What Banking Deserts Mean for More Than 12 Million Americans
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In a country as economically advanced as the United States, it can be hard to believe that so many people lack access to fundamental financial tools. In rural areas especially, the inability to conveniently access physical banking services is not only an inconvenience but can also lead to significant gaps in the ways these populations access and grow their wealth.
These areas are referred to as banking deserts — a neighborhood or community that lacks a physical bank branch within a ten-mile radius. As of 2023, more than 12 million Americans live in banking deserts.
- What’s worse, the number of people who lack access to banking has increased substantially since 2019 — the rate of bank branch closures, while steadily increasing since the Great Recession, has doubled since 2020, with more than 4,000 branches closing between 2020 and 2022.
In practice, families and individuals living in banking deserts are essentially cut off from physically accessing basic banking services, and instead must take long, and sometimes costly, trips to neighboring towns or cities. For many, a lack of reliable transportation exasperates the difficulty. As a result, simple deposit and withdrawal needs can impact an individual’s ability to access their funds efficiently and on their own terms.
Additionally, those that are “unbanked” — who do not use banks or banking services at all — often live in banking deserts. More than 15% of unbanked individuals living in banking deserts consider the lack of access to bank locations as the main reason they do not have a bank account. Without traditional banking services, consumers are forced to find alternatives, which can include predatory payday lenders and other costly arrangements.
Banking deserts also disproportionately cut across socioeconomic and racial lines: the population groups experiencing the greatest impact include those in lower-income brackets, majority-Black communities, and disabled Americans.
- In majority-Black communities, the closure of bank branches occurred at a rate of 10.1%, which is significantly higher than the national average of 6.4%.
Innovations in financial technology have provided solutions to many of the problems presented by banking deserts. First and foremost, online and mobile banking has become the primary method for many people to transact. Additionally, peer-to-peer (P2P) payments platforms offer easy and convenient ways for customers to make payments, conduct transactions, and enjoy savings. But financial technologies are not a panacea. Those who live in banking deserts also tend to live in areas with low device or broadband access, meaning they can’t reliably use these services either.
Banking deserts create challenges for the more than 12 million Americans living in them and it’s a problem that requires a long-term thinking. To solve it, we must first understand it.
Author
Block
Tags
In a country as economically advanced as the United States, it can be hard to believe that so many people lack access to fundamental financial tools. In rural areas especially, the inability to conveniently access physical banking services is not only an inconvenience but can also lead to significant gaps in the ways these populations access and grow their wealth.
These areas are referred to as banking deserts — a neighborhood or community that lacks a physical bank branch within a ten-mile radius. As of 2023, more than 12 million Americans live in banking deserts.
- What’s worse, the number of people who lack access to banking has increased substantially since 2019 — the rate of bank branch closures, while steadily increasing since the Great Recession, has doubled since 2020, with more than 4,000 branches closing between 2020 and 2022.
In practice, families and individuals living in banking deserts are essentially cut off from physically accessing basic banking services, and instead must take long, and sometimes costly, trips to neighboring towns or cities. For many, a lack of reliable transportation exasperates the difficulty. As a result, simple deposit and withdrawal needs can impact an individual’s ability to access their funds efficiently and on their own terms.
Additionally, those that are “unbanked” — who do not use banks or banking services at all — often live in banking deserts. More than 15% of unbanked individuals living in banking deserts consider the lack of access to bank locations as the main reason they do not have a bank account. Without traditional banking services, consumers are forced to find alternatives, which can include predatory payday lenders and other costly arrangements.
Banking deserts also disproportionately cut across socioeconomic and racial lines: the population groups experiencing the greatest impact include those in lower-income brackets, majority-Black communities, and disabled Americans.
- In majority-Black communities, the closure of bank branches occurred at a rate of 10.1%, which is significantly higher than the national average of 6.4%.
Innovations in financial technology have provided solutions to many of the problems presented by banking deserts. First and foremost, online and mobile banking has become the primary method for many people to transact. Additionally, peer-to-peer (P2P) payments platforms offer easy and convenient ways for customers to make payments, conduct transactions, and enjoy savings. But financial technologies are not a panacea. Those who live in banking deserts also tend to live in areas with low device or broadband access, meaning they can’t reliably use these services either.
Banking deserts create challenges for the more than 12 million Americans living in them and it’s a problem that requires a long-term thinking. To solve it, we must first understand it.