Bank branches play an important role in providing access to retail banking services, such as basic checking and savings accounts. Regulators measure how banks are doing in providing access to retail banking services on the CRA service test.

Currently, federal banking regulators count the physical presence of bank branches in underserved communities as a measure of meeting the transactional needs of low-wealth communities––a measure identified as inconsistent and unreliable. Instead, the CRA should ensure that the banks are actually providing services to low- and moderate-income people, and that those services are fairly priced.

The fact that a branch is located in a low-wealth community does not necessarily mean that the bank is offering retail products appropriate for low-wealth consumers, or that the bank is effectively reaching those consumers with its existing products. In fact, some low-wealth consumers often choose to bank near employment centers, rather than near their homes.  In either case, the physical location of a branch is an insufficient measure of how well a bank is serving low-wealth consumers.

In the past, federal bank regulators have argued that they lack the data to evaluate banks’ performances under the service test.  However, Woodstock research has shown that these data already exist and are used by banks as part of the regular marketing and monitoring of their business.  Banks regularly collect a variety of indicators on account holders and transactions, including such critical variables as census tract location, account holder, type and number of new accounts opened, age of account, and percent of bank income generated by fees. Such data would give a useful picture of the degree to which banks are actually providing bank services to lower-income people and communities. While the distribution of bank branches is an important indicator—and currently the only quantitative indicator measured in the service test—it is insufficient because it is only a proxy for the actual delivery of bank services.

These data on service delivery to low- and moderate-income people, the unbanked, and the underbanked should also be made public. Analysis of public data made available through the Home Mortgage Disclosure Act (HMDA) and the CRA have proved critical in understanding mortgage lending patterns and small business lending markets. These data have allowed researchers and advocates to highlight gaps in access to credit, expose disparate lending patterns, and work with financial institutions to improve lending levels in low- and moderate-income communities. Similar data on bank services would serve an important role in adding necessary transparency to the provision of bank products to lower-income communities and provide an incentive for banks to improve the types and availability of bank products to low- and moderate-income communities.