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In 2019, the Federal Deposit Insurance Corporation (FDIC) reported that 7.1 million households in the United States (5.4%) were unbanked and lacked a checking or savings account). Using three leading household surveys, this paper documents how the interaction between bank access and poverty has evolved over time. We present a historical time series of unbanked rates, showing high‐unbanked rates for those in poverty even with increases in financial access over time. In the 1980s, 49.6% of households in poverty were unbanked while 22.8% were unbanked in 2019. Unbanked rates were even higher for Black and Hispanic households that were in poverty. In the 1980s, these groups had unbanked rates of 73.6% and 66.5% which declined to 38.4% and 31.8% in 2019, respectively. To explain differences in banking rates by race, we use binary Kitagawa‐Oaxaca‐Blinder decompositions. Socio‐demographic characteristics explain less than half the difference in unbanked rates for Blacks and around half for Hispanics. [ABSTRACT FROM AUTHOR]

Every day, consumers borrow using short‐term credit products. Relatively little is known about "Deposit Advance Products" (DAP), short‐term, small‐dollar loans offered to checking account customers. We examine (1) how DAP borrowing changes with repeat use and (2) how consumers use DAP in conjunction with other credit. By analyzing transaction‐level data on more than 100,000 checking accounts over an 18‐month period, we find that consumers' DAP borrowing evolves. With repeat borrowing, consumers take credit for a longer time, increasingly withdraw new loans within a week of repaying prior ones, and borrow more. Additionally, consumers with repeat DAP use are more likely to simultaneously borrow using overdraft. Together, this evidence suggests that DAP may provide inadequate credit for consumers. We discuss implications for the short‐term credit market. [ABSTRACT FROM AUTHOR]

The former Chief Economist of the OCC discusses how FinTech innovators are developing new ways of improving banking services that promise to increase both the efficiency and soundness of the U.S. financial system. Most of these innovations are focused on either lending or payments, but not both, since FinTech providers, unlike traditional banks, tend to specialize in one of the two activities. This "unbundling" of payments from lending is particularly notable in block‐chain‐based coins used for payments. Although the greatest attention has been paid to Bitcoin in the debate over the future of blockchain‐based payments, the author notes that Bitcoin is not the most promising blockchain‐based payments technology, just the first. For one thing, Bitcoin is not a suitable substitute for the traditional system of checking accounts that execute payments via the centralized Fed‐managed network. Most obviously, account holders with checking accounts want to maintain significant balances in a stable store of value, and Bitcoin's value is anything but stable, owing to its lack of a connection to anything of intrinsic or derivative value. Stablecoins, by contrast, are a rapidly growing segment of blockchain‐based payments with the ability to offer faster, more complex, and more secure payment services, and a virtually riskless store of value. This combination of benefits should allow stablecoins to outcompete both Bitcoin and the existing bank to bank system in the long run. Furthermore, providing stablecoin issuers the option to be chartered as National Banks would, by ensuring their examination by reputable third parties, enable stablecoin issuers to make credible commitments to honest accounting practices—especially, regarding their reported cash resources—and credible disclosure of the algorithms that govern their operations. Despite the potential social gains from creating a blockchain‐based stablecoin payments network and permitting the chartering of stablecoin issuers, both the existence of stablecoin issuers and their prospective chartering as banks remain in doubt because of politics. Incumbent banks, the Federal Reserve, and constituents that benefit from transfers they receive under the current regulatory regime governing incumbent banks all stand to lose power and wealth from the disappearance of the existing system. And so the struggle over the future of payments is not just a matter of economic competition, but also of relative political influence in determining whether socially beneficial technological progress will be permitted. [ABSTRACT FROM AUTHOR]

Member shares of co‐operatives are hybrid securities in that they have characteristics of both equity and liabilities. Prior studies propose that in order to classify hybrid securities as equity or liabilities, the economic substance of those securities should be considered. This study aims to examine whether the economic substance of member shares can be considered as equity or liabilities. Systematic risk is used as a proxy of economic substance. This study tests whether the proportion of member shares to equity is positively or negatively related to equity betas. If the test shows a negative relation, member shares can be considered to have the economic substance of equity; a positive relation implies that member shares have the substance of liabilities. The results show that the proportion of member shares to equity is significantly negatively related to systematic risk of equity, which means that member shares have equity‐like characteristics. The robustness checks taking into account the tax effect of debt support the findings more strongly that redeemable member shares play an equity‐like role in consumer co‐operatives in South Korea. Although the legal and institutional systems in Korea do not provide member shares of consumer cooperatives with a clear status as equity, member shares still show equity‐like economic substance. [ABSTRACT FROM AUTHOR]

The article discusses adverse consequences of the U.S. Banking Act of 1980. The Act does nothing to eliminate hidden substitution effects that diminish the ability of market rates and yields to accurately signal the cost of funds. The Act's provision for the payment of interest on checking accounts will engender structural pressure on short-term rates. Since major provisions of the Act became law in November, 1980, large spreads have developed between unregulated interest rates and rates such as those on checking and savings accounts subject to rate ceilings.

