Unbanked in the US: Pt. 1 of 2 — Who They Are and Why It Matters

Contractors can sometimes make good money, and in 2008, Bob Kitts found that there can, literally, be major money in bathroom remodeling. While tearing down the bathroom walls of a home in Lake Erie, Pennsylvania, Kitts unearthed $182K in Depression-era money that had been hidden within. Unfortunately for Kitts, a disagreement with the homeowner over how the two should split the finding ultimately resulted in the majority of the money going to the 21 descendants of the Depression-era businessman who had hidden the money to begin with.At the time, widespread fears about the possibility of bank failures led many people who still had money to hide cash in unusual places, like the bathroom wall. Though it has been 86 years since the Depression ended, there are still a significant number of people within the US who aren’t using financial institutions to hold their money. In this 2-part series, we take a detailed look at the state of unbanked and underbanked households in the US. This first article focuses on the latest statistics and demographics of these groups, highlighting the ongoing challenges they face.

Unbanked Households Reach Record LowThe number of unbanked people in the US has significantly decreased in recent years, but there are still a great deal of people who do not have banking services or struggle with inadequate services. According to the Federal Deposit Insurance Corporation’s (FDIC’s) 2023 National Survey of Unbanked and Underbanked Households, 4.2% of households in the US continue to fall within the unbanked category — the lowest percentage of unbanked households recorded since the survey’s inception and well below the 8.2% of households that were unbanked in 2011. The FDIC credits the decrease in unbanked households to better socioeconomic conditions, such as improved income and education levels. Still, the agency found that the number of “underbanked” households throughout the country remains at 14.2% (roughly 19MM households). Unbanked Demographics When it comes to the unbanked, low-income households and individuals without higher education comprise a large portion of this group, with clear racial disparities remaining, as well. According to the FDIC’s findings, American Indians and Alaskan Natives comprise the largest portion of unbanked minorities (12.2%), followed by African Americans (10.6%) and Hispanics (9.5%). Comparatively, Caucasians account for only 1.9% of the unbanked. There has been some improvement within certain demographics, particularly in black households, which accounted for 21.4% of the nation’s unbanked in 2009. Yet, among the ongoing unbanked population, the FDIC found that black households are more than 5x more likely to be unbanked and more than twice as likely to struggle with inadequate banking services, rely on prepaid cards, and lack traditional credit scores. Lack of education was a significant link to unbanked and underbanked households. The survey revealed that 12% of underbanked and 34% of unbanked households did not have a high school diploma.Another group that falls within the unbanked is disabled individuals. According to the National Disability Institute, 11.2% of working-age people with disabilities were unbanked in 2023, close to 3x the number of people within the unbanked demographic without disabilities. Households with a volatile monthly income were also likely to be unbanked or underbanked.For those who reported being unbanked because of difficulty accessing bank branches (whether due to disabilities or a lack of local branches), barriers to better banking access include insufficient funds to meet or maintain minimum account balance requirements (42.3%) and a lack of trust in banks (15.7%). Privacy concerns and bank fees were cited as additional deterrents by individuals who indicated no interest in opening bank accounts. How the Unbanked Manage Their FinancesIt is no surprise that mobile banking has been a major factor in decreasing the overall number of unbanked individuals, a reality highlighted by the FDIC’s findings that 48.3% of banked homes rely almost solely on mobile banking for their needs. Equally predictable are the types of services that unbanked individuals rely on. Absent traditional credit scores and histories, unbanked individuals are typically unable to secure credit cards, often receiving very high interest rates when they can. Though 76.4% of US households had credit cards in 2023, 15.7% still lacked access to mainstream credit. Those who don’t have mainstream credit activity within the past year often did not have a credit score, which would make it even more difficult for them to qualify for credit, should a need arise for them to apply. So how do those without credit and traditional banking services pay bills or receive their income? The FDIC noted a substantially higher proportion of unbanked households use prepaid credit cards and online payment services like Venmo, PayPal, and CashApp to manage transactions that banked households typically conduct through traditional banking services, like checking and savings accounts. About 44% of underbanked households and 71% of unbanked households that used online payment services used them to receive income, pay bills, or store their money.

As community financial institutions seek to attract new customers in 2025 and strive to help alleviate the nation’s ongoing unbanked and underbanked issues, it is important to keep the above statistics in mind when it comes to ways to approach these groups. In the second article of this two-part series on reaching the unbanked and underbanked, we’ll dive into how to find underserved geographic areas and what the unbanked might be looking for in banking services.