246 

Minutes 


Of 


The Meeting of the FDIC Advisory Committee on Economic Inclusion 

Of the 

Federal Deposit Insurance Corporation 

Held in the Board Room 

Federal Deposit Insurance Corporation Building 

Washington, D.C. 

Open to Public Observation 

September 12, 2012 - 8:50 A.M. 

The meeting of the FDIC Advisory Committee on Economic 

Inclusion ("ComE-IN" or "Committee") was called to order by 

Martin J. Gruenberg, Acting Chairman of the Board of Directors of 

the Federal Deposit Insurance Corporation ("Corporation" or 

"FDIC"). 

The members of ComE-IN present at the meeting were Robert A. 

Annibale, Global Director, Citi Microfinance and Community 

Development; Michael Barr, Professor of Law, University of 

Michigan Law School; Ted Beck, President and Chief Executive 

Officer ("CEO"), National Endowment for Financial Education; 

Kelvin Boston, Executive Producer and Host of PBS's Moneywise 

with Kelvin Boston; Jose Cisneros, Treasurer, City and County of 

San Francisco, California; Martin Eakes, CEO, Self-Help/Center 

for Responsible Lending, Durham, North Carolina; 

Rev. Dr. Floyd H. Flake, Senior Pastor, Greater Allen AME 

Cathedral of New York; Ester R. Fuchs, Professor, School of 

International and Public Affairs, Columbia University; Wade 

Henderson, President and CEO, Leadership Conference on Civil 

Rights, and Counselor to the Leadership Conference on Civil 

Rights Education Fund; Andrea Levere, President, Corporation for 

Enterprise Development; Alden J. McDonald, Jr., President and 

CEO, Liberty Bank and Trust, New Orleans, Louisiana; Bruce D. 

Murphy, Executive Vice President and President, Community 

Development Banking, KeyBank National Association; Manuel Orozco, 

Senior Associate at the Inter-American Dialogue, and Senior 

Researcher, Institute for the Study of International Migration, 

Georgetown University; J. Michael Shepherd, President and CEO, 

Bank of the West and BancWest Corporation; John C. Weicher, 
247 

Director, Hudson Institute's Center for Housing and Financial 

Markets; and Deborah C. Wright, Chairman and CEO, Carver Bancorp 

Inc., New York, New York. 

Lawrence K. Fish, Former Chairman and CEO, Citizens 

Financial Group, Inc.; John W. Ryan, Executive Vice President, 

Conference of State Bank Supervisors; Robert K. Steel, Deputy 

Mayor for Economic Development, The City of New York; and Peter 

Tufano, Peter Moores Dean and Professor of Finance, Said Business 

School, Oxford University and Founder and CEO of D2D Fund, were 

absent from the meeting. 

Members of the Corporation's Board of Directors present at 

the meeting were Martin J. Gruenberg, Acting Chairman, and 

Richard Cordray, Director, Consumer Financial Protection Bureau 

("CFPB"). Roberta K. Mcinerney, Designated Federal Officer for 

the Committee and Deputy General Counsel, Corporate, Consumer, 

Insurance, and Legislation Branch, FDIC Legal Division, also was 

present at the meeting. Corporation staff who attended the 

meeting included Willa M. Allen, Gwendolyn F. Alston, Steven 0. 

App, M.P. Azevedo, Luke H. Brown, Kathleen S. Brueger, Susan 

Burhouse, David Chapman, Alexander S. Cheng, Kimberly K. Copa, 

Carolyn D. Curran, Patricia B. Devoti, Dianne E. Dixon, Bret D. 

Edwards, Keith S. Ernst, Robert E. Feldman, Richard Foley, 

Janet R. Gordon, Leneta G. Gregorie, Sally J. Kearney, Cheh Kim, 

Ellen W. Lazar, Marianne H. Lloyd, Christopher Lucas, Jonathan N. 

Miller, Robert W. Mooney, Janet V. Norcom, Erica Noyes, Yazmin E. 

Osaki, Richard Osterman, Mark E. Pearce, Luke W. Reynolds, 

Sherrie Rhine, Paul Robin, Betty Rudolph, Barbara A. Ryan, 

Richard M. Schwartz, Kimberly Stock, Masseh Tahiry, and James C. 

Watkins. 

Acting Chairman Gruenberg opened and presided at the 

meeting. He began by providing an overview of the meeting 

agenda, advising that the morning would be spent reviewing the 

results of the FDIC's 2011 National Survey of Unbanked and 

~derbanked Households ("Household Survey"), which he noted was 

conducted, as was the 2009 Household Survey, in partnership with 

the U.S. Census Bureau. He further advised that the Household 

Survey would be conducted every two years; that, as a result, the 

FDIC would develop over time a granular database on the 

demographic characteristics of the unbanked and underbanked that 

will be significant on a national, regional, and state-by-state 

basis; that, in his view, the survey serves as a foundational 

tool for the work of the Committee; and that one of the purposes 

for conducting the survey is to make the data widely available, 

via the www.economicinclusion.gov web site, for all parties that 

may have an interest in the information. He next indicated that 

the luncheon speaker would be Joseph A. Smith, Jr., Monitor, 

September 12, 2012 
248 

Office of Mortgage Settlement Oversight; that the first afternoon 

panel of speakers would address the work of moving forward with 

model safe accounts; and that the second afternoon session would 

involve an update on the work of the newly formed Mobile 

Financial Services Subcommittee. After informing the Committee 

that he would be leaving at 2:30 p.m. to attend a meeting on 

Capitol Hill and that Mark Pearce, Director, FDIC Division of 

Depositor and Consumer Protection ("DCP"), would chair the last 

hour of the meeting, Acting Chairman Gruenberg turned the 

discussion over to Mr. Ernst, Associate Director, Consumer 

Research and Examination Analytics, Policy and Research Branch, 

DCP. 

Mr. Ernst expressed his pleasure in sharing the results of 

the 2011 Household Survey, noting that the 2009 survey report and 

its underlying data have become an important resource for a wide 

range of stakeholders interested in economic inclusion; that, in 

addition to providing insights into changes since 2009, the 2011 

survey has added estimates of the types of accounts held by 

households and provides increased information about the frequency 

and timing of alternative financial services use; and that, 

together, the 2009 and 2011 surveys form a strong platform of 

knowledge for understanding the changing scope and nature of the 

challenge of expanding access to the unbanked and underbanked. 

Observing that the survey was an interdivisional effort, 

involving staff from DCP, the Division of Insurance and Research, 

the Legal Division, as well as Barbara Ryan, Chief of Staff, who 

also headed the 2009 survey, he offered praise to staff who 

worked around the calendar to collect and analyze data and 

compile the report. He then introduced Yazmin Osaki, Senior 

Consumer Research Associate, DCP, and Susan Burhouse, Senior 

Financial Economist, DCP, to present the 2011 Household Survey 

results. 

Ms. Osaki, reaffirming that the survey had been a team 

effort, indicated that in addition to herself and Ms. Burhouse, 

the members of the team included Sarah Campbell, David Chapman, 

Leneta Gregorie, Ryan Goodstein, Luke Reynolds, Sherrie Rhine, 

and Eric Robbins. She then provided background information on 

the survey effort, advising that economic inclusion is a priority 

for the FDIC, which has in place a number of initiatives designed 

to foster economic inclusion, many of which the Committee has 

helped to design and support; that, in addition, the FDIC has a 

statutory mandate pursuant to section 7 of the Federal Deposit 

Insurance Reform Conforming Amendments Act of 2005 to provide an 

estimate of the unbanked population in the United States; that 

the Household Survey is conducted as a supplement to the Current 

Population Survey ("CPS"), a monthly survey sponsored jointly by 

the Census Bureau and the U.S. Department of Labor and designed 

September 12, 2012 
249 

to provide employment statistics for the adult civilian 

population in the United States; and that the design and coverage 

of the CPS allows the FDIC to provide previously unavailable · 

estimates of the unbanked and underbanked at national, state, and 

MSA levels. She reminded Committee members that the first 

Household Survey was conducted in January 2009, with the results 

released to the public and the Committee in December 2009, and 

noted that the 2011 survey was conducted in June 2011 and 

captured the responses from nearly 45,000 households. Regarding 

the 2009 data, she advised that the estimates had been revised to 

be consistent with 2011 methodology, with the results yielding 

estimates that are not materially different from the ones 

released in 2009, and that the 2009 questionnaire was revised for 

2011 and, as a consequence, certain estimates and results are not 

comparable for the 2009 and 2011 surveys. 

