Wednesday, August 19, 2009

Ignoring Banks

"In Manhattan...12 percent of households still do not have a bank account, compared with the national average, 8 percent, according to ...Pew Charitable Trust....91,100 households feel more comfortable hiding their savings in closets,in pillows...They rely on check cashers and corner bodegas for cash.."

Christine Haughney, "New York Now Full of Banks, But the Poorest Don't Use Them,"New York Times,August 18, 2009.

Nothing seems to work -- more bank branches,credit unions, financial management programs, matched savings. Maybe we don't understand fully the financial thinking and behaviors of low-income people.

First, other research shows that even people with bank accounts freqeuntly derive their day-to-day financial transactional services from alternative financial providers like check cashers -- so what's with the bank account fetish. It's not just whether a bank is close by, but its hours, range of services, customer service,etc.

Second, what's wrong with the two examples of workers who send excess cash back to their home countries. This is certainly a form of savings -- just more social-network based than institutional. What more do we want?

Third, there is distrust -- whether deriving from experience in other countries, fear of overdraft charges, identity issues, etc. Maybe people feel more flexible,empowered to deal with uncertain and varied incomes by not being quite so institutional.

Why do some people who have the money choose to rent,not own, even in affordable markets other than NYC, when homeownership pencils out as cheaper? Smart move in this environment.

Maybe we should focus on making alternative financial providers more accountable and less of a ripoff.

1 comment:

Joel said...

Bank accounts sure aren't secure when you're going through bankruptcy, or working under the table.

Bank accounts and mortgages offer some incentives that encourage centralization of economic power. Narrowing those incentives might not be something that big players in a centralized economy are interested in doing.