Banks Are Focusing On Unbanked

CU360
May 22, 2009 | COMMENTS

In the first national survey of banks' efforts to serve unbanked and underbanked consumers, the FDIC found that improvement is possible in the areas of focus, outreach, and commitment. Most banks (63%) offer basic financial education materials, but fewer participate in the types of outreach efforts that are most effective for attracting and maintaining unbanked and underbanked customers.

Most banks are aware that significant unbanked and underbanked populations exist in their areas, but more can be done to reach out to this significant market. Government and industry need to work together to increase these individuals' access to the mainstream banking system, according to FDIC survey findings. Among other key findings of the study are:

• While most banks offer basic checking accounts to all customers, few offer deposit, payment, credit, and electronically based products that address the unique needs of unbanked and underbanked customers.
• Banks are concerned about the profitability of doing business with unbanked and underbanked individuals as well as perceived regulatory issues related to anti-money laundering
• laws and regulations.
• Over half of banks offer limited extended hours and foreign language capabilities at their retail branches.
• Almost two-thirds (64%) of banks report they've modified their retail operations in the last five years to make the bank more appealing or convenient for unbanked and/or underbanked customers.

Banks are not the only financial industry play- ers aware of the potential in the unbanked and underbanked market. Eighty percent of prepaid card industry executives reported seeing underbanked consumers as important or very important to the future growth of the prepaid industry, according to a poll recently conducted by the Center for Financial Services Innovation (CFSI).

Nearly 70% of industry executives believe that 2009 growth in the general-purpose reloadable card market will equal or exceed 2008. The responses showed a high level of optimism about the future, in part because of the opportunities presented by the current economic climate.

“In the midst of a rocky period in the financial services industry, many providers are looking to prepaid cards to serve the underbanked consumer,” said Jennifer Tescher, Director of CFSI.