Need
Hundreds of thousands of Philadelphians spend much of their hard-earned money on high fees to cash their paychecks, conduct regular financial transactions, and have little savings or assets. In the current economy, an account in the financial mainstream can be a life-line and a path to economic stability and independence for working families in Philadelphia.
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In Philadelphia, it is estimated that over 220,000 residents need a ‘fresh-start’ checking account.
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In addition, the Pew Charitable Trusts’ Safe Banking Opportunities Project estimates that over 81,000 Philadelphians do not have an account with a financial mainstream institution.
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Nationwide moderate-and lower-income households pay over $8 billion in fees to non-bank check cashing and short-term loan providers to meet their basic financial services needs.
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An unbanked worker spends an estimated average of $40 per payroll check to cash a check from a typical non-banked check cashing provider.
Source: The Pew Charitable Trusts. 2008
Opportunity
Bank on Philadelphia stands to substantially create the opportunity to leverage a wide distribution of community based organizations, banks, and credit unions to connect moderate and low income consumers to potentially lower-cost or no-cost financial accounts and alternative pay-day loan products.
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Over 90 percent of the non-bank financial service providers are located within one mile of a bank or credit union branch.
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Bank and credit union branches are more likely to be located in low-income and lower middle-income neighborhoods than non-bank financial services providers.
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A full-time worker with a low-cost checking account could potentially save as much as $40,000 during his 40-year career.
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Depending on types of checking accounts, residence, money management skills, and account stability, this same unbanked worker, assisted in transferring his/her savings into a low-cost exchange-traded fund with a discount broker, could generate as much as $360,000 in wealth over his 40-year career.
Source: Banking on Wealth: America’s New Retail Banking Infrastructure and its Wealth-Building Potential. Brookings. January, 2008
Resources
City Controller Alan Butkovitz will provide local leadership
to guide participants through the Bank on Philadelphia
process. The U.S. Department of the Treasury also has
provided a Community Consultant to assist the pilot sites
to build sustainable coalitions and approaches to make
available appropriate financial products and services and
financial education.
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A Community Consultant will be assigned to provide technical assistance, act as information and referral resource, and a coordination facilitator.
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The Community Consultant will examine specific challenges within the community, help to develop solutions, and work with partners to implement effective approaches.
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Partners will be linked to national, regional, and local partners engaged in financial literacy development strategies.
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Partners will have access to best practices, emerging trends, and research in the areas of education, asset development, and access to banking and credit union services.
Goals
Bank on Philadelphia will help to illustrate the process in developing and implementing effective elements for getting unbanked and under-banked residents into mainstream financial accounts.
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Increasing access to low-cost and no-cost financial mainstream accounts by low and moderate income individuals.
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Increasing access to innovative alternative pay-day loan products offered by credit unions.
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Increasing access to financial education and credit counseling services.
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Assisting non-banking Philadelphians to establish good credit to help mortgage a house or receive a car loan.