Next, Ms. Osaki provided some of the key findings of the 

2011 survey, first noting that, with over 28 percent of 

households identified as unbanked or underbanked in 2011, there 

continue to exist opportunities to increase banking engagement in 

the United States; and that, specifically, 8.2 percent of 

households are unbanked, having no checking or savings account, 

and 20.1 percent of households are underbanked, having used 

alternative financial services ("AFS") within the previous year 

despite having a bank account. She then identified as a second 

set of key findings information on the types of accounts held by 

households, noting that 10 percent of households do not have a 

checking account and almost 30 percent of households do not have 

a savings account, findings that she suggested represent a clear 

opportunity to expand savings account ownership among households. 

Finally, she identified as a third set of key findings data 

indicating that a sizeable portion of households use AFS, with 

survey results showing that approximately one quarter of all 

households had used AFS in the prior year; that one in ten 

households had used two or more AFS during the same period; that 

12 percent of all households had used an AFS product within the 

previous 30 days; and that an even larger number of unbanked and 

underbanked households, 40 percent, had used an AFS product 

within the previous 30 days. 

Ms. Osaki then addressed the survey findings in more detail, 

observing that the 2011 estimate of unbanked households at 8.2 

percent represents nearly 10 million households that include 

approximately 11 million adults; that the estimate of underbanked 

households at 20.1 percent translates into 24 million households 

or 51 million adults; and that, at the other end of the spectrum, 

close to 70 percent of U.S. households were fully banked and had 

not used AFS within the previous year. Regarding the fully 

banked, she reiterated that there still exist opportunities to 

September 12, 2012 
improve the quality and sustainability of banking relationships 

for such households, citing as an example the opportunity to 

expand savings. She then noted that the proportion of the 

unbanked increased slightly by 0.6 percentage points from 2009 to 

2011, representing an increase of 821,000 households; that it was 

currently difficult to assess whether the increase should be 

viewed as large or small, but that trends should become more 

clearer as subsequent surveys are conducted; that the highest 

statistically significant increases occurred among households 

that typically have the highest unbanked rates such as unemployed 

households and households in the lowest income category of less 

than $15,000 in earned income; but that, when viewed from the 

perspective of race, the reverse was true, with white households 

experiencing a statistically significant increase while the 

differences for other races were not statistically significant. 

Turning next to the change in the proportion of the 

underbanked from 2009 to 2011, Ms. Osaki explained that the 

estimates were not directly comparable primarily because 

questions regarding nonbank remittances and refund anticipation 

loans were asked quite differently. Elaborating, she advised 

that although the definition of "underbanked" in 2009 and 2011 

included households that had a bank account, but also made use of 

AFS such as non-bank money orders, non-bank check cashing, payday 

lending, pawn shops, rent-to-own, and refund anticipation loans 

("RALs"), the 2011 survey added non-bank remittances to the list 

of AFS and the timing of use for the two surveys was different, 

with the 2011 survey asking about use of each service within the 

past year and the 2009 survey asking about use of non-bank money 

orders, non-bank check cashing, payday lending, pawn shops, and 

rent-to-own at least once or twice a year and use of RALs within 

the past five years. She advised that despite the lack of direct 

comparability, however, excluding from consideration remittances 

and RALs provided evidence that in 2011 the proportion of banked 

households that used AFS within the past year had increased by 

one percentage point. She further advised that adding non-bank 

remittances to the "underbanked" definition increased the 

national underbanked rate by 1.5 percentage points, with greater 

increases for specific demographics such as an increase in the 

underbanked rates for Hispanics and Asians of 5.3 percent and 6.4 

percent, respectively. 

With regard to specifics on unbanked and underbanked rates 

by demographic groups, Ms. Osaki reported that, consistent with 

2009 results, the 2011 survey showed that unbanked and 

underbanked households are disproportionately represented among 

non-Asian minority, lower income, less educated, and unmarried 

family households, as well as households with younger 

householders, with unbanked rates for these groups hovering 

September 12, 2012 
251 

around 20 percent and underbanked rates for these groups 

oftentimes closer to 30 percent. When viewed from the 

perspectives of race and ethnicity, income, and household type, 

she stated that one in five black and Hispanic households was 

unbanked as compared to fewer than four percent of white and 

Asian households, with underbanked rates also considerably higher 

for non-Asian households at around 30 percent as compared to 16 

percent for white and Asian households; that unbanked rates 

declined sharply with increasing income, with rates as high as 28 

percent for households earning less than $15,000 to as low as 0.4 

percent for households earning at least $75,000 a year, with 

underbanked rates showing less dramatic from one income category 

to another; and that, with regard to household types, the highest 

unbanked and underbanked rates were among unmarried family 

households, at approximately 30 percent for both male and female 

unmarried family households, and the lowest unbanked and 

underbanked rates were among married family and non-family 

households, with the latter type of households comprised of 

single persons living alone or with roommates. Regarding 

unmarried households, she pointed out that this segment stood 

out, sometimes showing encouraging results while, at other times, 

showing cause for concern, particularly when you consider the 

fact that over 50 percent of children living in unbanked 

households live in unmarried female family households despite the 

fact that such households represent only 13 percent of all U.S. 

households. Concluding her review of unbanked and underbanked 

rates by demographic groups, Ms. Osaki presented results for 

households by age, by region, and by state, noting that both 

unbanked and underbanked rates declined consistently with 

increasing age, with the highest rates for both groups evident in 

households under age 24, with unbanked and underbanked rates in 

that age group of 17 percent and 31 percent, respectively; that, 

geographically, consistent with 2009 results, the Southern region 

of the country had the highest proportion of unbanked households 

at about 10 percent, as compared to about seven percent in other 

regions, with the South having 46 percent of the country's 

unbanked households, although it is home to only 37 percent of 

all U.S. households; that, similarly, the South had the highest 

proportion of underbanked households at 23.2 percent; that 

unbanked rates varied significantly by state, from a low of 1.9 

percent in New Hampshire to a high of 15.1 percent in 

Mississippi, with three states - West Virginia, Wyoming, and 

Minnesota - experiencing statistically significant increases 

since the 2009 survey; and that underbanked rates varied from 

12.5 percent in New Hampshire to 31.2 percent in Nevada. 

Reiterating the noncomparability of 2009 and 2011 survey results 

for the underbanked because of differences in how this group was 

defined, she advised that nevertheless, after excluding 

remittances and RALs, there was evidence that use of AFS among 

September 12, 2012 
252 

banked households increased in eight states - Alabama, Arkansas, 

Georgia, New Jersey, Nevada, Rhode Island, South Dakota, and 

Vermont - and a decrease in use of AFS among banked households in 

Alaska and the District of Columbia. 

Having discussed which demographic groups have the highest 

and lowest proportions of the unbanked and underbanked, Ms. Osaki 

next turned the discussion to the demographic composition of the 

unbanked, underbanked, and fully banked. Summarizing the results 

for household composition by banking status, she indicated that 

the demographic distribution of the unbanked is very different 

from that of the banked, both underbanked and fully banked; that, 

along some dimensions such as race, age, and family type, appear 

to be a blend of the unbanked and fully banked; and that, along 

other dimensions such as employment and income, the underbanked 

appear much more similar to the fully banked. Elaborating, she 

reported that, with respect to racial composition, the 

underbanked fell between the unbanked and fully banked in terms 

of distribution, with roughly one-third of the underbanked being 

white, black, and Hispanic as compared to the fully banked, 80 

percent of which are white and only eight percent of which are 

black or Hispanic; and that, with respect to household type, 

unmarried female households represent about 30 percent of the 

unbanked, but only 19 percent of the underbanked and less than 10 

percent of the fully banked, while the opposite is true for 

married couples, which account for more than half of the fully 

banked, about one-fifth of the unbanked, and approximately 44 

percent of the underbanked. She then reported that, with respect 

to income, over 80 percent of the unbanked earn below $30,000 a 

year and more than half earn below $15,000 a year, whereas the 

distribution of the underbanked and the fully banked are more 

evenly distributed among income levels; and that, with respect to 

employment, the unbanked have considerably higher proportions of 

households that are unemployed or are not in the labor force, 

over 60 percent, compared to 37 percent of underbanked households 

that are unemployed or are not in the labor force. 

