US Fed officials say more needs to be done on financial inclusion
The remarks come after regulators announced a plan to withdraw an overhauled rule meant to tackle redlining and boost lending to lower-income areas after industry groups sued to block it
[WASHINGTON] US Federal Reserve governor Michael Barr said on Tuesday (Jul 15) that banks and advocates have worked together to “deepen and widen financial inclusion”, but emphasised much more needs to be done to meet the needs of low-income Americans.
“Better access to affordable financial services, geared to the needs of underserved families and entrepreneurs, can help them to build more secure lives, stronger communities, and a stronger American economy,” Barr said in prepared remarks for the Fed’s Financial Inclusion Conference in Washington.
Barr also pointed to the benefits of faster payments services, responsible small-dollar lending and the use of alternative data to promote credit access, adding that “these efforts have shown promise in expanding financial inclusion”.
Earlier Tuesday, Michelle Bowman, the central bank’s vice-chair for supervision, also encouraged the financial industry to consider more innovation as one way to rope in credit invisible Americans who often struggle due to insufficient credit histories.
“Innovation comes in many forms. One example is through banks’ use of alternative data, which can enable banks to provide services such as affordable small-dollar loans or to provide access to credit invisibles who may not have access to loans and other financial services from traditional lenders,” Bowman said at the same Fed conference.
She added that this growing area of focus also helps align service offerings with a customer’s financial goals.
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The Federal Deposit Insurance Corporation (FDIC) said in a report published last year that a record 48.3 per cent of American households with bank accounts primarily use their mobile phones for routine banking.
Despite the growing popularity of mobile banking overall, the agency noted that older households and lower-income households were less likely to bank via smartphone.
The FDIC said at the time that after falling steadily from more than 8 per cent in 2011 to 4.5 per cent in 2021, the share of households without banks accounts remained flat overall, with a slight drop among Black households and a notable spike for American Indian or Alaska Native households. It added that unbanked Americans cite account opening costs, unpredictable fees, and high minimum balance requirements as among the top reasons for not obtaining accounts.
Bowman said the Fed is committed to learning more and building on the progress regulators have made leveraging technology to broaden financial service access.
“This work supports our ability to understand and communicate the state of financial inclusion, how banks support access to affordable financial services, and the role that our policies and practices play in promoting inclusion,” she said.
The remarks come after regulators announced a plan to withdraw an overhauled rule meant to tackle redlining and boost lending to lower-income areas after industry groups sued to block it. BLOOMBERG
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