State legislators in California have proposed offering banking accounts with low or no fees with the objective of supporting the needs of low-income individuals, although anyone would be eligible for the state-sponsored account. They aren’t planning on creating a state bank per se, but partnering with the private sector to make these accounts available.
Government Technology summarized the initiate:
Nearly 20 Democratic legislators on Tuesday introduced a bill to establish a statewide public banking program, which would partner with private sector financial institutions to provide low-income workers with access to no-fee money transactions and debit cards.
Labor advocates said the program could save hundreds of dollars annually for households who do not have bank accounts or rely on alternative services such as money orders and payday loans.
“For an equitable recovery, we cannot look to the same institutions, the Wall Street banks that have long seeded the problems laid bare at this time,” said Jyotswaroop Bawa, organizing and campaigns director for the California Reinvestment Coalition.
I am not sure what the State of California believes that they will achieve that isn’t already available in the market.
- Many financial institutions already offer low-cost banking options with no overdraft and no or limited check writing that might cause individuals to overdraw their account. I’ll point out that Bank of America, with a lot of branches in California has just such an account.
- Green Dot Corporation, a California headquartered company, and other firms that offer general purpose reloadable prepaid cards offer robust banking services at a low cost, available on-line and in retail locations.
- Neo banks and challenger banks like Chime, Dave, N26 and many, many others offer free accounts particularly sought after by the digital-first population.
So the good news for California legislators is that the solution already exists; there is no need to reinvent the wheel. Perhaps they could turn their attention to promoting these options or work on expanding access to the internet so more consumers can take full advantage of the value of these accounts.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