Ms. Osaki next turned her attention to survey insights on 

the previous banking status of the unbanked and the reasons given 

for why they are unbanked, noting that of the 8.2 percent of 

households that are unbanked, almost 45 percent were previously 

banked; that one in five previously banked households had become 

unbanked within the previous year; and that over half of unbanked 

households, 4.4 percent of all households, have never been 

banked. She pointed out, however, that for certain demographic 

groups, the rate of the unbanked who had never been banked was 

even higher, citing as an example the 15 percent of Hispanics who 

have never had a bank account. Regarding reasons for being 

unbanked, she advised that, consistent with 2009 results, the 

September 12, 2012 
253 

most common reason identified by never banked and previously 

banked respondents was not having enough money, with the second 

most common reason being that households did not need or want an·" 

account, although previously banked households were less likely 

than the unbanked to say they did not need or want an account. 

Reiterating that the 2011 survey captured new information on 

the type of accounts owned by households, Ms. Osaki reported that 

close to 90 percent of banked households own a checking account; 

that only 69 percent own a savings accounts, which she suggested 

represents a clear opportunity to expand savings account 

ownership; and that about two-thirds of households own both a 

checking and a savings account. She further reported that, when 

looking at the distribution of accounts by banking status, 

underbanked households are less likely to have a savings account, 

with slightly over two-thirds of the underbanked having a savings 

account as compared to 80 percent of fully banked households. 

She next addressed account ownership by race and income, noting 

with respect to race that slightly over half of Hispanic and 

black households have a savings account, which is considerably 

lower than other races; and noting with respect to income that 

checking accounts and even more so savings accounts are 

positively correlated with income, with only two-thirds of 

households earning under $15,000 a year having a checking 

account, compared to nearly all households earning at least 

$75,000 a year, and only 37 percent of households earning under 

$15,000 a year having a savings account, compared to almost 90 

percent of households earning at least $75,000 a year. Finally, 

with respect to account ownership by household type, Ms. Osaki 

stated that unmarried female households have among the lowest 

levels of account ownership, with about three-quarters having a 

checking account and about 54 percent having a savings account, 

as compared to married couple households, the vast majority of 

which own a checking account and close to 80 percent of which own 

a savings account. 

Next, Ms. Burhouse, noting that data on household use of AFS 

is a key determinant of the survey definition of "underbanked,u 

indicated that, by identifying households that are getting their 

transaction or credit services outside the financial mainstream, 

the types of products and services being used, and when, how, and 

why they are being used, is helpful in understanding where there 

might be missed market opportunities for banks. Briefly 

summarizing the survey questions regarding use of AFS, she 

advised that households had been asked about their use of three 

transaction AFS - nonbank money orders, nonbank check cashing 

services, and nonbank remittances - and four different types of 

credit AFS products - payday lending, pawn shops, RALs, and rentto-own agreements; and that respondents were asked whether they 

September 12, 2012 
254 

had ever used each of the products and, if affirmative, whether 

they had used the products within the last 12 months and, for all 

AFS except rent-to-own agreements and RALs, whether they had used 

the products or services within the last 30 days. 

Proceeding to the survey results on AFS use, Ms. Burhouse 

reported that, in 2011, 43 percent of all U.S. households had 

used at least one of the seven AFS included in the survey, as 

compared to slightly more than half that had never done so; and 

that about one-quarter of households had used AFS within the last 

year, including 12 percent of households that had used AFS within 

the last 30 days. Concentrating specifically on AFS users, she 

advised that nearly 60 percent of households that have ever used 

AFS had done so within the last year, including more than one in 

four AFS users had used an AFS within the last 30 days; that 

almost half of the subset of households that have used AFS in the 

last year had done so within the last 30 days; that AFS use is 

more prevalent among younger, less educated, and lower income 

households; and that higher proportions of black and Hispanic 

households have used AFS than white households. 

Next addressing use of AFS by unbanked and underbanked 

households, Ms. Burhouse stated that unbanked households are the 

heaviest AFS users, with almost two-thirds of unbanked households 

having used at least one AFS in the last year and close to onehalf having used at least one AFS in the last 30 days; that, 

nevertheless, there is a sizeable minority of unbanked 

households, about one in five, that have never used any AFS, 

suggesting that a relatively large segment of households rely on 

cash transactions or other types of informal arrangements; that, 

of the unbanked households that have ever used AFS, almost 90 

percent have done so in the last year and 60 percent have done so 

in the last 30 days; and that almost three-quarters of previously 

banked households have used AFS in the last year, as compared to 

60 percent of households that have never had a bank account. 

Regarding underbanked households, she reiterated that, by 

definition, they have used at least one type of AFS in the last 

year and noted that roughly 40 percent of underbanked households 

have used AFS in the last 30 days, with 60 percent having used 

AFS in the last year, but not in the last month; and that the 

proportion of underbanked households that have used AFS in the 

last 30 days is slightly smaller than the proportion of unbanked 

households, 46 percent, that have used AFS in the last 30 days. 

She advised that, notably, even some fully banked households have 

used AFS at some point in the past, though not within the 

previous year. Regarding the different types of AFS products 

used by households, she indicated that, overall, transaction 

products are more widely used than credit products, with about 

one in four households having used an AFS transaction product in 

September 12, 2012 
255 

the last year as compared to only about six percent of households 

having used an AFS credit product during the same timeframe; and 

that just four percent of households have used both transaction 

and credit products within the past year. 

After reminding Committee members that some of the 2011 

survey results were not comparable to 2009 because of the 

differing definitions of "underbanked," Ms. Burhouse advised 

that, in the aggregate, there is evidence of increased AFS use, 

with larger shares of both unbanked and fully banked households 

in 2011 reporting ever having used an AFS product; that, overall, 

36 percent of all households in 2009 had used one of the AFS 

products included in the 2009 survey versus 41 percent of 

households, excluding nonbank remittances, in 2011; and that 

increases in AFS use across a wide variety of demographic groups 

occurred both in transaction and credit products, with larger 

proportions of households of different ages, education levels, 

races and ethnicities, and family types reporting ever having 

used AFS in 2011 than in 2009. Switching back to an exclusive 

look at 2011 data on use of multiple AFS products, she reported 

that slightly less than 10 percent of households had used two or 

more different types of AFS products in the last year, with more 

than one in three unbanked households having used two or more AFS 

products in the last year, as compared to about one quarter of 

underbanked households; that 12 percent of unbanked households 

had used three or more different AFS products in the last year; 

and that the share of unbanked households that had used multiple 

AFS transaction products in the last year was almost double the 

share of underbanked households that had done so. She further 

reported that the proportion of all households that had used 

multiple AFS products in the last 30 days was less than three 

percent as compared to six percent of underbanked households and 

over 16 percent of unbanked households. 

