The Model Safe Accounts Pilot was originally launched in January 2011 by the Federal Deposit Insurance Corporation (FDIC), an independent agency created by Congress tasked with maintaining stability and public confidence in the nation’s financial system. The Model Safe Accounts Pilot was designed as a case study to determine how financial services companies could provide low-cost banking accounts to underserved consumers. The pilot was enacted as a program aligned with the FDIC’s mission to ensure that every American household has access to banking programs — no matter what their income level.
The Underserved Banking Population
In previous studies, the FDIC found that over 25% of American households are considered underserved. It is critical that all Americans should have access to a safe and secure place to save their money to improve their access to financial security. There are many areas of opportunity for banks and other financial organizations to provide safe and low-cost accounts to the underserved population that tends to have low- or moderate-income levels.
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The Benefits to Consumers
Over 3,500 Safe Accounts were opened, which was comprised of 662 transaction accounts and 2,833 savings accounts. Companies that offered a Safe Account found that it worked as well or even better than the other checking/savings accounts offered by the financial institution. The study found that a large number of underserved households maintained their Safe Account throughout the year. In fact, 81% of transaction accounts and 95% of savings accounts remained open at the conclusion of the Safe Account pilot program. Also, there was a low overdraft risk with Safe Accounts; this demonstrates that Safe Accounts have the potential for longer use and lower costs than more traditional banking accounts.
What the Banks Learned
The financial institutions benefitted as well. Most reported that the costs associated with running Safe Accounts were similar to managing their regular bank accounts. This could be because the Safe Accounts did not have paper checks and the costs related to maintaining them. Also, many financial institutions reported that the Safe Accounts pilot was a positive educational experience for the banks as well, and demonstrated that they can, in fact, offer low-cost products to the underserved population without straining their other services. Banks also knew to train their tellers to tout the Safe Accounts program to those who may need it. Finally, numerous business models for Safe Accounts were discovered, which suggests flexibility in the FDIC Model Safe Accounts Template to best serve the needs of the financial institution and its customers.
The largest challenges reported by banks was properly marketing/advertising the Safe Accounts program and ensuring their staff was more than adequately trained to assist the Safe Accounts customers. By developing strategic alliances with community organizations, churches, legal, accounting and investment professionals, the Model Safe Accounts Pilot can be a model for other innovations to more effectively integrate the unbanked and underbanked into the financial system.