Refining the Definition of the Unbanked

We propose a new way to classify individuals without a bank account, accounting for their actual interest in being banked. Analogous to how unemployment statistics are defined, we differentiate individuals that do not have a bank account and would like to have one (“unbanked”) from individuals that do not have a bank account and are not interested in having one (“out of banking”). Using FDIC data, we show the evolution over time of these new measures and show that the two groups differ in policy-relevant ways. These factors should be considered when designing policies aimed at increasing financial inclusion.