Ms. Burhouse then discussed households' use of specific AFS 

products, stating that nonbank money orders are the most commonly 

used type of AFS, with almost one in five households have 

purchased a money order from a nonbank provider within the last 

year; that nonbank check cashing is the second most commonly used 

type of AFS, with roughly eight percent of households have used 

such a service in the last year; and that the other AFS products 

and services are less commonly used, with roughly one to four 

percent of households using nonbank remittances and AFS credit 

products. When viewed from the perspective of household status, 

she advised that among unbanked households, nonbank money orders 

and check cashing are still the top two most commonly used 

products; but that the share of unbanked households using the 

products is much higher than that for all households, with about 

half of unbanked households having used a nonbank money order in 

September 12, 2012 
256 

the last year and almost 40 percent of such households having 

used a nonbank check cashing service; and that about 10 percent 

of unbanked households reported having used nonbank remittances 

and pawn shops within the past year. With respect to underbanked 

households, she advised that the use of nonbank money orders is 

particularly high, with almost three out of four such households 

having used a nonbank money order within the last year; but that 

nonbank check cashing is much less prevalent among underbanked 

households than among unbanked households, with 20 percent of 

underbanked households having used a nonbank check cashing 

service as compared to 40 percent of unbanked households; and 

that the proportion of underbanked households that have used pawn 

shops, rent-to-own agreements, and RALs within the past year was 

similar to the unbanked. As for use of AFS products and services 

within the past 30 days, Ms. Burhouse pointed out that there is 

heavier usage, particularly for nonbank check cashing, among 

unbanked households, with over one quarter of those households 

having used nonbank check cashers in the last month as compared 

to approximately nine percent of underbanked households; that, 

although the difference was smaller for use of nonbank money 

orders, the share of unbanked households, almost one-third, 

having used the product in the last 30 days was somewhat larger 

than the share of underbanked households, 28 percent, having 

purchased a nonbank order in the last 30 days; and that, although 

use of pawn shops and nonbank remittances is similar for the 

unbanked and underbanked, there is a difference between the 

groups' use of payday loans, with very low use among unbanked 

households given that a bank account is generally a requirement 

for such loans. Finally, Ms. Burhouse noted that, among 

underbanked households that had ever used nonbank money orders, 

more than one-third did so in the last 30 days, with more than 

one-quarter of underbanked households that had ever used nonbank 

check cashers having done so in the last 30 days, as compared to 

more than one-half of unbanked households that had ever used 

nonbank money orders and nonbank check cashers having done so in 

the last 30 days; and that households that reported using AFS in 

the last month tend to have done so numerous times, with almost 

20 percent of underbanked households having used transaction AFS 

doing so in the last month on three or more separate occasions as 

compared to 40 percent of unbanked households. 

Next addressing the reasons why households use AFS providers 

rather than going to banks for those services, Ms. Burhouse 

pointed out that, overall, convenience was cited by households 

that had used nonbank money orders as the number one reason for 

using the product, with the second most cited reason being a 

belief that banks would charge more for money orders than nonbank 

providers; that, overall, convenience was also the reason cited 

by households that had used check cashers as the number one 

September 12, 2012 
257 

reason for using the service, although unbanked users of nonbank 

check cashers cited not having a bank account as the most common 

reason; that, overall, the ability to get money faster from a 

nonbank check casher was another important reason for using the 

service, cited by almost 17 percent of customers; that 

convenience and speed were also the most common reasons cited by 

households for using nonbank remittances, with one-third of all 

households using remittances doing so for convenience and nearly 

one-quarter doing so because they felt AFS providers would get 

the money to recipients faster than a bank could; and that just 

over 10 percent of households using nonbank remittances do so 

because they perceive that remittances are more expensive at 

banks than at AFS providers. 

Ms. Burhouse stated that, on the other hand, the reasons 

cited for using AFS credit products were different than those 

cited for using AFS transaction products, with convenience not 

being nearly as big a factor. She advised that households that 

use payday lenders feel that it's simply easier than qualifying 

for a bank loan, with 40 percent of payday loan and pawn shop 

users citing this as the most common reason for using these 

services; and that a relatively large proportion of households 

using AFS credit, about one in five, do so because they feel that 

banks do not provide small-dollar loans. She also advised that, 

when households using AFS credit products were asked why the 

funds were needed, almost half said they needed the money to pay 

for basic living expenses and an additional 18 percent felt they 

needed to make up for lost income, with unbanked households 

citing these reasons slightly more often than underbanked 

households. She noted, however, that the share of households 

that needed AFS credit to pay for everyday living expenses rose 

from 35 percent in 2009 to 46 percent in 2011, suggesting a rise 

in household financial distress. 

Switching gears, Ms. Burhouse then reviewed the 

characteristics of subsets of households that rely more heavily 

on AFS than others, i.e., those households that had used AFS in 

the last 30 days and those that used multiple types of AFS in the 

last year. In that regard, she indicated that, in terms of 

banking status, about one-third of households that have used 

multiple of AFS and a similar proportion of households that used 

AFS in the last 30 days are unbanked, with the remaining twothirds underbanked; that over 60 percent of multiple AFS users 

have checking accounts and almost 40 percent have both checking 

and savings accounts; that almost half of the households that 

have used AFS in the last month had also used multiple types of 

AFS in the last year; and that, in terms of demographic 

characteristics, households that tend to be overrepresented among 

the unbanked and underbanked also tend to be overrepresented 

September 12, 2012 
258 

among the heaviest AFS users with, for example, large proportions 

of recent and multiple AFS users being black and Hispanic and 

unmarried female households. Commenting on the sizeable share of 

households that are already engaged in the banking system to some 

extent, but nevertheless make heavy use of nonbank financial 

products, she suggested that the finding should be kept in mind 

by policymakers and practitioners who are developing inclusion 

strategies. 

On the issue of prepaid cards, Ms. Burhouse, after pointing 

out that prepaid cards were not included in the "underbankedu 

definition and that the survey did not distinguish between cards 

issued by banks and those issued by nonbanks, reported that about 

one in ten households in 2011 reported having ever used a prepaid 

card, relatively consistent with the 2009 survey, but that there 

was growth in the share of unbanked households using prepaid 

cards, climbing from 12 percent in 2009 to 18 percent in 2011; 

and that, overall, more than 15 percent of prepaid card users are 

unbanked, with another one-third being underbanked. She then 

pointed out that payroll cards, which are also not included in 

the definition of "underbanked,u are less widely used than 

prepaid cards, with only about three percent of all households 

receiving wages on payroll cards at the time of the survey; that 

payroll cards are somewhat more prevalent among unbanked and 

underbanked households; and that both prepaid and payroll card 

users are more likely to use AFS products, both credit and 

transaction, than households that don't use the cards, with about 

one quarter of prepaid and payroll card users having used AFS in 

the last month as compared to 10 percent of households that do 

not use the cards. 

Moving to the likelihood that unbanked households would open 

an account in the future, Ms. Burhouse reported that the majority 

of unbanked households, about 60 percent, indicated that they 

were not too likely or not likely at all to open an account in 

the future, with only 14 percent indicating that they were very 

likely to do so; that, nonetheless, there were notable 

differences between previously banked and never banked 

households, with about half of all never banked households 

indicating that they are not likely to open an account in the 

future and just one in five indicating they are very likely to do 

so as compared to almost half of previously banked households 

indicating they were somewhat likely or very likely to open 

another account going forward; and that, among previously banked 

households, about two-thirds of those that became unbanked within 

the past year felt they were very or somewhat likely to open an 

account as compared to less than half, 44 percent, of those who 

had become unbanked more than a year ago. She also reported that 

the stated likelihood of opening an account in the future varied 

September 12, 2012 
259 

according to household experience with AFS providers, advising 

that larger shares of households that had used AFS in the last 

year felt they were somewhat or very likely to open an account, 

with almost half of unbanked households that had used AFS credit 

in the last year indicating they were likely to open an account, 

and larger shares of unbanked households that used payroll and 

prepaid cards indicating being likely to open an account. From a 

demographic perspective, she reported that unmarried female 

family households are among the most likely to open an account in 

the future, with almost one in five such households indicating 

that they are very likely to do so; that younger households also 

appear more likely to open an account going forward, with just 

over half of unbanked households headed by someone aged 24 or 

younger indicating a likelihood of opening an account and onequarter indicating they are very likely to do so. 

In closing, Ms. Burhouse addressed the reasons households 

provided for their likelihood to open an account in the future, 

noting that the most common reasons were to write checks and pay 

their bills, to secure the household's money, and to save money 

for the future, with the difference between reasons given by 

never banked and previously banked households not being as large 

as for other measures on the survey. She stated that, hopefully, 

understanding the reasons households wish to have an account, 

along with the characteristics of households that feel they are 

likely to open an account, would be helpful in developing 

appropriate products and outreach strategies. 

