CRS Considers Current State of Financial Inclusion

The Congressional Research Service ("CRS") reviewed policy options to expand bank account access for unbanked consumers.

In an "In Focus" report, the CRS examined the economic barriers that keep lower-income households out of the traditional banking system. The CRS reported that despite decades of effort, roughly 4% of U.S. households still lack a basic bank account, with the burden falling heaviest on lower-income Americans, racial minorities, and rural communities. The CRS found that the unbanked are shut out largely by economics: banks find low-balance customers unprofitable, leading to fees that are hardest on those least able to pay them. Those without accounts turn to costlier alternatives like check cashing, payday loans, and prepaid cards—which are considered useful but lack the consumer protections and long-term credit-building benefits of real bank accounts.

The CRS concluded that the most promising solutions combine private innovation with targeted policy reforms. They highlighted:

• "Bank On" accounts: The CRS stated that a growing number of banks now offer low-cost, basic transaction accounts designed specifically for underserved consumers. Evidence suggests these have contributed to the decline in unbanked rates.
• Fintech innovation: The CRS highlighted fintech companies that have launched no-fee checking alternatives, often targeting unbanked and underbanked populations directly.
• Real-time payments and earned wage access: CRS said that faster payment systems let workers access wages before payday—reducing reliance on expensive check-cashing services.
• Expanded bank access: The CRS said that proposals to ease the creation of new banks or expand branching into underserved areas could bring more households into the system, though concerns about safety and financial soundness remain.
• Government-provided accounts: The CRS said that some have proposed offering banking services through post offices or the Federal Reserve. Critics argue this would put government in competition with private industry and may not effectively attract the consumers it aims to serve.
• Community Reinvestment Act ("CRA") reforms: The CRS said adjustments to the CRA—which already encourages banks to serve the communities where they take deposits—could push institutions to do more for low- and moderate-income customers.

The CRS said that the broader trend is positive given that the unbanked share has fallen from 14% in 1989 to 4% today. But they argued that the remaining gap remains stubborn, concentrated among the most vulnerable, and that closing it would require sustained effort from government, financial institutions, and nonprofits alike.