Postal bank could provide free accounts to 21 million Americans who do not have access to a credit union or community bank
The research brief is a brief overview of interesting academic work.
The big idea
About a quarter of census tracts with a post office do not have a community bank or credit union branch, suggesting that postal banking could provide a financial lifeline to millions of Americans without a bank account. , according to our new research
To reach this conclusion, we analyzed national data on post office retail outlets and bank and credit union branches, as well as other demographic details in these regions. We wanted to understand the prevalence of US Postal Service locations in areas underserved by banks and credit unions.
Our research examined data from US census tracts, which are districts created by the US Census Bureau to geographically represent a neighborhood. The country has 73,057 plots which vary in square kilometers but have a standardized average population of around 4,000 inhabitants.
We found that 69% of census tracts that have a post office do not have a community bank – defined as having less than $ 10 billion in assets – while 75% do not have a cooperative branch. credit. And 24% have neither, affecting nearly 21 million people.
Results varied considerably from state to state. For example, in Arizona, 44% of areas with a post office do not have a credit union or community bank, while in Nebraska the figure is only 4%. And we have found that members of minority groups tend to be disproportionately located in areas without banks but with a post office.
Why is this important
In 2019, about 7.1 million Americans did not have a bank account and an additional 24.2 million are considered “underbanked,” meaning they use other, more expensive services like lenders on salary and stores that cash checks for a fee to meet their financial needs.
The lack of affordable banking services creates real hardship that disproportionately hurts low-income Americans and communities of color. Without a bank account, people pay higher fees and interest rates, have more difficulty building a credit history, and are less able to obtain mortgages and other types of loans. And during the pandemic, when tens of millions of people in the United States lost their jobs and struggled to feed their families, they had to wait longer to receive the government assistance they were entitled to.
Some lawmakers are pushing the Federal Reserve to help solve these problems by partnering with credit unions, small community banks, and even the U.S. Postal Service to provide free bank accounts to low-income people.
Our research shows that the post office may be better positioned than community banks or credit unions to expand access to financial services.
The United States had a postal banking system, which operated in various forms from 1910 to 1967, when industry pressure persuaded the federal government to end it. Elsewhere in the world, such as the UK and France, postal banking remains popular and serves around 1.5 billion people.
What is not yet known
We still do not know some details about postal banking services, such as how the targeted communities would benefit from them. However, policymakers, advocacy groups and unions have asked Congress to allocate $ 6 million to support a pilot postal banking program to assess issues like this.
Next, we’ll look at how postal banking compares to other options for expanding access to financial services, such as online and mobile banking.
In states with some of the worst broadband internet usage rates in the country, online banking is largely unavailable and therefore not an option for many residents. We will use data to determine whether the post office offers comparative advantages over online banking.