Without a bank account, a stimulus check recipient had to rely on a paper check delivered by mail.

Expanded federal anti-poverty aid during the pandemic has been hailed by advocates as something that could lift millions above the poverty line, but for some, its success could hinge on whether they have access to a bank account.

A recent nationwide survey by TD Bank of people who use few or no mainstream banking products found that about half of respondents saved less than $50 each month. In Boston, 69 percent of these unbanked and underbanked individuals did not have enough savings to cover a month of expenses if they lost all income sources, despite successive federal stimulus checks and monthly payments via the expanded federal child tax credit.

“Here we have this event that throws us all back on our heels, makes all of us more thoughtful perhaps about how to plan for disasters and be ready for a turbulent and uncertain future,” said Timothy Flacke, executive director of the nonprofit Commonwealth. “And yet for lower- and moderate-income people especially, just something as basic as a place to store up a little bit of cash when you have a little bit to store and then be able to get it when you need it is still a gap in the marketplace.”

Poverty Dropped, Then Rose

While most U.S. households have a banking account, the Federal Reserve’s annual report on economic well-being continued to show opportunities for more people to gain access to mainstream banking products. Across the U.S., 5 percent of adults did not have a checking, savings or money market account in 2020, according to the report released in May. The unbanked rate for Black households was 13 percent, and for Hispanic households, it was 9 percent.

Another 13 percent of households were underbanked – they had a bank account but still used an alternative and usually more expensive financial services product, including money orders and check-cashing services. The rate of underbanked increased to 27 percent for Black households and 21 percent for Hispanics.

The Fed study also showed higher unbanked and underbanked rates among adults with lower income and with less education.

Before the pandemic, the U.S. poverty rate was 10.5 percent, according to the U.S. Census Bureau. While the official 2020 rate will not be available until later this month, other studies suggest that the poverty rate has declined. One study this summer from the Urban Institute, a Washington-based think tank, projects a 2021 poverty rate down to 7.7 percent.

But even with improving financial conditions spurred by government aid during the pandemic, households continue to struggle with savings and financial security.

The Federal Reserve did briefly see an improvement in whether a household had enough savings to cover an unexpected $400 expense early in the pandemic, when the Trump administration and Congress struck a deal to send $1,200 checks to most Americans. While 37 percent of respondents in 2019 could not cover a $400 expense, the rate improved to 30 percent in July 2020 before ending the year at 36 percent before a second and third round of federal checks totaling $2,000 were sent out earlier this year.

Without bank accounts, some stimulus check recipienst had to rely on a paper check delivered by mail. For the newly expanded federal child tax credit, which gives families with children $250 to $300 each month, families will also be able to receive reloadable prepaid debit cards or payment apps that have routing and account numbers, the IRS says. Even so, Columbia University researchers estimate the one-year program could cut the child poverty rate by 45 percent.

Opportunity to Gain Customers

Commonwealth, a Boston-based nonprofit that promotes financial security nationwide, has found that the rate of households that could not cover a $400 emergency expense increases to 58 percent for households with income less than $60,000, 70 percent for Hispanic households with less than $60,000 in income, and 72 percent for Black households with income less than $60,000.

“To see that kind of response is really noteworthy,” Flacke, Commonwealth’s co-founder and executive director, said of the results. “We still see that for the average person it’s a struggle to have a product or tool or a feature that can allow them to build up or draw down liquid savings.”

While behavioral changes are part of the solution, Flacke said the unbanked and underbanked also need options from financial institutions and financial technology companies, adding that the pandemic has suggested that opportunities are there to reach these individuals.

Commowealth’s research has shown that 38 percent of survey respondents changed how they bank during the pandemic, going against traditional wisdom that people are reluctant to change banking relationships, Flacke said. He added that people who had experienced a financial hardship were then three times more likely to use financial apps then those who did not have a hardship, possibly pointing to an openness to change.

“All of us operate with the tools and choices available to us,” Flacke said. “From a mission perspective, we want to see as many and as many high-quality tools and choices available to just regular working people and people with lower incomes.”

Financial institutions could also find opportunities in government policies, such as the expanded federal child tax credit, to offer products and services to help customers and prospective customers make the most of these benefits, Flacke said. Truist Bank – the North Carolina regional giant formed when BB&T and Sun Trust merged in 2019 – is one such lender with a marketing campaign focused on the child tax credit

Affordable Products Needed

TD Bank’s survey of 1,000 unbanked and underbanked individuals, including a subset in Boston, found that 50 percent of respondents in Boston did not keep a spending budget. Of those that did have a budget, 58 percent had difficulty sticking to it, often overspending.

Like many banks in recent years, TD Bank introduced a new checking account in August that meets national standards created by the Bank On movement for meeting the needs of unbanked and underbanked individuals, including low costs and no overdraft fees.

Diane McLaughlin

“You really need to make sure that you’ve got a product that meets your needs and that’s affordable and easy for you to be able to start that journey and start that process,” said Lisa Joyner, TD Bank’s New England regional community development manager.

Joyner works with nonprofit organizations, community development corporations and community development financial institutions to understand the needs of the unbanked and underbanked. She said in addition to having the right product and tools, financial education is a key need for these communities.

Trust has often been an issue keeping people out of banking relationships, and while 30 percent of U.S. respondents to TD Bank’s survey said the pandemic had negatively impacted their trust in banks, only 20 percent of Boston respondents had less trust in banks, providing an opportunity to reach people in this market.