Technology Bringing Underserved Into the Fold

CUNA's eScan
August 8, 2012 | COMMENTS

Financial institutions are making creative use of analytic tools and mobile technology to move underserved consumers into the mainstream.

The technology is being used to establish and broaden relationships with customers who would otherwise have a difficult time establishing payment and account relationships because of thin or no credit histories.

Mobile apps

Mobile applications now offer better and more convenient alternatives to the high fees of payday lending and check cashing firms, reports Bank Technology News, especially for those heavy users of prepaid cards.

In May, prepaid card marketer Plastyc rolled out an app for the Kindle Fire, a less expensive Wi-Fi-only tablet that's in the price range of prepaid card users. Plastyc's mobile users also can use a phone's GPS to spot merchants that sell Green Dot's MoneyPaks, which can be used to reload prepaid card accounts.

Mobile and online channels are part of check and card-tech firm Chexar's range of services, which enable cash transfers, bill pay, mobile top-up, and prepaid cards delivered via other self-service channels.

Mobile apps allow faster loading of prepaid accounts, an option that's also spreading to banking customers, according to Chexar CEO Drew Edwards.

"There's a whole industry that used to be the domain of the check cashers that banks are now looking at," says Edwards, whose clients include some of the largest U.S. banks.

"There's a shift away from professional check deposits and toward a prepaid relationship. It started with the underbanked segment but is moving toward people who also have accounts," Edwards adds.

Analytics

Financial institutions also are tracking transactions and analyzing data of consumers who are using their prepaid products. This allows financial institutions to identify consumers who are candidates for additional financial relationships.

This model can allow institutions to reach and serve underbanked consumers with less institutional risk because the analytics engine allows a view into how people prioritize recurring debts.

“You can look at the stored value card and see how people keep a balance on it, and when money comes in and goes out,” said Marc DeCastro, a research director at IDC Financial Insights.

In American Express's new "Make Your Move" program, the card firm tracks where prepaid card users execute their transactions and then run them through an analytics engine. After a minimum of six months, some card members will be invited to apply for credit cards based on solid spending activity.

But in most cases, the people targeted by the card firm don't have a substantial credit record. The program also includes tips on how to use the prepaid card for groceries, gas, mobile phone bills, or other recurring payments to build a solid credit history.