Using a simple model of banking services we consider how deposit-taking banks price for their services and choose the type of deposit customers that they target. In considering a banking model with a consumer population heterogeneous in income we go beyond previous theoretical work on consumer banking, allowing us to determine the role of household income in the access to deposit services. In addition we consider the usage and pricing for Alternative Financial Services (AFS) by households left out of the mainstream banking sector. We look to identify how the prices they pay for financial transactions differs from those in the mainstream sector. We show that, all other things equal, a higher rate of return on investments available to banks is an important factor in lowering financial exclusion, increasing the profitability of low-income consumers for deposit-taking institutions. This would suggest that the possibility of financial exclusion increases in periods of recession. In addition, if the bank's ability to invest is connected to financial exclusion, any regulation restricting the bank's ability to make investments should take this into account. Finally, by introducing specific income distributions to our model, we are able to demonstrate how an increase in income dispersion can lead to a greater proportion of consumers excluded from mainstream banking.
