“Banking development districts” and “savings lotteries” could help more Texans open and use bank accounts.
In the parts of Dallas known as South Dallas and West Dallas, west of the Trinity River, many neighborhoods could rightly be called “banking deserts.”
“You see a handful of bank branches, a Chase drive-through or an ATM kiosk in a strip mall,” says Texas State Rep. Eric Johnson, whose district includes these areas. “You don’;t see any – or very few – of the smaller community banks or credit unions.”
But what these neighborhoods do have in abundance, says Johnson, are what he calls “lower-tier” financial services providers: payday lenders, title lenders, pawn shops, and check cashers.
Dallas is, in fact, among the most “unbanked” cities in America, and Texas is among the most “unbanked” states. According to the Federal Deposit Insurance Corporation (FDIC), more than one-third of Dallas-area households – about 36 percent – either have no bank account at all or rely mostly on check cashers and other non-bank providers for financial services. These households are what the FDIC calls “unbanked” and “underbanked.” Statewide, nearly 4 in 10 Texas households – or about 38 percent – fall into one of these categories, compared to about 27 percent nationwide.
But Texas might now be on the path to reversing these trends. In May, Johnson successfully led the passage of legislation that could put Texas at the forefront of improving access to mainstream financial services. Better access to banks, Johnson hopes, would also mean better access to mainstream financial products such as home mortgages, small business loans and lower-cost consumer credit – all of which are in short supply in many parts of Dallas and Texas.