Mainstream financial institutions – banks, savings and loans and credit unions – create and allocate capital and economic opportunities through their central and defining function of taking in deposits and making loans. This process determines where credit and capital will flow. As such, it shapes nearly every aspect of our social, economic and built environment. Market forces and regulatory structures behind this flow are powerful and, at times, contentious. Banking practices and public policy influence one another continually, but are continually impacted most by emerging market conditions.

The U.S. banking system has undergone a dramatic restructuring since the 1970s. One of the biggest changes is the reduced number and market share of community banks. The number of banks with less than $1 billion in assets – a common definition of community bank – has declined from approximately 14,000 in 1980 to about 7,000 today. Concurrently, the proportion of assets held by the ten largest bank holding companies increased from less than 25 percent to more than 75 percent, while community banks’ share fell from about one-third of the market to well under one-fifth.

Financial institutions are understandably concerned with the technological and procedural implications of Check 21, but smoothing the transition with customers ultimately may prove to be the key challenge. Millions of people still use paper checks and won’t be happy to find facsimiles returned in their monthly statements.

The Sargent Shriver National Center on Poverty Law is leading a local effort to prove that low-income parents can build assets and save for their children’s future education if they are offered tailored financial products, incentives and training.