Working Paper

Beyond Banks: Trust Among the Financially Underserved

Abstract: In 2023, over 18 percent of US households were either unbanked or underbanked, a group commonly referred to as financially underserved (e.g., see Burhouse, Navarro and Osaki (2016)). Prior work and survey evidence identify a lack of broad-scope trust in banks as an important reason for financial exclusion (e.g., FDIC (2024), Falcettoni and Nygaard (2025), and Xu (2020)). Yet it is not clear whether this mistrust is unique to banks or whether it extends to other institutions, such as government entities or nonbank providers of account services. This distinction matters for policymakers when considering how to serve this segment of the population. If mistrust is specific to banks, then alternative providers of account services — such as nonbanks or government entities — could improve access to the financial system. But if mistrust extends to alternative providers, then financial education or other trust-building initiatives might be more effective at increasing financial inclusion. To address this gap, we designed our own surveys and fielded them to a sample of unbanked and underbanked individuals in the US. We elicited their levels of trust in various institutions, including different types of banks, government-related entities, and alternative payment providers. Using principal component analysis, we identify three dominant components of the trust scores which we label, in descending order of importance: (1) broad-scope trust, (2) concerns about traditional financial institutions, and (3) preference for a physical business presence. We explore how sociodemographic characteristics, including income, age, education, race and political affiliation, affect these components of trust.

JEL Classification: D10; G21; G40; G50;

https://doi.org/10.26509/frbc-wp-202606

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers

Publication Date: 2026-03-02

Number: 26-06