Imagine a world where you don’t use a bank account.
 
That world is a reality for one in four people living in Baton Rouge who are either unbanked or underbanked, meaning they don’t use a bank or credit union account. Instead, they must rely upon alternative financial services such as check-cashing services, pawn shops and payday loan outlets for their basic financial needs. 
A consumer may be unbanked or underbanked for a number of reasons: a poor credit history, an outstanding issue from a previous banking relationship, living paycheck-to-paycheck due to unstable and minimal income or a lack of appropriate identification and language barriers for immigrant residents.
Individuals who use alternative financial services are subject to substantial fees and interest rates, inhibiting their ability to make full use of their paycheck and disallowing families to save and protect their wealth. 
In an attempt to make the financial mainstream more accessible to East Baton Rouge Parish residents, Mayor-President Kip Holden partnered with local financial leaders last week to unveil a new program called “Bank On Baton Rouge,” a plan designed to help unbanked or underbanked East Baton Rouge residents open free or low-cost checking and savings accounts. 
“Bank On Baton Rouge will offer a low-cost bank and credit union accounts to these unbanked individuals, and allow them to start saving their money instead of using it to pay expensive check-cashing fees and to take out high-interest payday loans,” Holden said. 
Bank On Baton Rouge will be extremely effective in helping break the poverty cycle. Unbanked consumers will now be able to establish a credit history, allowing them to acquire assets such as cars and homes. 
Not only will this program be beneficial for consumers, but it will give banks the opportunity to capitalize on what has been a largely untapped market. Banks will now have more capital to give out loans, certificates of deposits and other financial products. 
Holden also noted that research indicates that over a lifetime, the average unbanked American worker spends more than $40,000 just to cash his or her checks. 
Bank On Baton Rouge is modeled after an similar program launched in San Francisco in 2006 where the city of San Francisco, the Federal Reserve, and 15 banks and credit unions partnered to make checking and savings accounts more accessible to unbanked and underbanked consumers. 
The program required that institutions charge reduced or no fees to open saving and checking accounts, waive monthly minimum balance requirements and eliminate certain overdraft charges. The Bank On San Francisco program was a success, opening more than 11,000 Bank On San Francisco accounts within its first year. 
One of the first requirements for Bank On Baton Rouge is for all banks and credit unions to forgive most past financial mistakes — such as bounced checks — and allow people to open accounts who would otherwise be blocked from doing so.
This requirement is vital. The primary purpose of this program is not only to forgive previous mistakes, but to teach applicants proper use of financial services. 
However, there are some limitations regarding who qualifies for the program; for example, anyone who has committed bank fraud is not allowed to participate. These types of requirements are essential, ensuring the validity of the program and prohibiting applicants who do not plan on using the program for legitimate purposes.
Holden is taking a major step in increasing social mobility by implementing this banking program. Now, consumers will be better positioned to pay for a child’s education, save to buy a house or car and cover household expenditures.
Holden, in partnership with certain financial institutions, is taking a crack at breaking the poverty cycle and improving the overall Baton Rouge economy. It’s a win-win situation for everyone.
Jay Meyers is a 19-year-old economics freshman from Shreveport. Follow him on Twitter @TDR_jmeyers.
 
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Contact Jay Meyers at [email protected]