Several groups in our society are unable to open a checking account and access other banking services because of past life circumstances. To help address this situation, financial service providers are offering second chance banking. This program is designed to provide financial opportunities to unbanked individuals and formerly incarcerated people.
Second chance banking involves a special checking account that doesn’t require a background check of a person’s past banking history. This account has limited features to minimize potential fees and no minimum balance. For those who lack a US ID or Social Security number, a foreign ID or passport is accepted to access this service.
A major goal of second chance accounts is to build banking credibility. Once reliability is demonstrated over time, a person is then able to open a regular checking account. These accounts have a positive impact in low-income communities, where customers traditionally pay higher bank fees resulting in their account often being closed by the financial institution due to overdrafts.
In addition to making banking available to unbanked and underbanked consumers,
second chance banking also serves as an important step in financial freedom for formerly incarcerated people. A high percentage of these individuals were unbanked prior to their confinement, lack proper identification, or denied banking services due to their criminal history. Some who previously had an account may have had it closed due to inactivity or extensive fees.
The program also involves financial education to help a person build credit, save money, and achieve financial independence. A wide variety of banks, credit unions, community development financial institutions, minority depository institutions, and community-based non-profits are involved in second chance banking.
For additional information on second chance banking, click here.
- Have students talk to others to learn about difficulties they may have encountered with banking services.
- Have students create a visual summary (poster or slide presentation) to communicate how banking services are related to successful money management and financial planning.
- What are benefits of second chance banking for individuals, their community, and society?
- Describe actions you would recommend to a person in need of obtaining a bank account.
MoneyLion offers a low-cost financial service tool that integrates investing, banking, lending, and financial wellness. Using the brand name RoarMoney, the company also offers a virtual debit card for contactless payments and Instacash with a free overdraft service. With Money Lion’s Shake N’ Bank program, customers earn cash every time they spend $10 or more with their bank card. To determine the amount they get back, users literally shake their phones and a random amount up to $120 shows up.
To guide financial wellness, the Financial Heartbeat program of MoneyLion rates customers from 1 to 10 on these categories:
1) Save measures financial preparedness; how well a person can pay expected and unexpected expenses.
2) Spend measures purchasing in relation income available.
3) Shield determines how well you understand and organize your insurance needs and coverages.
4) Score creates a Bottom of Formcredit score to assess overall credit health based on debt usage and interest rates paid.
For additional information on FinTech and financial wellness, click here.
- Have students talk to others to learn about the features of banking and money management apps they have used.
- Have students create a visual proposal (poster or slide presentation) for an app that would help people better manage their money and improve their financial wellness.
- What features of an app or FinTech product might help people improve their financial wellness?
- Describe actions a person might take to evaluate an app or FinTech product.
As you walk into your bank, you are met by a video teller. These robo-banks allow you to connect with financial specialists based on your needs through a virtual concierge and videoconferencing. These banking staff members are located hundreds and thousands of miles away. Banks benefit from these actions with fewer branches and fewer employees covering customers in many geographic settings.
Other actions being taken by banks and other financial institutions to better serve customers include:
- A variety of services to enhance the banking experience, such as offering co-working spaces for customers who work remotely.
- Payment systems in the athletes’ Olympic pins to complete purchases transactions at the 2018 Winter Games.
- Customers can pay with a facial recognition scan in some retail settings.
- Financial services offered through Alexa (Amazon), Siri (Apple), and Google Assistant allowing bank and credit card customers to check their balances, pay bills, and send money.
For additional information on technology banking trends, click here.
- Have students talk to two or three others to obtain their ideas about: (a) future banking technology, and (b) the setting and services of the bank branch of the future.
- Have students create a presentation or video that communicates future banking activities.
- What technology services do you desire from a bank for your financial services?
- Describe actions banks might take to better serve the needs of customers.
Nearly 90 million people in the United States have no bank account or rely on expensive financial services from check-cashing services, payday loan companies, or pawnshops. To help address this situation, the U.S. Postal Service is considering a program to provide financial services to the population that is underserved by traditional banks.
The USPS, which already offers money orders to customers, plans an expanded product line that would include reloadable prepaid debit cards, mobile transactions, domestic and international money transfers, a Bitcoin exchange, and possibly, small loans. As a result of their size, USPS loan rates would be lower than pawnshops or payday loan enterprises. Post office branches in low-income neighborhoods could provide services to customers in areas no longer served by traditional banks.
Opposition to this action will occur from the banking industry. However, compelling evidence is offered that many Americans lack trust in or access to banks.
While going to the post office for financial services may seem strange in the United States, about one billion people in 50 countries bank through postal system offices. These include India, Pakistan, Japan, Brazil, Malawi, and Kenya.
For additional information on banking at the post office, go to:
Click to access rarc-wp-14-007.pdf
- Have students research the banking services offered by postal services in other countries.
- Have students create interview questions that they might ask someone who does not use a traditional bank.
- What factors would influence the need for the postal service to consider offering financial services?
- Describe possible benefits and concerns associated with the U.S. Postal Service offering financial services.
- Other than the postal service, how might underserved and unserved banking consumers obtain financial services?