A recent survey (Rhoades, 1977b) of Structure-Conduct-Performance studies in banking lists twelve studies of the effect of concentration on checking-account prices. All twelve rely on proxies for price instead of actual price. Here we evaluate this practice by comparing the three most widely used proxies with the prices actually charged by a sample of 154 Texas banks. [ABSTRACT FROM AUTHOR]

This paper has developed and discussed a general model of the demand for money by household units. It resulted in demand functions for each short term asset that were functions of rates of return and transactions costs of the asset in question and its adjacent assets only. All other returns and costs are irrelevant in the determination of asset holdings. The model also integrated the existence of the two media of exchange into money demand theory. It is demonstrated that an important determinant of the fraction of money holdings held in demand deposits or currency is the fraction of transactions made using that form, the relative transactions costs using both forms, and their rates of return. Finally, commodity inventories have been integrated into a choice theoretic model of optimal behavior so as to consider this asset as a viable alternative form of short term holdings. It is demonstrated that the existence of commodities results in a reduction in the transactions demand for money at all interest rates and consumption levels. [ABSTRACT FROM AUTHOR]

The article discusses checks and their importance as a medium of exchange that is free of regulation, and, it seems, analysis. This article examines the price determinants and price impact in New York State of special banking services known under several names that include Checkmaster, Check-o-matic, or Autocheck. The article focuses on the cost reductions that result in an average price, the profitability of the service, and the insulated nature of the pricing component of checking services. Structure of the price, bank revenue and price, bank costs and profits, comparative prices, and competition are all considered.

The article addresses the democratization of money. The author equates the economic importance of the use of checks or deposit currency with the ability to physically distribute goods through railways. The author considers government intervention into the regulation of deposit currency, as it is beginning to replace the use of currency and coins, which are provided to the public free of charge. The author argues against the criticism that this is a socialization of the banking system by stating that this subsidy would take the place of the costs of generating paper currency and coins, and would strengthen the banking system by the increase in individual bank business.

Debit cards are the fastest growing consumer payment method despite being more expensive and less versatile than credit cards. In this paper, we investigate some of the oft cited explanations for debit card use. Checking account data shows that debit card use is correlated with age, pay frequency, overdrafting, and ATM use, but not income, gender, crime, or expenditure. The data contain some signs that debit cards might be used as a method of spending restraint. (JEL D14, G21, L14 ) [ABSTRACT FROM AUTHOR]

Using the Surveys of Consumer Finance from 1989 to 2001, this study explores households' reasons for not having a checking account. Reasons have changed over time, shifting away from account features and toward human capital and institutional reasons. We also find that reasons for not having an account are related to income, race/ethnicity, marital status/gender, planning horizon, education, previous account experience, and credit history. We suggest potential responses for community educators, firms, and policy makers. [ABSTRACT FROM AUTHOR]

Innovations in banking, like the introduction of credit cards and interest-bearing checking accounts, certainly affect the demand for money and, hence, price levels and interest rates. Indeed, the observed instability of money demand functions in the 1970's and the corresponding difficulty in estimating money demand functions (see Judd and Scadding 1982) has, to a large extent, been attributed to financial innovations. In an extreme case, the current system based oscher (1983), and others. A related problem in the banking literature is the effects of reserve requirements on banks. Within a general equilibrium framework, this issue has been dealt with by Santomero and Siegel (1981) and Siegel (1982), who consider the effects on the variability of the price level, and in overlapping-generations models by Romer (1985) and Freeman (1987) who look at effects on interest rates, savings and welfare. The present paper analyses both of the issues mentioned above. The analytical framework is the class of monetary asset-pricing models developed by Lucas (1980, 1982, 1984), LeRoy (1984a, b), Townsend (1987) and Svensson (1985, 1986). These papers have improved our understanding of monetary phenomena, in particular the relations between real and monetary aspects. They do, however, model the supply of money in the most rudimentary way, by abstracting from a banking sector and by considering an exogenous stock of money and lump-sum monetary transfers. They are, therefore, in their present form not suitable to study financial innovations. In this paper, we take a step towards the study of banking and financial innovations in a rigorous general equilibrium framework by introducing a banking sector in a monetary asset-pricing model of the cash-in-advance variety previously examined in Svensson (1985). By doing this, we can consider two assets that may be used as means of payment. Like Hartley (1988) we distinguish between cash goods, which can only be purchased with cash, and... [ABSTRACT FROM AUTHOR]

This article presents the author's reply to comments on his article Cash As An Item of Stock. Since I have used an unvarying 0.10 per annum for the overdraft cost, F. K. Wright assumes that this was only the charge levied by the Bank. Whilst I can find no grounds for this interpretation of my work, I should explain that this particular figure was chosen solely for ease of calculation. A much more important point between us, however, is the value one should assign to the total cost of operating an overdraft. I had always envisaged that this particular cost would incorporate both the charge levied by the Bank and the Opportunity Cost of not using the liquid cash which the overdraft had created.