States Where Financial Inclusion Has Improved the Most Since 2013

There’s no question that consumers are facing some tough economic headwinds: 40-year inflation highs, supply shortages of everything from sriracha sauce to used vehicles, and a stock market that lost more than 20% of its value during 2022. Amid all this uncertainty, however, now may be a good time to zoom out and observe how much the economic situation has collectively improved for Americans, some of whom were sidelined from being full participants in the economy just a decade ago.

Experian looked at the changes in three basic economic metrics—the percentage of Americans who are not unbanked or underbanked, average incomes (adjusted for inflation), and FICO Scores—to see how (and where) these measures of financial inclusion have improved since 2013.

The Unbanked and Underbanked: Who They Are, and How Many Households Are Affected

Unbanked consumers and households have no access to traditional banking products, such as personal checking accounts and savings accounts. As a consequence, many of the unbanked must use more expensive, inconvenient or otherwise less-beneficial alternatives—including prepaid debit cards, money orders and payday loans.

According to the most recent data from the Federal Deposit Insurance Corporation (FDIC), 4.5%, or about 6 million households, were unbanked as of 2021. It’s a vast improvement from 2013, when 7.7% of households were unbanked.

The Percentage of Unbanked Americans Continues to Decline

There are also some consumers and households who have partial access to banking services. These consumers are referred to as “underbanked” by the FDIC. Unlike the unbanked, however, the underbanked may have one or more of these traditional banking products but also regularly use alternative financial services, such as money orders and check cashing services, to make transactions. In 2021, some 14.1% of U.S. households were underbanked, down from 20% in 2013.

Often, both the unbanked and underbanked use alternative services to make transactions that banks offer either for free or at a substantially lower financial cost.

Most States Have Seen Financial Inclusiveness Improve Since 2013, Some Dramatically

In 2013, the rate of unbanked and underbanked households reached nearly 50% in some states. And some states had more catching up to do than others. To that end, we show the states where the percentage of unbanked has decreased the most.

The good news: All but three states have fewer unbanked households than they did in 2013. And there’s been significant improvement in some states where the proportion of unbanked households was much higher in 2013. Seven states, most of which are in the South, saw the percentage of unbanked households fall by 5 percentage points or more from their post-2013 peaks.

Reduction of Unbanked Households by State
State Unbanked Households, 2021 (%) Change From 2013-2021 (Percentage Points)
Arizona 3.6 -9.2
Arkansas 3.4 -8.9
West Virginia 3 -8
District of Columbia 4.5 -7.3
Louisiana 8.1 -5.8
Oklahoma 5.4 -5.5
North Carolina 3.3 -5.1
South Carolina 5.5 -5
Texas 5.6 -4.8
Virginia 1.8 -4.7
New Jersey 3.5 -4.7
Tennessee 5 -4.7
Alabama 4.7 -4.5
Kentucky 5.2 -4.5
Wyoming 1.3 -4.3
Georgia 6.7 -4.2
Delaware 2 -4.1
New Mexico 7 -3.9
Ohio 3.5 -3.7
Montana 3 -3.6
Mississippi 11.1 -3.4
California 5 -3
Illinois 4.4 -3
Oregon 1.6 -2.9
Nebraska 3 -2.7
Rhode Island 3.5 -2.7
Wisconsin 2.1 -2.7
Pennsylvania 2.6 -2.6
New York 5.9 -2.6
Florida 3.7 -2.5
Idaho 3 -2.4
Nevada 5.6 -2.3
Hawaii 1.5 -2.3
Kansas 3.8 -2.2
Massachusetts 3.6 -2.2
Utah 1.2 -2.1
Washington 2.1 -2
Indiana 5.6 -1.6
Iowa 3 -1.5
Missouri 7.4 -1.5
New Hampshire 1.4 -1.5
Minnesota 2.4 -1.2
Connecticut 4.4 -1.2
Maine 1.3 -1.1
Vermont 2.5 -0.6
South Dakota 3.7 -0.5
Colorado 6 -0.4
Michigan 5.4 -0.3
Maryland 5 +0.2
North Dakota 3.2 +0.4
Alaska 4.8 +2.9

Source: FDIC; Experian calculations

The states at the bottom of the above table aren’t necessarily laggards, as many of them already had fuller banking participation than other states that saw significant improvements over the decade. Overall, there’s now less of a difference among the unbanked in the individual states now than in 2013.

States Where Personal Incomes Are Rising the Most

Personal income growth is one of the primary ways to measure a region’s or area’s overall economic health: Income on the rise usually translates into more economic consumption, which is the lifeblood of the U.S. economy. More economic activity, and more jobs, enable unbanked households to better participate in the financial system.

And more good news: All 50 states grew their incomes in the years leading up to the pandemic. Here, we see a significant Western tilt.

