Unbanked

What Is an Unbanked Person?

An unbanked person is someone who does not have an account at a bank or other formal financial institution. Without a checking account or savings account, this person usually handles money in cash or through alternative services. The term describes individuals and households outside the traditional banking system, and it is often used in economic research and policy discussions about access to financial services.

How Unbanked Status Is Measured

Governments and researchers usually identify unbanked people through household surveys. In the United States, for example, the Federal Deposit Insurance Corporation (FDIC) runs a recurring National Survey of Unbanked and Underbanked Households that asks whether each household has a bank account. Households that answer no are counted as unbanked. These surveys also often ask about underbanked households, which have an account but still rely heavily on costly products outside the banking system.

Why It Matters

Lacking a bank account can make everyday money management more expensive and less convenient. Common challenges include:

• Paying bills with money orders or cash, which can carry fees
• Cashing paychecks at a check cashing service, which charges a fee
• Keeping cash at home, where it can be lost or stolen
• Having limited access to credit, which may lead people toward high-cost payday loan products
• Missing the protection of FDIC insurance, which covers deposits at insured banks if a bank fails

Some unbanked people use a prepaid card or mobile money service as an alternative, but these often carry their own fees and may offer fewer protections.

Why People Are Unbanked

People may lack bank accounts for many reasons. Some do not have enough money to meet minimum balance requirements, some distrust banks, some lack identification or a fixed address, some were previously removed from banking after account problems, and some simply live far from a branch. Because these reasons vary, policymakers often focus on financial inclusion efforts, such as low-cost basic accounts, to bring more people into the formal financial system.

For investors, the concept shows how many potential customers remain outside traditional finance, which can matter when studying the business models of banks and financial technology companies.