A recent report from the Federal Deposit Insurance Corporation (FDIC) highlights a growing trend. Households with limited access to traditional banking are more likely to own cryptocurrencies. These households often rely on alternative financial services like payday loans and check cashing. This exposes them to risks linked to both crypto investments and nontraditional financial services.
The FDIC report draws from a June 2023 survey of 30,000 households. It is part of a long-term series tracking access to banking services. The study focuses on “underbanked” and “unbanked” households, terms describing those with limited or no access to mainstream banking. The FDIC has conducted similar research periodically since the 2007 global financial crisis.
Decline in Unbanked Households
One significant finding is the decrease in unbanked households. These are households without checking or savings accounts. As of 2023, only 4.2% of U.S. households (about 5.6 million) are unbanked. This marks a substantial decline from 2011 levels. Despite this progress, certain groups remain disproportionately affected. Black, Hispanic, Native American, single-parent, and disabled households are more likely to be unbanked or underbanked.
The term “underbanked” refers to households with bank accounts but continued reliance on alternative financial services. Examples include payday loans, pawn shops, and check-cashing services. Many underbanked households turn to these services due to convenience or necessity. These households also show a higher likelihood of owning digital currencies like Bitcoin. They may see digital currencies as an alternative to traditional financial products.
Underbanked Households and Digital Financial Tools
According to the FDIC, 14.2% of U.S. households (about 19 million) are underbanked. Among these, over 6% reported owning cryptocurrencies. By comparison, only 4.8% of fully banked households reported owning digital currencies. This indicates that underbanked households may view cryptocurrencies as an appealing alternative investment.
The FDIC report also highlights the use of Buy Now, Pay Later (BNPL) services. Nearly 10% of underbanked households use BNPL services, compared to only 3% of fully banked households. However, BNPL users often face repayment challenges. Around 13% of BNPL users missed or delayed payments. Among the underbanked, this figure rises to over 20%, highlighting the financial strain on this group.
These findings underscore the greater engagement of underbanked households with riskier financial products. Options like cryptocurrencies and BNPL services provide access and flexibility but come with higher risks. Households with limited access to traditional banking may face fewer consumer protections, increasing their exposure to financial challenges.