Concluding the presentation of the 2011 Household Survey 

results, Ms. Osaki laid out four implications of the survey: that 

the survey highlights the need to better understand the different 

segments of the unbanked and underbanked population to hopefully 

make economic inclusion strategies more targeted and effective; 

that banking status is dynamic, with there being no guarantee of 

long term or full engagement in the financial mainstream by 

virtue of having a bank account, and that, therefore, effective 

economic inclusion strategies require not only bringing 

households into the banking system, but keeping them in the 

system; that having a bank account appears to be associated with 

households' positive perceptions about the value of an account 

and also with less use of AFS; and that financial institutions 

that are interested in pursuing the market opportunities 

represented by the unbanked and underbanked need to do a better 

job in demonstrating the value of having an account, particularly 

with respect to AFS users who perceive nonbank provides as more 

convenient, faster, less expensive, or lower barriers to 

qualification. She then directed Committee members to the 

www.economicinclusion.gov web site for the full details of the 

report at regional, state, and MSA levels. 

September 12, 2012 
260 

Acting Chairman Gruenberg, correcting an earlier oversight, 

announced to the Committee that Richard Cordray, Director 

(Director, Consumer Financial Protection Bureau), was present at 

the meeting. After welcoming Director Cordray, he then announced 

that the meeting would briefly recess. Accordingly, at 

10:01 a.m., the meeting stood in recess. 

* * * * * * * 

The meeting reconvened at 11:02 a.m. that same day, at which 

time Mr. Ernst, after briefly summarizing the main findings of 

the 2011 Household Survey, opened the floor to Committee member 

questions and discussion of the survey findings and implications. 

Mr. Henderson began the discussion by congratulating staff 

on the depth of the survey, presentation of its findings, and the 

clarity of the presentation. He then noted that a study 

conducted by the Educational Testing Service ("ETSu), entitled 

"Fault Lines in Our Democracy: Civic Knowledge, Voting Behavior, 

and Civic Engagement in the United States,u shows a correlation 

between academic attainment, or the lack thereof, poverty, and 

civic engagement, and asked whether any further analysis had been 

done to determine the level of household academic attainment in 

relation to banking status; the cost disparities associated with 

the use of AFS by unbanked and underbanked households, 

particularly African American and Latino households; and 

household exposure to financial literacy. In response, Mr. Ernst 

indicated that the survey data would allow staff to take a closer 

look at the educational attainment of African American and Latino 

households in relationship to banking status, which could be done 

going forward, and that the points raised about the cost of AFS 

use and exposure to financial literacy were interesting areas 

that could possibly be explored in future surveys. In follow up, 

Mr. Henderson suggested that it might be important to look at 

adding the overlay of financial services to the correlation 

between lack of academic attainment and lack of civic engagement 

demonstrated in the ETS report and also to look at whether 

African American and Latino households, which had been most 

adversely impacted by the foreclosure crisis, may be moving to 

AFS more out of necessity than convenience. Mr. Ernst agreed 

that looking more deeply into the factors that may have led 

people to become unbanked and obtaining more information on the 

relationship between families, their household standing, and 

their use of AFS would be interesting avenues of exploration that 

could be followed up on by staff. On the issue of cost, Mr. 

Eakes suggested that defining inclusion as being banked or 

unbanked may not really address whether consumers have a 

mechanism for meeting their financial needs in a low-cost, nonSeptember 12, 2012 
261 

exploitive way, and that perhaps future research should put more 

emphasis on determining the actual cost of AFS products and 

services as compared to bank products and services and whether 

certain AFS providers may be a better entry point into mainstream 

financial inclusion. Mr. Annibale, citing remittances as an 

example, suggested that it is important to know whether consumers 

are making an economic decision based on lower cost; and Mr. 

Shepherd, pointing to the timeliness of Committee discussions 

about mobile and digital delivery of services, suggested that 

perhaps that is an area where a greater sense of certainty and 

security can be offered by banks at a lower cost. 

Ms. Levere also thanked staff for a great presentation, then 

asked that staff give some thought to the possibility of looking 

at the correlation between liquid asset poverty and lack of 

savings accounts and use of AFS; whether starting early with 

savings might be an effective means of bringing households into 

the banking system; and what strategies might be considered to 

bring about a change in the use of AFS to supplement household 

incomes. In response, Mr. Ernst noted that, although the data 

indicate that savings accounts heavily distribute towards the 

higher end of incomes, it also shows a substantial base of 

savings accounts at the lower end of household income, and the 

extent to which the accounts are being utilized and the amount of 

funds in the accounts may be an area for future study; and Ms. 

Burhouse, in agreement, noted that the data does show that having 

both a checking and a savings account is associated with the 

least use of AFS. Mr. McDonald suggested that the Committee, at 

some point, make a recommendation that financial education be 

mandatory at all levels in the school system. 

Mr. Orozco, addressing the implications of the survey, 

acknowledged that segmentation is an important concept in 

economic inclusion strategies, but suggested that segmentation by 

race alone would not provide a complete picture and that it was 

also important from a policy standpoint to look at determinants 

of two major predictors of unbanked capability - the need to 

perform cash transactions and the extent of integration into 

formal market economies - to target the particular needs of 

specific populations to get them into savings products. He 

further suggested, with regard to the implication that banks need 

to more clearly demonstrate the value of an account to AFS users, 

that such a strategy takes a group effort, involving government, 

the private sector, and civil society, citing as an example the 

remittance provisions of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act which, he noted, might be an opportunity 

to bring a large number of people into the financial mainstream. 

September 12, 2012 
262 

Mr. Boston, expressing alarm at the number of unbanked and 

underbanked, particularly for people of color, asked whether the 

data were skewed because only people who are interested in a 

banking relationship are represented in the numbers, in response 

to which Mr. Ernst advised that, although it is a good idea to 

always be cautious and skeptical of consumer data and to look for 

corroboration of the data whenever possible, the Household Survey 

is a supplement to the CPS, which is designed to be 

representative of the non-institutionalized civilian population 

in the United States. 

Rev. Flake asked whether the data captured individuals who, 

during the course of the recessionary period, have a different 

attitude as it relates to utilizing their available funds, in 

response to which Mr. Ernst indicated that the data do show that 

those relying on AFS were much more likely in 2011 to indicate 

that their motivation for doing so was to cover basic living 

expenses and that there are substantial proportions of households 

indicating they do not need or want an account or perceive that 

they do not have enough money for an account, but that the 

reasons for being banked do not capture the nuance of shifting 

attitudes due to recessionary pressures. In follow up, Mr. Beck 

and Ms. Levere questioned whether there is a disconnect between 

banking minimums and what consumers perceive those minimums to be 

and whether better understanding of what is meant by "enough 

money" might be the appropriate place to begin targeting 

underserved populations. Mr. Cisneros, in answer, stated that in 

launching Bank On programs, it had become clear that consumer 

misperceptions do exist, that financial education to dispel some 

of the misperceptions is critical to economic inclusion efforts, 

and that, in future research efforts, it might be beneficial to 

explore those who opened accounts and their reasons for opening 

accounts, whether households that want to be banked don't 

understand the process, and how many households attempted to open 

an account, but were turned away. Mr. Murphy agreed that one of 

the reasons some households are unbanked is lack of knowledge 

about the options available to them and that it was important to 

engage community advocates in educating the public rather than 

placing sole responsibility on financial institutions. Mr. 

Weicher asked whether staff could determine whether the 

previously banked are no longer banked for reasons not of their 

own volition, such as loss of employment, a substantial pay cut, 

or some other economic factor, in response to which Mr. Ernst 

advised that staff could link the CPS data to explore the 

relationship between banking status and employment status, but 

noted that the trend emerging from the discussion appeared to be 

a desire on the part of Committee members to know more about the 

triggers for entering and exiting the banking system, which could 

September 12, 2012 
263 

be explored for the 2013 survey because of limits to what could 

be done with the current data. 

Acting Chairman Gruenberg noted that he found it striking 

not that about 50 percent of households with incomes below 

$15,000 are unbanked or underbanked, but that nearly 50 percent 

of those households are fully banked, and suggested that perhaps 

further exploration could be done to determine how it is that 

those with accounts have them and how they are utilizing those 

accounts. 

