Among the many inequities that the COVID-19 pandemic has revealed, a glaring example is the number of people in the United States lacking sufficient access to a bank account. This has led to millions of households—especially those with lower incomes—facing delays in receiving their Economic Impact Payments. The extent of financial exclusion is large—6.5% of U.S. households are unbanked, having no access to a bank account, while 18.7% are underbanked, meaning they may have a bank account but also rely on alternative financial services, such as payday loans. These disparities are even worse for Black and Latinx households. 

Today, Prosperity Now is releasing a new report, Financial Access for All: Putting Banking within Reach through a Universal Account System, that looks at how universal access to banking could support vulnerable households. Aside from streamlining government payments, like stimulus checks, financial access can help families better manage their money, avoid costly alternative financial services and even build wealth. 

As our report outlines, a good way to connect households to banking would be to establish universal accounts—transaction or savings accounts that are accessible to everyone. These accounts should have four key features to ensure equitable access: 

• Minimal fees and no minimum balances: The cost of having a bank account, which can include expensive overdraft fees, presents an obstacle for many low-income households. For those living paycheck to paycheck, minimum balance requirements can also be hard to meet. Given this, universal accounts should have minimal fees and no minimum balances. 

• Real-time payments: Real-time payments would allow consumers to access deposited funds instantly, instead of having to wait for days. This could help low-income individuals reduce their reliance on predatory products, like payday loans, while they wait for their paychecks to clear.  

• Smarter anti-money laundering (AML) requirements: AML requirements mean some applicants for bank accounts may be denied for reasons such as incurring overdraft fees or having an account closed involuntarily in the past. In order to not bar these innocent people from the financial system, universal accounts should be exempt from or have smarter AML requirements.  

• Additional services like mobile banking, debit cards, automatic bill-pay, and savings incentives and tools: These features would allow households to access their bank accounts quickly and conveniently, as well as help them manage their spending and savings. 

A universal account system could take several forms. One possibility is for federal regulators to require banks and credit unions to offer basic, low-cost accounts. The Bank On initiative, which has worked to increase access to safe, affordable bank accounts, is a good example of how this model could be successful and benefit both consumers and banks. 

As an alternative to being offered through banks, universal accounts could also be provided by the government. For example, government-issued bank accounts called FedAccounts, administered by the Federal Reserve, would be accessible to all individuals and have minimal associated fees. Additional features, like online banking, and a partnership with the United States Postal Service (USPS) could contribute to FedAccounts' ease of use. There are several pieces of legislation, such as Rep. Rashida Tlaib's (D-MI-13) Automatic Boost to Communities Act, that have proposed the implementation of FedAccounts. 

Finally, postal banking proposals, such as Sens. Kirsten Gillibrand (D-NY) and Bernie Sanders' (I-VT) Postal Banking Act, would allow USPS locations around the country to offer low-cost banking services, including transaction and savings accounts. Postal banking could increase banking access for low-income households—particularly households of color—living in banking deserts, while also raising some much-needed revenue for USPS. 

The delays in disbursing the COVID-19 stimulus payments have made it clear that we must be better prepared for any future crisis. A universal account system can help ensure that those in need are not left waiting for assistance. Most importantly, it can increase financial access among low-income households, which is key to helping them build financial security and long-term wealth. To learn more about how universal accounts can support vulnerable households, check out our report.