By Claudia Sahm / Bloomberg Opinion

Since the failure of Silicon Valley Bank, we have heard a lot about deposit insurance and whether our money really is safe being left at a bank.

But that discussion ignores those who don’t have bank accounts, better known as the unbanked, or who have accounts but also rely on alternative financial services like payday or auto title lenders and check cashers; the underbanked. Those services are less regulated, uninsured and costlier relative to banks and credit unions. They can be riskier, too, as the recent allegations of allowing fraudulent accounts against Block (formerly known as Square), which offers a digital wallet promoted for the underbanked, remind us. (Block said it will explore legal action against Hindenburg Research after the short seller issued a report alleging the payments company facilitated fraudsters.)

Overall, about 6 million Americans are unbanked and another 19 million are underbanked, according to the Federal Deposit Insurance Corp.’s biennial survey. However, there are stark differences among those who are outside the traditional banking system. Roughly one-third of Black, Hispanic and Native American households are unbanked or underbanked, which is three times the rate of white households. Similar disparities exist across education, income and disability status.

Given the costs and risks of operating outside the banking system, why don’t families just use banks? Some can’t. The most common reason in the FDIC survey for being unbanked was “Don’t have enough money to meet minimum balance requirements.” The extra income from stimulus checks and unemployment insurance and the strong labor market loosened that constraint; there were 1.2 million fewer unbanked households in 2021 than in 2019. And there are 5 million fewer relative to 2011 during the sluggish economic recovery from the Great Recession. But we can’t rely solely on smart fiscal policy to make banking services “work” for all Americans. It requires additional approaches.

An increasingly popular alternative to traditional banking has been “fintech” firms such as PayPal, Venmo and Cash App that use online platforms or digital apps to quickly send and receive money. The use of these products has grown substantially in recent years. In 2021, nearly 30 percent of the banked and about 12 percent of the unbanked had used them to make payments or receive money. However, money that customers keep with fintech firms is not insured by the FDIC, and the regulatory oversight of such non-banks is notably less than at banks. Safety and soundness are not guaranteed, and the burden is on customers to do their own due diligence. As a result, a vulnerable population can sometimes be made more vulnerable. But the reliance on the internet for such services means they won’t meet the needs of some populations such as the elderly and those without reliable, high-speed connections.

Real-time payments for the banking system, in which funds deposited at a bank are available immediately for use, would reduce the need for costly check-cashing services and avoid overdraft fees. Normally, money from a check is available two business days after deposited, but in some cases it could take up to a week, and for those living paycheck-to-paycheck that is often too slow. The current payments system at banks penalizes those who need access the most and pushes them to costlier options. Ellen Merry, an economist at the Federal Reserve, found that income that various varies considerably from month to month — which is often the case for low-wage and gig workers — is strongly associated with inability to access one’s money at the bank.

Later this year the Federal Reserve will launch FedNow, a payments service that will allow customers of participating banks and other financial institutions to send and receive funds immediately. That would put banks on a more even footing with non-bank digital wallets and mobile apps on convenience, while maintaining their additional consumer protections. However, adoption by banks is voluntary, and it will take time for the unbanked and underbanked to learn about this option.

Bank accounts that are tailored to people on the margins of the banking system are essential. Since the pandemic began, the FDIC has led the #GetBanked program to help people open bank accounts. One impetus was to ensure that families got all their money from their stimulus checks, instead of losing some of it to check-cashing fees. One of the partners in the initiative is Bank On from the nonprofit Cities for Financial Empowerment Fund. They certify bank or credit union accounts that have a $25 or less minimum opening balance, $5 or less required monthly fees, and other standard features for free, including FDIC deposit insurance. Currently, there are 340 accounts across the country, largely at community and regional banks and credit unions in the program. Participation by larger banks would greatly extend the reach of the program. The unbanked is a structural problem which requires structural changes in the offerings of banks.

Discussions now about how to make banks safer for customers should also include how to make them more inclusive. Everyone deserves that peace of mind with their money.

Claudia Sahm is the founder of Sahm Consulting and a former Federal Reserve economist. She is the creator of the Sahm rule, a recession indicator.