Increase in Income by State
State Average Personal Income, 2021 Annualized Income Increase, 2013-2021
California $76,614 5.9%
Oregon $61,596 5.6%
Washington $73,775 5.6%
Utah $56,019 5.5%
Nevada $60,213 5.4%
Florida $62,270 5.3%
Arizona $55,487 5.1%
Colorado $70,706 5.1%
Massachusetts $83,653 5.0%
Georgia $55,786 5.0%
North Carolina $56,173 4.9%
Idaho $52,369 4.8%
Maine $58,484 4.8%
South Carolina $52,467 4.7%
New Hampshire $73,200 4.7%
New York $76,837 4.7%
New Mexico $50,311 4.6%
Tennessee $56,560 4.6%
Illinois $67,244 4.6%
Michigan $56,494 4.6%
District of Columbia $96,477 4.5%
Kentucky $51,266 4.5%
Indiana $56,497 4.5%
Rhode Island $64,376 4.4%
South Dakota $64,462 4.4%
New Jersey $77,016 4.3%
Montana $56,949 4.3%
Pennsylvania $64,279 4.2%
Hawaii $60,947 4.2%
Minnesota $66,280 4.2%
Wisconsin $59,626 4.2%
Alabama $49,769 4.1%
Arkansas $50,625 4.1%
Ohio $56,879 4.1%
West Virginia $48,488 4%
Virginia $66,305 4%
Missouri $55,325 4%
Vermont $61,882 3.8%
Delaware $59,931 3.8%
Mississippi $45,881 3.7%
Maryland $69,817 3.7%
Texas $59,865 3.7%
Connecticut $83,294 3.6%
Iowa $57,163 3.5%
Nebraska $61,205 3.5%
Louisiana $54,217 3.4%
Wyoming $69,666 3.3%
Kansas $58,924 3.1%
Alaska $65,813 2.8%
Oklahoma $53,870 2.6%
North Dakota $64,524 2%

Source: Bureau of Economic Analysis

At the other end of the spectrum, many of the Great Plains states, crushed by floods and a boom and bust cycle that hit energy producers in the region earlier in the decade, have seen lower income growth.

Credit Scores Have Improved Across All States Since 2013

All 50 states saw average FICO Score improvement from 2013 to 2021. Again, as with personal incomes, the bigger gains were in Western states. But the nation’s capital and Michigan also observed significant improvement versus FICO Scores earlier in the decade.

FICO Score Improvement by State
State Average FICO Score, June 2021 FICO Score Point Improvement, 2013-2021
Nevada 701 34
District of Columbia 717 31
Arizona 710 30
Michigan 719 30
California 721 29
Washington 734 29
Florida 707 28
Oregon 731 28
Idaho 725 27
Delaware 714 26
Utah 727 26
Colorado 728 25
Georgia 693 25
Maine 727 24
South Carolina 693 24
Wisconsin 735 24
Indiana 712 23
Maryland 716 23
North Carolina 707 23
New Mexico 699 23
Virginia 721 23
West Virginia 699 23
Alaska 717 22
Hawaii 732 22
Mississippi 681 22
New Hampshire 734 22
Rhode Island 723 22
Tennessee 701 22
Kentucky 702 21
Minnesota 742 21
Montana 730 21
New Jersey 725 21
Ohio 715 21
Pennsylvania 724 21
Texas 692 21
Wyoming 722 21
Massachusetts 732 20
Missouri 711 20
New York 722 20
Illinois 719 19
Kansas 721 19
Louisiana 689 19
Vermont 736 19
Nebraska 731 18
Alabama 691 17
Arkansas 694 17
Connecticut 726 17
Iowa 729 17
Oklahoma 692 17
South Dakota 733 15
North Dakota 733 14

Source: Experian

Bringing It All Together

Based on the observations above, the following six states (and Washington, D.C.) saw greater-than-average improvement in all three categories:

States With Above Average Improvement in Economic Well-Being, 2013-2021
State Change in Unbanked Households, (Percentage Points) Annualized Income Increase (%) FICO Score Improvement (Points)
Arizona -9.2 5.1 30
District of Columbia -7.3 4.5 31
Georgia -4.2 5.0 25
New Mexico -3.9 4.6 23
North Carolina -5.1 4.9 23
Oregon -2.9 5.6 28
South Carolina -5 4.7 24

Source: Experian; based on FDIC, BEA and Experian data

Will Financial Inclusion Continue to Improve?

Cutting in half the number of households without a bank account over a decade is an achievement, but there’s still some way to go. While the percentage of Americans with adequate access to banks and credit unions have improved markedly over the past decade, there are still about 5 million households that transact largely outside of the banking system, relying on more expensive means for virtually any type of financial transaction.

Percentage of Unbanked Persons or Households, Selected Nations

For their part, more than 200 banks are offering accounts designed to assist potential new customers gain access to low-cost, low initial deposit savings and checking accounts through Bank-On, a program by the nonprofit Cities for Financial Empowerment. Bank-On accounts were designed to assist the unbanked access to low-cost savings and checking accounts.

To find a bank with an account that best suits your needs, visit the FDIC’s GetBanked program.

The post States Where Financial Inclusion Has Improved the Most Since 2013 appeared first on Experian’s Official Credit Advice Blog.

https://www.experian.com/blogs/ask-experian/research/states-where-financial-inclusion-has-improved-the-most/

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