a bank account. 

For these banked households, the funds are secure, guaranteed against loss, have the potential to generate earnings, and may be used for other purposes, such as securing access to mainstream credit.  On the other hand, unbanked households that keep savings at home receive none of these benefits. 

While we do not have time this morning to touch on all of the results pertaining to household use of financial services, I can say that the data suggest opportunities for banks to continue to address the needs of underserved consumers.  Among those needs are saving; using responsible, mainstream consumer credit; and paying regular bills and commitments using safe, convenient payment methods.

We look forward to issuing the full report on October 20th and to receiving feedback on the results and areas for future work related to economic inclusion. 

Continued growth in mobile and online banking

Finally, today, I would like to touch on the channels through which households are accessing their bank accounts. 

As you are no doubt aware, consumers are increasingly turning to mobile and online banking to access and manage their accounts. Consumers appreciate the control and convenience that these channels can provide.  Our household survey results bear this out, as increasing proportions of consumers continue to turn to online and mobile banking channels.  The proportion of consumers using on-line banking increased from 55.1 percent to 60.4 percent from 2013 to 2015.  During that same period, the share using mobile banking grew substantially, from 23.2 percent to 31.9 percent.

At the same time, the survey also shows that 75.5 percent of consumers visited traditional brick-and-mortar branches.7

Of course, as you might expect, younger households are more likely to use technology to access banking through mobile channels, for example.  Older, rural, lower-income households, and households with less education are more likely to rely on bank branches.

But our survey data have also shown technology use that might not match your expectations.  Underbanked households are more likely to own a smart phone, more likely to use it to access their bank account, and more likely to use it as their primary means of managing their account than fully banked households.

To learn more about how mobile financial services can help expand economic inclusion in the banking system, late last year, the FDIC conducted 18 focus groups of underserved consumers across the country, including four in Spanish.  In these focus groups, people told us about their preferences for control, access to their money, convenience, and affordability, among other necessities.8 They saw significant benefits from immediate access to account information as well as helpful reminders and balance alerts to help keep them on track with their finances.

These results indicate that by providing more information on balances and transactions—and more timely information—mobile financial services may give consumers an important element of control over their financial lives and may help address some of the underlying reasons consumers report for being unbanked.  These reasons include unexpected fees and worries about low balances.  Solutions to these concerns might be particularly helpful to the households managing variable incomes.

Although we know that mobile services are being rapidly adopted by a wide variety of consumers and institutions, it is not clear if the technology’s full potential is being leveraged to expand inclusion in the banking system.  Mobile financial services likely will only recognize its potential for economic inclusion when that goal is thoughtfully designed and integrated into a bank’s overall strategy.9

In May, the FDIC requested comments on and expressions of interest in participating in a research project designed to demonstrate the economic inclusion potential of mobile financial services.  The FDIC is particularly interested in demonstrating how the technology affects outcomes for consumers and for institutions deploying it.  This information should help financial institutions more generally understand how technology might enhance their economic inclusion efforts.


In conclusion, research has been, and continues to be, an important focus at the FDIC.  It helps build a solid foundation for many of the activities we engage in to meet our mission, including our work to promote economic inclusion.  We look forward to continued engagement with the research community on this and other vital topics, and encourage your interest in seeking out information to help promote economic inclusion for all Americans. 

1 The change in the unbanked rate for households headed by working-age individuals with a disability (estimated at 17.6% in 2015) was not statistically significant.

2 For purposes of the survey, working ages are considered to be from age 25 to 64. In 2013, 27.7 percent of all U.S. households were unbanked or underbanked. Among households earning less than $30,000 per year, African-American households, Hispanic households and households headed by a working-age individual with a disability, combined unbanked and underbanked rates in 2013 were, respectively, 42.8 percent, 53.7 percent, 46.5 percent, and 46.4 percent.


4 Rengert, Kristopher M. and Sherrie L..W. Rhine, “Bank Efforts to Serve Unbanked and Underbanked Consumers,” May 25, 2016,

5 Burhouse, Susan and Sherrie L.W. Rhine, “FDIC Model Safe Accounts Pilot Final Report,” April 2012,

6 See “Remarks by Chairman Martin J. Gruenberg for Bank On/Cities for Financial Empowerment National Launch of Account Standards; San Francisco, CA”, October 27, 2015 (available at

7 This finding is consistent with other research from the FDIC.  See, Breitenstein, Eric C. and John M. McGee, “Brick and Mortar Banking Remains Prevalent,” FDIC Quarterly, vol. 9 , no. 1, (2015) , 37–51,

8 Burhouse, Susan, Benjamin Navarro, and Yazmin Osaki, “Opportunities for Mobile Financial Services to Engage Underserved Consumers,” May 25, 2016,

9 Burhouse, Susan, Matthew Homer, Yazmin Osaki, and Michael Bachman, “Assessing the Economic Inclusion Potential of Mobile Financial Services,” June 30, 2014,