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“Unbanked” is a term for individuals who conduct their financial transactions outside of the financial mainstream, meaning that they don’t use products such as checking accounts, credit cards, savings accounts, and mortgages. Bank on San Francisco, launched in September of 2006, is a two-year public-private partnership to help the unbanked enter the financial mainstream.

Why Bank on San Francisco?

The Credit Path, Alternatives Federal Credit Union

About 50,000, or nearly 15 percent, of San Francisco’s households are unbanked. In most of San Francisco’s low-income neighborhoods, check-cashers, pawn shops, payday lenders, and other fringe financial services outnumber mainstream banks and credit unions. With limited or no access to mainstream financial services, unbanked individuals rely instead on the cash economy and/or use fringe services that charge high fees and interest rates. This means that the unbanked end up paying more to conduct basic financial transactions than those with bank accounts.  Estimates suggest that people who regularly use a check casher can spend nearly $800 a year on transactions.  The unbanked may also lack the tools they need to save and build assets, leaving them particularly vulnerable in times of crisis or emergency. A bank account is an important step on the path to financial security.

The unbanked can face both hard and soft barriers to opening a checking account. In general, conventional banking products and policies are not designed to meet the needs of lower-income clients. The use of credit scores and/or ChexSystems can effectively bar those with impaired or nonexistent credit histories from banks and credit unions.

In addition, the technical details and requirements of the US banking system are often misunderstood by lower-income households, leading to perceptions that they don’t have adequate financial resources or the right identification to qualify for accounts. Bank on San Francisco is designed to help remove those barriers.

What is Bank on San Francisco?

Bank on San Francisco is unique collaborative effort to bring 10,000 of the city’s estimated 50,000 unbanked households into the financial mainstream. The Mayor’s Office and the Treasurer’s Office of the City and County of San Francisco, the Federal Reserve Bank of San Francisco, a local nonprofit EARN (Earned Assets Resource Network), and the city’s financial institutions worked together to:

1. Increase the supply of starter account products that work for the low-income unbanked market by developing baseline product criteria that must be offered by all participating financial institutions.
2. Raise awareness among unbanked consumers about the benefits of account ownership and spur them to open accounts.
3. Clamp down on the proliferation of check cashers and payday lenders.
4. Raise city-wide awareness of the unbanked problem and potential solutions.
5. Make quality money management education more easily available to low-income San Franciscans.

Banks and credit unions participating in Bank on San Francisco have agreed to:

• Offer a low- or no-cost product with no minimum balance requirement. High minimum balances and fees are a key factor keeping people out of the financial mainstream.
• Adapt internal systems to allow customers with a poor banking history to open “second chance” accounts.
• Accept consular identification cards as primary ID. For many immigrants, the barrier to opening an account is having the proper documentation.
• Waive one set of overdraft fees per client. Banks are often criticized for penalizing clients for mistakes, so this waiver gives everyone a chance to learn account management.
• Improve customer service at the branch level, expand marketing and outreach strategies in targeted, low-income neighborhoods, and increase the visibility of appropriate products in San Francisco. 
• Partner with local community based organizations to provide financial management training and transition customers ready to enter the financial mainstream.

One year into the pilot, the collaborative of financial institutions had opened over 11,000 Bank on San Francisco accounts, surpassing the original goal of banking 10,000 of San Francisco’s unbanked. The goal has now doubled to banking 20,000 unbanked individuals in the city by the fall of 2008.