Big problem is AML and KYC related legislation - this is expensive to do for people who are statistical outliers. I.e. people with low income. So it'd have to be government subsidised banking.
people who are statistical outliers. I.e. people with low income
Here's a longer description:
KYC and AML costs are fixed. I.e. identifying someone is a one time cost (if done virtually, around 5-25 USD, more if done in person).
AML costs are ongoing, but can be automated to a great degree to save on costs. Usually this is done via various heuristic and statistical methods. These work great for the customer types you have a lot of, but for those you have less of you have less training data and your models will cause more alerts than necessary. Alerts that need to be looked at manually.
Most of these occur from rich people doing stupid shit, but you also get the same happening on the other end of the spectrum. Poor people usually are very creative with their money, and this causes them to hit AML checks. (Think crypto, remittances, romance scam victims and the like).
Rich people aren't a problem, they have so much money in the bank that their compliance costs are offset by the profit the bank earns on them.
The average customer usually isn't a problem either, there's a lot of them so a few being unprofitable doesn't really matter.
But low income people will incurr more AML and KYC costs that the bank can't offset --> these customers aren't profitable and the bank will do as much as they legally can to annoy them until they leave.
This phenomena is called de-risking (it happens to companies, too) and is hugely damaging and is a side-effect of the increasing AML and KYC regulations (Which are shit).
AML / KYC regulations desperately need exceptions for people who aren't moving a lot of money. And, conversly, those who DO move a lot of money need to be put under stricter regulations. A) Because it is financially possible and B) they're the guys who do the really damaging money laundering.
To some extent I believe the larger financial institutions lobby for these regulations in order for them to not have to serve low income customers.
From experience I can say that it reduces crime, but it does create massive issues too.
Problems are current regulations aren't risk based, which results unproportional compliance costs.