New Study Challenges Attitudes About Unbanked Employees

When an employee declines direct deposit and chooses to receive a paper check, what do you think? A recent study makes the case for finding out why employees have barriers to banking.

Published last year by the Cities for Financial Empowerment (CFE) Fund, “Making the Case for Banking: Talking to Unbanked People About Bank Accounts” was the topic of a recent video by William Dunn, Director of Government Relations for the American Payroll Association.

The study’s stated goal was to “build a more complete understanding of the financial attitudes and goals of unbanked people and to explore the most effective messaging themes that could drive transactional account adoption.”

“Nine out of 10 workers have their employers deposit their pay directly into their bank accounts,” Dunn said. “What is it about that one out of 10 who opt instead for a paper check? In some cases, the employees might lack bank accounts into which they might have their pay deposited.”

CNBC in its feature “On The Money,” cites the Federal Deposit Insurance Corporation’s (FDIC’s) 2017 research that shows 25% of Americans are either unbanked or under banked.

More than a thousand individuals responded to the survey, in which they were asked about their motivational barriers to banking. The reasons given for not having a bank account were:

• Lack of money – 43%
• High banking fees – 32%
• General distrust of banks – 30%

The respondents who had closed an account said they did so due to:

• Overdraft fees – 29%
• Minimum balance requirements – 22%
• No longer had direct deposit with their jobs – 27%

Dunn said the CFE’s research also pointed out some myths and realities that employers who want to shift away from paper checks should know.

“The CFE Fund suggests that some of what we think we know about unbanked and under banked individuals is just wrong.”

The survey indicated a majority of unbanked individuals are open to new information – that’s good news. But they don’t want to hear about how a bank account will help them with major, aspirational life goals; they are more likely to respond to how a bank account can help with short-term goals like improving credit and decreasing debt.

Conventional wisdom may indicate that the unbanked employee doesn’t value traditional banking but will engage with banking apps is not the case.

“The reality is,” Dunn said, “specific, tangible features related to securing their money – like no fees, fraud protection, and direct deposit – were most important features to unbanked people.”

If your company is interested in eliminating paper paychecks and increasing employee well being, understand these three takeaways from the CFE Fund research:

• Employees are open-minded about banking.
• Fine-tune your message. Unbanked individuals would rather hear about short-term solutions than long-term goals.
• Focus on features that will protect their money from fraud and high fees.

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