Question 12.14: Should lifeline banking be offered to low-income customers? ...

This is not an easy question to answer. One of the most serious problems individuals outside the financial mainstream face is lack of access to a deposit account. Lifeline banking is providing basic banking services to these individuals. Most financial-service providers are privately owned corporations responsible to their stockholders to earn competitive returns on invested capital. Providing financial services at prices so low, they do not cover production costs interferes with that important goal. Thus, from a profit motive point of view banks should not offer unprofitable services. However, it should be considered that depository institutions receive important aid from the government that grants them a competitive advantage over other financial institutions like deposit insurance. Therefore, they have some public-service responsibilities which may include providing certain basic services to all potential customers.