Banking deserts in US are literally in deserts only…

Banking deserts in US are literally in deserts only…

Interesting post on NY Fed’s Liberty Street blog.

Below we map all 75,057 tracts covered in the 2010 census, with the 1,214 banking desert tracts shaded red. Commentary on banking deserts often paints a picture of neglected urban landscapes and communities abandoned by banks. In fact, most banking deserts are in very sparsely populated areas in the West; most of Arizona, northern Nevada, and southwestern California, which are actual deserts (or semi-arid regions), are also banking deserts. Mississippi, Arkansas, and Maine have a few deserts, but there are almost none in the Northeast or the Midwest. Overall, just 23 percent of banking deserts are in Metropolitan Statistical Areas (MSAs), with the rest in rural areas. New York City, the largest MSA in the country, has no banking deserts, nor do its neighboring MSAs, Boston and Philadelphia. 

The relative paucity of urban deserts supports the finding in our earlier post that residents of majority-minority census tracts, which tend to be urban, are less likely to live in a banking desert than residents of other tracts. Although that result seems sensible (since urban areas are better able to support a bank branch), it might depend partly on how banking deserts are defined (see this study). 

The ‘Banking Desert’ Mirage

Most people who live in these deserts do not complain of lack of branches, but lack of money:

“Banking desert” is an evocative term, but our findings make us wonder if it’s a distraction. Most banking deserts are literally in deserts, where few people live, and states with a higher share of bank desert dwellers don’t have more unbanked households. 

On the policy front, physical distance from a bank seems not to be what keeps the unbanked away, and so motivating or compelling banks to open branches near the unbanked may not reduce their numbers. In fact, in the FDIC’s 2015 survey, only 2 percent of unbanked respondents cited “inconvenient location” as the main reason why they did not have a bank account. Far more important reasons were “not enough money to keep in account,” “don’t trust banks,” and “account fees too high.” Those issues merit more attention than banking deserts. 


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