Recent Study Explores Financial Choices of New Yorkers
by Sarah Bainton Kahn
New York Mayor Michael R. Bloomberg, Deputy Mayor Linda Gibbs and Consumer Affairs Commissioner Jonathan Mintz recently released the findings of the city’s Neighborhood Financial Services (NFS) study and announced the launch of two new city initiatives designed to improve low-income residents’ access to mainstream financial services that meet their needs.
The study, conducted by the New York City Department of Consumer Affairs’ Office of Financial Empowerment, with support from the Center for Economic Opportunity and the William J. Clinton Foundation, found that the lack of financial services and products that meet the needs of low-income residents drives many New Yorkers to rely on less traditional and more costly financial services like check cashers.
New York is one of 10 cities currently participating in NLC’s Bank On Cities Campaign, a technical assistance project conducted by the Institute for Youth, Education, and Families. The project strategically engages mayors and their senior staff in advancing local efforts to connect residents to mainstream financial services. Other participating cities include: Boston; Houston; Los Angeles; Miami; Providence, R.I.; San Antonio; San Francisco; Savannah, Ga.; and Seattle.
Study Indicates Mismatch Between Needs and Services
The NFS study focused on two neighborhoods — the Melrose section of the Bronx and the Jamaica section of Queens — and relied on surveys and focus groups to ask more than 600 residents about the availability and usage of financial products and services in their communities.
The study’s results indicate a basic mismatch between the financial needs of low-income residents and the financial products and services available to them. Many of those surveyed reported that, despite the availability of mainstream banking institutions in their neighborhoods, the products and services offered by these banks often failed to meet residents’ needs. These findings contradict a widely-held notion that individuals choose alternative forms of banking primarily because they don’t live within close proximity to a financial institution.
One-third of the Jamaica and Melrose residents surveyed are “unbanked” and do not have a checking or savings account. Three-quarters of neighborhood residents use check cashers at least once every few months, spending an estimated $19 million per year in check cashing fees. The study also reported that Jamaica and Melrose have nearly twice the number of check cashers and more than five times the number of pawn brokers per capita than the city average. “This study identifies — and quantifies — critical mismatches in the supply and demand for financial products and services in low-income communities,” said Mintz. “These findings suggest fundamental paradigm shifts for policy makers, advocates, and particularly financial institutions focused on expanding inroads to mainstream banking.”
Improving Financial Opportunities for Residents
New York’s Office of Financial Empowerment recently launched two new initiatives — a Financial Empowerment Center and a Financial Education Network — both designed to help residents get on the path to financial stability.
The Financial Empowerment Center is a pilot center located in the Bronx. It will offer free financial counseling to residents, and allow them to work with financial coaches who will teach them about money management and budgeting, financial planning, credit and debit counseling, affordable banking services, and government benefit screenings.
The new online Financial Education Network is a searchable database of free and low-cost financial education services available across the city, and is available in 13 languages.
Implications for Other Cities
According to the Center for Financial Services Innovation, 28 million Americans are “unbanked,” meaning they do not use or have access to a bank account, and more than 44 million are “underbanked,” spending approximately $11 billion each year on alternative financial services such as those provided by check cashers, payday loan outlets and pawn shops.
Other cities around the country have engaged in similar research projects to identify gaps in financial services for residents. Municipal leaders in cities such as Savannah, Providence and San Francisco have realized that one of the first steps to help families become more financially stable is to learn about challenges they face and the availability of services in their neighborhoods. The three cities listed above are conducting their research in partnership with the William J. Clinton Foundation and local community partners.
Details: The full Neighborhood Financial Services report is available at www.nyc.gov/html/ofe/downloads/pdf/NFS_Compiled.pdf. For more information about how cities are connecting residents to mainstream financial services, contact Sarah Bainton Kahn at bainton@nlc.org or (202) 626-3044, or Heidi Goldberg at goldberg@nlc.org or (202) 626-3069.
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