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Investing.com -- Federal Reserve Governor Michael S. Barr emphasized the importance of financial inclusion in creating a safe and fair financial system during the Fed’s second annual Financial Inclusion Conference in Washington, D.C.
Barr noted significant progress in reducing the number of unbanked Americans, which is now at its lowest level since tracking began in 2009. Despite this improvement, disparities persist among certain groups. Households with disabled members are three times more likely to be unbanked than those without disabilities, while Hispanic and African American households are five times more likely, and American Indian and Alaskan Native households six times more likely to be unbanked compared to White households.
The governor highlighted several initiatives expanding financial access, including the Bank On program, which has certified accounts at over 46,000 bank branches nationwide. These accounts feature low minimum deposits, minimal fees, and free banking services.
Barr also emphasized the role of faster payment systems in financial inclusion. The Fed launched the FedNow Service in 2023, enabling banks and credit unions to transfer money instantly and securely at any time. Early adopters are already offering services like instant access to earned wages for gig workers.
According to the Fed’s 2024 Survey of Household Economics and Decisionmaking, 19% of adults would struggle to cover an unexpected $400 expense, rising to 46% among households with incomes under $25,000. Barr praised bank-offered small-dollar loan products that follow responsible lending principles established in 2020 guidance.
The governor also discussed how alternative financial data can supplement traditional credit measures, helping lenders evaluate borrowers with limited credit history through measures like cash flow analysis.
Barr concluded by reaffirming that while progress has been made, many Americans still feel locked out of the banking system, and more work is needed to design financial products that better serve low and moderate-income households.
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