During the ensuing discussion, Committee members offered a 

number of other suggestions for further areas of exploration, 

with Mr. McDonald suggesting that Census tracts be matched with 

other demographic data information; Mr. Boston suggesting that 

the survey include a question as to whether public benefits would 

be impacted by having a bank account; Mr. Eakes suggesting that 

perhaps the Committee could give some thought to regulatory 

restraints for banks in meeting the financial services needs of 

the underserved; Mr. Boston and Mr. Orozco suggesting a need to 

change some of the survey questions, with Mr. Orozco citing as an 

example the need to delve more deeply into variables that 

correlate to asset building capability as opposed to simply 

owning a bank account; Ms. Levere suggesting that, with the 

ability to look at who is banked and unbanked in specific 

communities, perhaps some direction could be provided to 

organizations on the ground, whether statewide or municipal, 

which could better answer some of the questions raised by 

Committee members; and Mr. Henderson suggesting it might be a 

good idea to set up a follow up conference call to allow members 

to advise staff on additional areas they would like to have 

addressed. In response to the many suggestions offered by 

Committee members, Mr. Ernst stated that the discussion had been 

helpful not only to FDIC staff in identifying areas for further 

analysis and research, but also to the larger research community 

about what research needs to be conducted with the rich and 

extensive data from the survey; and that staff would be available 

to Committee members interested in a follow up phone conversation 

Acting Chairman Gruenberg, noting that staff had been 

diligently taking notes on Committee member comments and 

suggestions, asked that staff write up their notes, summarize 

them, and circulate them for additional feedback for purposes of 

the Committee's next meeting, at which time the Committee could 

consider initiatives it might consider supporting as the result 

of the research and the Committee's discussion of the research 

results. He particularly pointed to the survey results 

indicating that the percentage of households without savings 

September 12, 2012 
264 

accounts is triple the percentage without checking accounts and 

observed that a savings account initiative would be a natural 

follow on, as well as a complement to, the account-based debit 

card initiatives to be discussed during the afternoon session. 

He also indicated that, if Committee members were interested in a 

conference call for further discussion prior to the next meeting, 

staff would be happy to make the arrangements. He then announced 

that the meeting would recess for lunch. Accordingly, at 

11:31 a.m., the meeting stood in recess. 

* * * * * * * 

The meeting reconvened at 1:25 p.m. that same day, at which 

time Acting Chairman Gruenberg indicated that the next panel, 

with representatives from KeyBank and Citigroup and Mr. Cisneros, 

a leader in the Bank On movement, was a follow-up to the model 

safe transaction and savings account templates that the Committee 

had been instrumental in helping to develop. He advised that 

both Key Bank and Citigroup were prepared to offer transaction 

accounts consistent with the template and that Bank On was 

prepared to promote these types of model accounts. He then 

turned the meeting over to Ellen Lazar, Senior Advisor to the 

FDIC's Acting Chairman for Consumer Policy. 

Ms. Lazar began by noting that the findings for the 2011 

Household Survey discussed during the morning session confirmed 

the importance of continuing economic inclusion efforts to bring 

unbanked and underbanked consumers into the financial mainstream. 

She then introduced panelists David Bowen, Director, Key 

Community Bank Product Management and Specialty Programs, 

KeyBank, and Committee members Mr. Annibale and Mr. Cisneros. 

Providing an overview of his presentation, Mr. Bowen stated 

KeyBank's approach to product development and management, its 

approach to meeting the needs of the underbanked and underserved, 

and recent development of the KeyBank Access Account, a product 

that directly serves the underbanked customer base. Regarding 

the bank's approach to product development, he reported that the 

bank is guided by what it refers to as its "fairness pyramid," 

with emphasis first and foremost on regulatory compliance, 

followed by product disclosures that are as clear and concise as 

possible, a formulaic approach that applies a blind standard to 

assessing or refunding fees, a market-based approach to pricing 

and industry standards to ensure product competitiveness, and, 

finally, emphasis on client choice and control across the entire 

product line to meet the full spectrum of client needs. 

Regarding the bank's approach to meeting the needs of underserved 

consumers, he advised that rather than applying an underbanked 

lens, check-the-box mentality to its products and services, 

September 12, 2012 
265 

KeyBank instead incorporates a vein of the underserved into the 

fabric of its day-to-day, business as usual ("BAU") model, which 

helps to eliminate any stigma associated with special programs 

for the underserved; that such an approach more effectively 

leverages the mind share of the bank's sales force to offer the 

best fit for a client's current situation; that it creates a 

graduated process, allowing clients to enter the banking network 

through whichever product or service is most natural and 

providing an opportunity to cross sell other well-suited products 

with each transaction; and that, coupled with a financial 

education "wrapper" delivered through the bank's branches, the 

BAU approach is the best way to use the bank's relationship model 

to make progress in meeting the needs of the underserved. 

Proceeding to a discussion of the KeyBank Access Account, 

Mr. Bowen reported that the account had been introduced in 2011; 

that it is a checkless checking account, with debit card access, 

online banking and bill pay, text and email alerts, and no fee 

for direct or ATM deposits although, in an effort to keep the 

account transactions as electronic as possible, there is a fee 

for over-the-counter deposits; that it is not subject to 

overdraft or nonsufficient fees because the account does not 

permit overdrafts; that it has a low monthly fee of $5 that is 

waived if the accountholder has two or more transactions per 

month or makes deposits of $200 or more; and that the accounts 

are offered at the bank's network of branches or through 

KeyBank's "Bank at Work" program. With respect to accounts 

opened through the "Bank at Work" program, he stated that they 

represent five to six percent of the institution's total sales, 

that they are an indicator of the appeal of such products to low 

wage workers, and that they represent a win-win situation for 

both employers and employees. 

Mr. Annibale began by expressing thanks for the opportunity 

for Citibank to participate in the FDIC Model Safe Accounts pilot 

by offering a product based on the pilot's savings account 

template and noting that, as a result of its participation, the 

bank had learned a lot about the need to create a platform into 

which such products can be coherently integrated and then 

replicated to scale. He then advised that many attributes of the 

transaction account to be offered by Citibank were similar to 

those described by Mr. Bowen, including the checkless feature and 

no overdraft capability in addition to the attributes of any 

other Citibank account such as online access, bill pay, the 

ability to conduct business via ATMs or tellers, mobile payments, 

and built-in, client set alerts. Regarding the alert feature, he 

explained that accountholders can set a variety of text message 

or email alerts, including threshold balance alerts, end-of-day 

balance alerts, and/or transaction clearance alerts. 

September 12, 2012 
266 

Mr. Annibale next noted that once you have a good product 

design, it becomes a question of how you get people to access the 

product. He explained that Citibank's footprint is concentrated 

in major urban centers where there is generally no shortage of 

large bank, regional bank, local bank, community bank, and credit 

union branches; that, even with the right product, there is a 

need to ensure that people know about it and have a feeling of 

trust for, comfort with, and connection to the institution 

offering the product; and that Citibank had learned through its 

model savings account initiative that the best way to establish 

trust and familiarity is to partner with organizations, such as 

non-profit organizations, other community organizations, and 

government agencies within the same footprint, and that the bank 

plans to repeat those partnerships for the transaction account, 

beginning in New York. He cited as among other lessons learned 

from participation in the pilot and the pilot findings the need 

to pair products with financial education and financial 

capability, the need for keeping product descriptions simple and 

easily comprehensible, structuring products in a manner that 

keeps costs low and helps consumers understand how to use an 

account in the most economical way, and the value of linked 

transaction and savings accounts to serve a number of needs, all 

of which Citibank hoped to incorporate into its transaction 

account. In conclusion, Mr. Annibale reiterated that Citibank 

hopes to build on the experience gained from its pilot savings 

account program in its new transaction account offering and to 

report back to the Committee on the new venture. 

