Enrique Marcarian / Reuters

Banks haven’t always been the giant, impersonal corporations Americans today are familiar with. For much of the twentieth century, they were more commonly small, community institutions that helped local residents manage their money and provided quick, small loans in times of financial upheaval. Banking in those days was rooted in personal relationships. That might sound idyllic, but it fostered a variety of problems, including widespread discrimination, says Lisa Servon a professor of urban policy at the New School in New York City. But the system that has arisen in its place, in which banking is faceless and algorithmic presents different problems, ones that poor and middle class Americans bear the brunt of.

In her new book, The Unbanking of America, Servon explains how changes to both the banking system and the economy inhibited many Americans from accessing basic necessities and building strong financial foundations.

She writes:

At the same time that the banking industry has reneged on its responsibilities to ordinary consumers, the larger economic context in which we make financial decisions has changed in ways that make the American Dream an unattainable fantasy for far too many people.

To make her argument, Servon immersed herself in the world of so-called alternative financial products, getting jobs working at a RightCheck, a check-cashing operation in the Bronx, and at Check Center, a payday lender in Oakland, in the process learning about the services rendered and the people who use them. On top of the academic research that forms the foundation of her case, it is these personal, first-person accounts of those trying to cobble together some form of financial security that provide the texture of a story about what the American economy looks like in practice.

In recounting her work as a check casher, Servon notes that she was initially confused by some of her customers’ choices. In one example, Carlos (Servon identified him only by his first name), a construction worker who stopped by RightCheck frequently to have his checks cashed, handed over a check for $5,000 for cashing, which required a 1.95 percent fee—$97.50. Servon questions why Carlos would willingly pay such a large fee—plus the $10 tip he leaves Servon—instead of just depositing the money into a bank account and retrieving the entire sum later for free. Her coworkers at RiteCheck explain why that might not be an option: Carlos has workers to pay, some of whom might require cash for a variety of reasons, including lack of documentation. If Carlos doesn’t get his check until Thursday, a bank likely wouldn’t have the entire thing processed and available by Friday’s payday—24 hours later. In another example, a RightCheck regular comes by to get cash in small denominations and pays a hefty fee for it—despite the fact that there are ATMs in the neighborhood that would charge less, or nothing at all. When Servon, again asks why, she’s reminded that ATMs often only dispense denominations of $20, and check cashing customers often have an immediate need for less than the ATM would allow them to withdraw—and no more. “They pay the two dollars to get the eight dollars now because they can’t wait until their account builds up to twenty dollars,” Servon writes. “This is logical, albeit expensive, behavior.”

In examples like these, Servon helps to dispel an all-too popular misconception: that poor people and people who use expensive, alternative financial services don’t have enough financially savvy to understand how expensive the services are, or that they don’t handle their finances well enough to have access to cheaper, traditional banking options. In fact, Servon finds, most people who use alternative lenders are all too aware of how finances work and are desperately trying to use a system bent against them. “Framing the problem as ‘banked versus unbanked’ has helped spotlight problems of financial exclusion, but it has also placed a value judgement on some people’s financial decisions,” she writes. “What if, instead of focusing narrowly on people’s ‘poor choices’ ... we worked harder to understand the options available to people and the context in which they make those choices?”

With payday loans, for instance, Servon notes that many people who rely on this pricey, short-term option actually have credit cards with lower interest rates that they haven’t yet maxed out. They choose payday loans over credit cards not because they don’t understand how interest works, she says, but because they’re smart enough to know that payday delinquency won’t be reported to a credit bureau in the same way late credit card payments are, thus preserving their credit score which can help them obtain a variety of other necessities including more credit.

Many consumer advocates say that alternative loan products, such as payday loans and auto loans, are unequivocally harmful to the finances of those Americans who can least afford high interest rates and staggering fees. But even as regulators have cracked down on some of the worst instances of financial gouging, few mainstream replacements have emerged to help those in need of quick, small-dollar loans. “The question that remains is whether expensive credit is better than no credit at all,” Servon writes.

Servon is careful to provide a balanced view of the difficult tasks that regulators and financial innovators face. More than changing regulations or increasing financial services from major banks, Servon suggests that the thing that might most help those who remain without access to necessary financial products is simply better wages and greater wage protections. To that end, she advocates a universal basic income that could better help families of all income levels, but especially low-income families, weather the financial shocks that so often leave them reliant on high-priced, dangerous loans and credit.

Servon has no delusions about these stopgap measures—but notes that the decisions many Americans face are a choice between bad options and worse ones. Even in cases of promising, local-loan alternatives—of which she highlights several—the challenge of scaling such programs up to meet the need would be herculean.