By Patti Murphy
ProScribes Inc.
The percentage of Americans that don't use banks hit an all-time low in 2019. While the numbers may inch up due to the economic fallout from COVID-19, at nearly 95 percent of all households, the U.S. banked population is strong.
Only about 7.1 million households (5.4 percent of all households) in the United States were unbanked in 2019, according How American Banks: Household Use of Banking and Financial Services, 2019 FDIC Survey, released in late 2020 by the Federal Deposit Insurance Corp. That's the lowest number since the FDIC began surveying consumers on their banking practices in 2009. Back then, 7.6 percent of households were unbanked, meaning no one in those households had checking or savings accounts at federally insured banks or credit unions. FDIC data indicates the unbanked population peaked in 2011, at 8.2 percent of households.
In a postscript to the report, the FDIC noted that while the data reflects what was going on in 2019, most of the analysis was done n 2020. And the COVID-19 pandemic may have thrown more Americans out of the banking system.
The sad but very real fact is that being unbanked is more about income than preferences. Some Americans dislike banks enough to stay clear of them: 56.2 percent of respondents said they had no interest in having bank accounts; just 24.8 percent were very or somewhat interested, the FDIC reported. But socioeconomic circumstances present the biggest obstacles; many folks simply can't afford bank accounts.
As senior editor for The Green Sheet, I often receive news of emerging technologies and payment form factors, like cryptocurrencies, that could help move unbanked consumers into the banking mainstream. One example is crypto ATMs, which help consumers convert greenbacks into cryptocurrency, which they then can use to stash cash and invest.
This concept may fit in emerging markets where bank branches are scarce and poor people need ways to transact, but I don't see the case for it in the United States. Americans who can't afford bank accounts—or basic expenses—aren't going to be interested in converting what little cash they have to volatile cryptocurrencies.
As the FDIC noted in its report, a significant number of Americans have no savings for unexpected expenses or emergencies—35.8 percent of all households. Moreover, 37 percent of households could not cover an emergency expense of $400 using only cash, savings or a credit card they could pay in full following their next monthly statement. Here's another telling data point from the FDIC report: nearly one in five households (19.7 percent) don't have credit scores, which makes it even harder to obtain credit for emergency expenses. The situation is even more dire among unbanked households: nearly three in four (74 percent) have no savings for unexpected expenses or emergencies; 80.2 percent do not have credit scores.
Nonbank P2P services, like the PayPal unit Venmo, also get touted as banking alternatives for the unbanked. But as the FDIC's survey revealed, fewer than one in 10 unbanked households (just 8.8 percent) use nonbank P2P services, compared with nearly one in three (32.3 percent) of banked households.
Meanwhile, a survey Venmo conducted of its users suggested folks who use the service really like it (89 percent), and that nearly half (47 percent) would use their Venmo app at merchant checkouts if they had the option.
Asked to rank the categories of items they would most likely purchase using Venmo, the top vote getters were clothing, shoes and accessories; restaurants and beverages; groceries; and food delivery.
I admit I'm a happy Venmo user. I use the app to pay small, independent businesses, like the dog's veterinarian and some artists I support. It's really no more of a hassle for me to send payment instructions from my phone than it is to pull out a card while I'm at the POS, and there's no need to touch a POS device that countless others have touched. Plus, it's a near instantaneous payment.
Users can tie prepaid debit cards to Venmo accounts, which makes it a viable option for the unbanked. 
Patti Murphy is senior editor at The Green Sheet and co-host of the Merchant Sales Podcast. Follow her on Twitter @GS_PayMaven.
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