Mr. Cisneros then expressed his excitement at hearing the 

reports of the new safe transaction offerings by KeyBank and 

Citibank for the unbanked and low wage earners, noting that 

ensuring the availability of safe starter accounts had been the 

goal of the first Bank On program, launched in San Francisco in 

2006. Providing a brief history of the Bank On San Francisco 

program, he advised that the program arose out of the city's 

desire to move its unbanked citizens away from expensive and 

oftentimes predatory check cashers and payday lenders and into 

the financial mainstream; that, in order to make certain that 

there were appropriate and safe alternatives to check cashers and 

payday lenders, the city convened a series of meetings with banks 

and credit unions and, after nine months of such meetings, 80 

percent of San Francisco's banks and credit unions had agreed to 

the terms of the Bank On program; and that the account features 

agreed upon included low costs, no monthly minimum balances, a 

waiver of the overdraft fee for the accountholder's first 

overdraft, account availability for anyone with identification 

considered valid under the USA Patriot Act, and account 

availability for those who were on ChexSystems for reasons other 

September 12, 2012 
267 

than fraud. He noted, moreover, that the banks and credit unions 

made a commitment to community outreach, to financial education 

as part of the program, and to track the number of accounts 

opened through the program. 

While expressing satisfaction that the City of San Francisco 

had been successful in launching its Bank On program, Mr. 

Cisneros indicated that that was only the first step, with the 

next concern being to ensure that customers understood, through 

financial education and community outreach efforts, the products, 

their costs and trade-offs, and that bank and credit union staff 

understood the characteristics and needs of the unbanked. 

Regarding the latter concern, he indicated that Bank On 

representatives actually worked with staffs of the financial 

institutions to train them on how they could better serve the 

unbanked and get them into the most appropriate products to meet 

their needs. In closing, Mr. Cisneros noted that despite 

persuading Bank On participants to change their practices and, 

sometimes, even their accounts, the city was never able to get 

anything close to the model safe accounts currently under 

discussion; that the Bank On program could now point to the model 

safe accounts templates identified by the FDIC and the safe 

transaction accounts being introduced by KeyBank and Citibank as 

real life examples in support of the idea that all insured 

depository institutions should be offering similar accounts; that 

it is important that the lowest income unbanked person has the 

opportunity to join the mainstream in getting their financial 

service needs met in the same way as everyone else; and that even 

those who have made financial mistakes in the past should be 

offered a second chance to earn their way back into good 

standing, with the model safe accounts providing the right 

approach to achieve that objective. 

A discussion followed, during which Committee members asked 

and panelists responded to a number of questions. Mr. Beck, 

recalling that at the Committee's previous meeting in April, 

there had been discussion about the cost to financial 

institutions of $200 to $300 to provide a checking account, asked 

Messrs. Bowen and Annibale whether KeyBank and Citibank had 

discovered some creative way to deal with those costs in offering 

safe transaction accounts. In response, Mr. Bowen stated that 

the primary means of reducing costs was to encourage electronic 

transactions by charging a small, $3 fee for teller transactions 

and that the bank's hypothesis, although it had yet to be proven, 

was that the lifetime value of many of the clients would be 

greater than what it is at the entry level. Mr. Annibale, in 

response, stated that Citibank also encourages electronic 

payments, but recognizes that the targeted population is 

primarily cash focused; that Citibank, therefore, seeks to 

September 12, 2012 
268 

control costs by leveraging the bank's existing platforms, which 

through scale and efficiency, allows it to offer the safe 

transaction account at marginal additional cost; and that, in 

addition, the bank has been able to bring larger numbers of 

people on board in a more streamlined way through partnerships 

with employers. Ms. Levere then asked Messrs. Bowen and Annibale 

to address the financial education aspects of their respective 

transaction accounts, in response to which Mr. Bowen advised that 

KeyBank has had in place a financial education program for a 

number of years, that the bank has approximately 500 trained 

financial educators in its community bank network, that it also 

offers online financial education curricula and is exploring ways 

of incorporating the curricula into the bank's overall rewards 

program, but that there is no special financial education program 

associated with the bank's new safe transaction account; and Mr. 

Annibale advised that access to financial support, advice, and 

counseling is important to the success of programs to reach the 

unbanked and underbanked and that Citibank relies on its 

community partners to provide much of that support. 

Mr. Eakes asked what had factored into the banks' decision 

to offer checkless transaction accounts rather than following the 

path of other large banks that have entered the prepaid card 

business, with its higher interchange fees. In answer, Mr. 

Annibale said that, while he could not speak to the motivation of 

institutions entering the prepaid card business, the prepaid 

model is different from the model used by Citibank to service 

most of its clients and that the bank's intent in offering the 

safe transaction account was to build a window through which 

unbanked and underbanked individuals could have access to the 

full banking platform, including access to savings, which the 

transaction account provides; and Mr. Bowen said that KeyBank 

simply does not have a prepaid system, that the bank had 

identified a client problem and the safe transaction account was 

a solution that worked, and that, from the client's perspective, 

the safe transaction account is essentially the same as a prepaid 

card. Mr. Cisneros added that, from the Bank On point of view, 

the mainstream population largely conducts its financial 

transactions with banks and credit unions and that, rather than 

focusing on any one individual account at any one moment in time, 

which prepaid card programs do, the focus should be on a lifetime 

of financial needs, transactions, and progress, a journey is best 

accomplished through more fully featured and diversified account 

offerings like the model safe accounts. Mr. Eakes also asked 

whether there was a financial argument that could be offered to 

the CEOs of other large banks to offer safe transaction accounts, 

in response to which both Mr. Bowen stated that, at this point, 

there is no compelling financial argument for or against such 

accounts and that, in his opinion, the decision to offer such 

September 12, 2012 
269 

accounts is inherent in the values of an institution's leaders. 

In agreement, Mr. Annibale indicated that a commitment to serve 

the needs of the unbanked and underbanked flows from the top 

down. 

Mr. Bowen and Mr. Annibale also fielded questions from Mr. 

Barr and Mr. Boston on whether their institutions had given 

thought to meeting the check cashing and credit needs of the 

unbanked and underbanked that are currently met by AFS providers. 

With respect to check cashing services, Mr. Bowen indicated that 

KeyBank offers such services for a fee of one percent of the face 

value of the check, with a minimum fee of $3 and a maximum fee of 

$25. With respect to credit products, Mr. Annibale advised that, 

although Citibank does not link credit products to the safe 

transaction account, accountholders are eligible to apply for an 

overdraft line of credit; and Mr. Bowen advised that, although 

KeyBank does not offer overdraft protection for the Key Access 

account, it has introduced a basic line of credit, ranging from 

$250 to $1,500, for an annual fee of $25, that can be used as a 

standalone line of credit by Key Access accountholders, and that 

it is a subprime account carrying higher interest rates than 

would be offered to prime customers. 

Committee members also offered several suggestions, with Mr. 

Boston suggesting that the bill pay capability available through 

both KeyBank's and Citibank's safe transaction accounts 

represents a significant marketing opportunity, inasmuch as bill 

pay can be linked to increased credit scores; with Mr. Henderson 

and Mr. Annibale suggesting that the Committee should explore 

ways of reinforcing the positive steps represented by the safe 

transaction accounts and of providing Community Reinvestment Act 

credit for banks offering such products; and with Mr. McDonald 

suggesting that the FDIC develop a scorecard to keep track of the 

number of institutions offering such programs; and with Mr. Eakes 

and Professor Fuchs suggesting that the FDIC explore certifying 

accounts that meet the standards of safe accounts. In response 

to Mr. McDonald's suggestion, Ms. Lazar stated that the FDIC has 

been looking at similar types of accounts offered by banks 

participating in the Alliances for Economic Inclusion and that 

she would discuss with staff ways in which the information might 

be captured on a broader scale. 

Mr. Eakes offered his opinion that having two large banks 

such as KeyBank and Citibank offer safe transaction accounts 

based on the Committee's work was significant and cause for 

celebration. Mr. Henderson expressed agreement, noting that the 

safe transaction accounts offered by KeyBank and Citibank 

constitute a significant breakthrough in best practices with 

respect to accounts that conceivably meet a kind of moral 

September 12, 2012 
270 

standard for organizations seeking to reach the underserved 

market. 

