This three-part series will discuss the underserved, a population of Americans whose financial needs are not entirely being met by mainstream financial services’ institutions- In part one, I referred to a USPS report released in early 2014 (1). In a bid to grow its revenue, the USPS determined that it was well-positioned to ‘provide non-bank financial services to those whose needs are not being met by the traditional financial sector’. These individuals – collectively, the underserved – are much more than just subprime consumers. They represent a broad spectrum of the population, and come from many demographic, economic, and ethnic backgrounds. I concluded that these consumers – some 68 million, according to the USPS report – represent a great opportunity for financial services’ institutions. In a recent piece from the Financial Brand (2), Joan Susie from Bank Director (3) agrees that retail institutions are missing an opportunity. Susie says that if banks don’t seize the opportunity, other players in the financial industry will: “With well priced and carefully conceived products, these customers can be profitable,” Susie says. “Large banks, non-bank financial services companies and a few community bank pioneers are quickly realizing there is an even better reason than CRA (Community Reinvestment Act) credits to bank new immigrants and other underserved populations. It is becoming clear that the biggest and savviest financial institutions are actively exploring ways to profitably provide access to credit and financial services for a significant segment of the population struggling financially.” The Unbanked and Underbanked According to the FDIC National Survey of Unbanked and Underbanked Households (4), over 30 million US households are either unbanked or underbanked:
- 9 million households are unbanked, and possess no checking or savings account;
- 21 million households are underbanked. They possess a checking or savings account but principally use Alternate Financial Services (AFS).