Financial Services for the Underserved – Part 3: Five Observations about the Underserved

Parts One and Two of this series defined the underserved and discussed the overwhelming need for mainstream financial services companies to create products and services for this population.  In writing this series, I learned many things about the underserved, and the potential to help them.  To round out the series (and to provide food for thought), here are five key observations I gathered from the research, in no particular order:

Blog: financial instruments

  • The Underserved Need to Be Part of the Wave of Increasing Consumer Sentiment:   The recession created huge shifts in the financial priorities of many households, diminshing overall consumer spending.  A recent Thomson-Reuters/University of Michigan report (via the Wall Street Journal) shows that consumer sentiment rose to 93.8 in early December–the highest level in eight years, supported by lower unemployment, lower gas prices and other economic factors.  Higher consumer sentiment equates to greater consumer spending, which currently accounts for two-thirds of total US economic output.  The question is: will the nearly 70 million underserved consumers be able to participate in the rising tide?  If so, through what means and mechanisms?
  • The Underserved Will Increasingly Benefit from Mobile Financial Services: With events as diverse as the Arab Spring, the Boston Marathon Bombing, movie/music launches and more, mobile has become a key element in everyday life.  Mobile as it relates to financial services is no different: in fact, smartphones often serve as the sole computing device for low- and moderate-income individuals and families. A recent neighborhood survey conducted by the nonprofit Mission Economic Development Agency (MEDA) in San Francisco’s Mission District showed that, while 74 percent of homes had access to the Internet — in the heart of tech savvy SF — 95 percent of homes did have access to smartphones.  Clearly, mobile is poised to help the underserved;
  • The Underserved Reflect the Changing Financial Needs of Americans:  In our fast-paced world, change is the only constant…and knowledge is power.  Organizations such as The National Endowment for Financial Education (NEFE) help consumers navigate the changes and provide financial education and practical information to people at all financial stages, with a specific mission to ‘serve the underserved’. I agree with NEFE that consumers who are informed and understand financial instruments/methods are better able to take control of their circumstances, improve their quality of life, and ensure a more stable future for themselves and their families;
  • The Underserved Are Looking for Solutions: Mainstream companies are starting to address the needs of the underserved.  As part of the launch of their Bluebird and Serve products, Amex sponsored Spent: Looking for Change, a documentary highlighting the plight of the underserved with a call for advocacy and to expand the financial offerings available to them.  According to Amex, they hope to ‘drive change and improve financial inclusion in the U.S….reimagining what a new future for financial services might look like through the use of digital technologies.’
  • The Underserved Also Represents a Big Opportunity for Insurance Companies: I agree with J. Eric Smith, CEO of Swiss Re Americas that insurance innovators who are willing to create opportunities for the underserved could benefit greatly. In a recent article, he points out that huge window of opportunity for addressing the needs of the underserved, in straightforward terms: “In the U.S., if you look at life insurance and look at people that are making $40,000 to $90,000 a year in household income, which is a lot of the households in the U.S., there’s nobody in life that’s taking care of those people anymore”.

The changing face of financial services is a complex landscape, and the underserved are a big part of it.  The evidence is clear: financial services companies need to address this population with products and services that make sense, and allow them to participate in the mainstream.