Acting Chairman Gruenberg, after thanking panelists for 

their contribution, noted that two leading financial institutions 

and a major national organization providing an example for 

expanding the offering of model transaction accounts should be 

viewed as a beginning, not an end. He advised that, prior to the 

next Committee meeting, staff would give some thought on how best 

to carry forward the work on model safe accounts, taking into 

account the organizations identified by Mr. Henderson that might 

be useful in that regard. 

Acting Chairman 

would briefly recess. 

stood in recess. 

Gruenberg 

Accordi

then 

ngly, 

an

at 

nounced 

2:27p.

that 

m., 

the meeting 

the meeting 

* * * * * * * 

The meeting reconvened at 2:29 p.m. that same day, at which 

time Mr. Pearce, acting as Chair of the meeting, reminded the 

Committee that among the issues discussed during the presentation 

of the 2011 Household Survey results were that one of the 

perceived advantages of AFS is convenience to consumers, and that 

one of the potential solutions to address the desire for 

convenience as it relates to the banking industry is to increase 

the availability of mobile technology to conduct banking related 

activities; that, at its meeting on April 26, 2012, the Committee 

had, in its wisdom, created a subcommittee to look at mobile 

technology; and that Professor Fuchs had agreed to chair the 

subcommittee, the members of which included Mr. Annibale, Mr. 

Cisneros, Ms. Levere, and Mr. Murphy. After noting that the 

subcommittee had been busy over the past few months, he turned 

the discussion of updates on the Subcommittee on Mobile Financial 

Services over to Professor Fuchs. 

Professor Fuchs began by expressing that it was her pleasure 

to offer the report and work plan of the Subcommittee on Mobile 

Financial Services, and that it had been a pleasure to work with 

the other subcommittee members as well as FDIC staff members 

Luke H. Brown, Associate Director, Compliance Policy Branch, DCP, 

Jonathan Miller, Deputy Director, Policy and Research, DCP, and 

Mr. Ernst. She then advised that, prior to the meeting of the 

full Committee, the subcommittee had met and engaged in a very 

informative and engaging discussion, the results of which she 

felt would be helpful to the Committee as it considers the 

possibility of recommending to the FDIC opportunities for using 

the potential of mobile financial services technology as a tool 

to reach more unbanked and underbanked consumers. She then 

September 12, 2012 
271 

thanked everyone who had participated in the subcommittee's work 

and ceded the floor to Mr. Miller. 

After thanking Professor Fuchs for her engagement and 

direction in the work of the subcommittee; Mr. Annibale, Mr. 

Cisneros, Ms. Levere, and Mr. Murphy for their input; and Mr. 

Ernst, Mr. Brown, and their staffs for helping to put the work 

plan together, Mr. Miller indicated that, at the end of the 

presentation of and discussion about the plan, the Committee 

would decide whether to move for its adoption and the 

subcommittee would begin the work to bring it to fruition. Then, 

by way of background, he recalled that mobile financial services 

had been a topic of discussion at several of the Committee's 

meetings and that, because of the level of smart phone 

penetration in populations that are disproportionately 

represented in the unbanked and underbanked communities, it made 

sense to look for ways to use mobile technology to create deeper 

and longer lasting relationships between insured depository 

institutions and the unbanked and underbanked and to encourage 

insured depository institutions to offer safe, affordable 

products to such consumers to bring them into the financial 

mainstream. 

Next presenting the subcommittee's proposed work plan, Mr. 

Miller advised that it was comprised of several categories: 

research, financial education, mobile financial services 

partnerships, and development of a mobile financial services 

template, similar to the Model Safe Accounts template. In the 

area of research, he advised that the idea was to obtain baseline 

information, some of which may be based on original research and 

some of which may be an aggregation of existing data, identifying 

answers to such questions as which mobile financial products and 

services unbanked and underbanked consumers are currently using 

that could be adopted to meet the goal of economic inclusion; 

which mobile tools and services might unbanked and underbanked 

consumers find useful going forward; and whether current mobile 

banking and payment offerings, such as mobile text alerts, are 

effective and whether they can be designed in a way to change 

consumer behavior and yield better outcomes. In the area of 

financial education, he advised that the subcommittee was 

suggesting that the FDIC move forward with efforts to develop a 

mobile application for the MoneySmart curriculum as well as 

develop a MoneySmart module focused on mobile financial services 

technology. With respect to mobile financial services 

partnerships, Mr. Miller suggested that perhaps some of the 

theoretical ideas generated by the subcommittee's research could 

be tested in partnership with financial institutions, non-profit 

organizations, and other groups to determine whether, in 

practice, they are effective in motivating consumers and changing 

September 12, 2012 
272 

their behavior. Finally, with respect to development of a mobile 

financial services template, he indicated that the idea would be 

to lay out the features of mobile financial products and services 

in an effort to identify best practices, with some possible 

features being check notification, actionable text alerts, and 

remote deposit capture, to provide consumers with accurate 

information in real time, provide access to tools to help 

unbanked and underbanked individuals overcome geographic 

barriers, increase access to cash and financial services in a 

timely manner, and enhance financial management capability. In 

closing, he noted that the potential of mobile technology to 

provide mainstream financial services to the unbanked and 

underbanked was an exciting prospect. Professor Fuchs added 

that, while the technology is indeed exciting, the subcommittee 

was mindful in its development of the work plan of the need to 

create safe practices for consumers. Mr. Miller then opened the 

floor to Committee member comments and questions. 

Mr. Barr, after expressing his support for the work plan, 

offered two suggestions: first, that the subcommittee take 

advantage of work on mobile financial services being done at 

other regulatory agencies such as the Federal Reserve Banks; and 

second, that the subcommittee also get input from the younger, 

technology-oriented generation. In response, Mr. Miller, 

acknowledging that Mr. Barr's suggestions were good advice, 

advised that Jim Cunha, with the Federal Reserve Bank of Boston, 

had been intricately involved in the subcommittee's discussions; 

and Mr. Brown advised that FDIC interns had also been actively 

involved and had offered strong opinions, with many of their 

thoughts imbedded in the work plan. 

Mr. Eakes suggested that the subcommittee take a look at a 

recently announced international remittance service to be offered 

by Boom Financial, working with the World Council of Credit 

Unions, which will allow users to send money across borders via 

text message, in response to which Mr. Miller thanked Mr. Eakes 

for the information and advised that the subcommittee would 

review the service. 

Mr. McDonald, referencing the FDIC's hope to partner with an 

insured depository institution with regard to a mobile MoneySmart 

application, asked whether software vendors have the flexibility 

to utilize some of the modules in the MoneySmart program absent 

an act of Congress, in response to which Mr. Miller advised that 

the material is not copyrighted and is made available on the 

FDIC's web site, with the thought that it can be used by others 

as they deem appropriate. 

September 12, 2012 
273 

Ms. Wright then moved for, and the Committee unanimously 

voted in favor of, adoption of the work plan of the Subcommittee 

on Mobile Financial Services. 

Next, Mr. Pearce announced that at the next Committee 

meeting, scheduled for December 13, 2012, staff would be 

presenting the results of the FDIC's 2011 Survey of Banks' 

Efforts to Serve the Unbanked and Underbanked and, as earlier 

mentioned by Acting Chairman Gruenberg, updates on additional 

research on the data from the 2011 Household Survey. 

There being no further business, the meeting was adjourned. 

Robert E. Feldman 

Executive Secretary 

Federal Deposit Insurance 

Corporation 

And Committee Management Officer 

FDIC Advisory Committee on Economic 

Inclusion 

September 12, 2012 
Minutes 

of 

The Meeting of the FDIC Advisory Committee on Economic Inclusion 


of the 


Federal Deposit Insurance Corporation 


Held in the Board Room 


Federal Deposit Insurance Corporation Building 


Washington, D.C. 


Open to Public Observation 


September 12, 2012 - 8:50 A.M. 


I hereby certify that, to the best of my knowledge, the attached 

minutes are accurate and complete. 

1~rlnb~' Chairman 


Board of Directors 


Federal Deposit Insurance Corporation