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Bank on Houston Effort Sees Big Returns as Residents Open Thousands of Accounts

"I don't have to worry about having cash in my purse all the time."

"I learned about saving, and I'm going to teach my children to save, and try to save for my son to go to college."

"When I was in the hospital, I was able to pay my bills, and my check was automatically deposited—I didn't have to worry about whether it would be stolen."

—Participants in the Bank on Houston program

Enrollment is up in financial education courses in Houston, including classes at Credit Coalition.

Exceptionally high numbers of unbanked Houston residents are experiencing the advantages of having a bank account as the Bank on Houston program wraps up its second quarter of operation.

Bank on Houston is a collaborative effort that offers low-cost starter checking accounts to the unbanked, helping them protect their money and take a first step toward wealth and asset building. Program partners include the city controller's office, the Houston Branch of the Federal Reserve Bank of Dallas, the Federal Deposit Insurance Corp., 24 local banks and credit unions, numerous nonprofits and community organizations, and the National League of Cities.

Banks and credit unions in the program are offering several key features to customers:

• A no- or low-cost checking account
• No minimum balance requirement
• Acceptance of the Mexican matricula card as one form of identification
• An ATM or debit card
• At least one additional feature, such as second-chance checking accounts for people with histories of bounced checks or overdraft fees; remittances; waiver of overdraft fees; free checks; or free online banking

Eclipsing Expectations

Launched at a January kickoff event at the Houston Fed, Bank on Houston has already surpassed expectations. In its first quarter, the program exceeded its entire first-year goal of 10,000 new checking accounts. According to tracking reports submitted to the Federal Reserve by the program's participating banks and credit unions, 10,264 accounts were opened in the first three months of 2009.

"These results are stunning," said City Controller Annise Parker. "We never expected to meet our goal this fast. Obviously, there is a need for this program."

Prior to Bank on Houston's launch, research by the city planning department determined that 51 percent of households in Houston's minority-dominated neighborhoods had no banking relationship. In addition, seven out of 10 Hurricane Katrina evacuees arriving in Houston did not have bank accounts. Without access to a bank account, millions of Houston residents rely on check-cashing services and payday lenders, which cost unbanked Houston families nearly $70 million in fees annually, according to Brookings Institution estimates.

In the face of these challenges, Bank on Houston is making a difference for thousands of people in the metropolitan area. Parker attributes the program's early success to the strong commitment of participating financial institutions and a multifaceted English and Spanish marketing campaign, which included inserts in 480,000 city water bills, 45 billboards, 250 local television ads and a website.

Busy Hotline

While the TV spots were running, the Bank on Houston hotline was receiving up to 40 calls a day. Most originated on Houston's east side, a targeted area where as many as half of all households have no banking relationship.

Callers voiced a variety of interests and concerns. Some hoped to benefit from bank and credit union offers of second-chance checking. There was also a great deal of interest in "free" accounts that include direct deposit. Many Hispanic callers had never had a bank account and wanted to find out about the process, expressing hesitation and some intimidation. Common concerns included identification requirements, access to funds, and the cost and ease of sending remittances.

One elderly woman said she was tired of worrying about her pension check getting to her mailbox and then having to go out and cash it. She was eager to find an account that would enable her to protect and easily access her money without burdening her with fees. Another caller asked if she could get an account with low or no fees if her child support checks were directly deposited.

In March, a Federal Reserve employee visited the Mexican Consulate to deliver Bank on Houston brochures and explain the program. She was approached by a Mexican visitor, who shared that he had accumulated $20,000 in cash and did not know what to do with it. Interested to learn about the Bank on Houston program, he said he had not realized how simple it would be to open a bank account.

Financial Management Component

Another goal of the Bank on Houston program is to increase accessibility to money-management education, and this, too, has been a resounding success.

Customers opening accounts through Bank on Houston are encouraged to complete a free financial education class in which they learn basic money-management skills. The result has been a sharp uptick in attendance in local financial literacy classes. People's Trust Foundation reported a record number of adult financial literacy workshops during the first quarter of 2009. Likewise, the Alliance for Multicultural Community Services has seen its classes double in size. Demand for classes is up at other organizations participating in Bank on Houston, including the Fifth Ward Community Redevelopment Corp., the Credit Coalition, Money Management International and the Houston Area Urban League.

"Not only are we introducing previously unbanked residents to the financial mainstream, we are helping them learn to manage their money better," said Parker, the city controller. "We all benefit when more of our residents become financially independent. This is especially important given the ongoing economic downturn."

While call volumes have decreased since the TV ads ended, interest in Bank on Houston remains high. First-quarter results were reported in the Houston Chronicle and local magazines, and several local TV stations are airing segments on Bank on Houston this summer.

International Notice

The program has also garnered international attention. In late May, Andrea Campos from the city controller's office traveled to Mexico City to speak about Bank on Houston at a conference coordinated by the Ministry of Foreign Affairs, the Mexican Consular Network and the Institute of Mexicans Abroad. The trip was coordinated by the Mexican Consulate General of Houston, which is a strong supporter of Bank on Houston and its goals.

Campos reports, "There was a lot of discussion regarding the program and how we got the banks to develop a product that would accommodate the Hispanic market. The very idea that banks were willing to participate was quite surprising to them." Conference participants were also enthusiastic about the program's financial education component.

As Bank on Houston progresses, some of Houston's banking newcomers are seeing real changes in their lives. One customer observed, "You feel as though you're in the mainstream, that you can transact your business just like everyone else." Said another, "It's dignity. I feel like I'm worth more than I was before, and I feel a lot more sure about my money, a lot more secure."

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e-Perspectives, Volume 9, Issue 2, 2009

Federal Reserve Bank of Dallas  Community Development Office  P.O. Box 655906, Dallas, Texas 75265-5906 214-922-5377
Gloria Vasquez Brown  Vice President		Alfreda B. Norman  Assistant Vice President and Community Development Officer
Jackie Hoyer  Houston Branch Senior Community Development Advisor		Julie Gunter  Senior Community Development Advisor
Wenhua Di  Community Development Economist		Elizabeth Sobel Blum   Community Development Research Associate
Roy Lopez  Community Development Specialist
The views expressed are the authors' and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. Articles may be reprinted on the condition that the source is credited and a copy is provided to the Community Development Office.