This article examines similarities and differences among three groups of consumers: those without a checking or savings account (unbanked), bank account adopters who have used alternative financial services (AFS) in the past 12 months (underbanked), and bank account adopters who did not use AFS in the past 12 months (fully banked).

Consumers in the three groups have different demographic characteristics, income, and payment behaviors. The payment behavior of the underbanked is similar to that of the fully banked; unbanked consumers make fewer payments per month than the fully banked and the underbanked; fewer than half of the unbanked know their credit scores, while about 85% of the underbanked and the fully banked know theirs; and both unbanked and underbanked consumers are significantly more likely than fully banked consumers to own a general purpose reloadable (GPR) prepaid card.

We find no evidence that consumers are prevented from opening a bank account; many cite personal preferences and cost as reasons for choosing to be unbanked. These preferences are likely related to income constraints.