Underbanked and Unbanked Consumers in the U.S.: Successfully Targeting Consumers of Alternative Financial Services
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Underbanked and Unbanked Consumers in the U.S.: Successfully Targeting Consumers of Alternative Financial Services

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This report analyzes the retail financial services activities and the macro and micro economic trends that have resulted in the percentage of households that are unbanked to rise for the first time ...

This report analyzes the retail financial services activities and the macro and micro economic trends that have resulted in the percentage of households that are unbanked to rise for the first time since the Federal government began tracking consumer banking relationships. It also provides detailed demographic portraits of both underbanked and unbanked consumers while diving deeply into their financial behaviors and consumer psychographics.

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Underbanked and Unbanked Consumers in the U.S.: Successfully Targeting Consumers of Alternative Financial Services Underbanked and Unbanked Consumers in the U.S.: Successfully Targeting Consumers of Alternative Financial Services Document Transcript

  • Underbanked and Unbanked Consumers in the U.S.: Successfully TargetingConsumers of Alternative Financial ServicesPublished: July 2011No. of Pages: 167Price: $ 3750Underbanked and Unbanked Consumers in the U.S. provides market size, industry andproduct revenue forecasts and analyzes the legislative and regulatory challenges driving thegrowth of alternative financial services (AFS). Increasingly, these products are seen as aviable alternative to banks by the 26% of U.S. households that are underbanked orunbanked.This report U.S. Consumers Market analyzes the retail financial services activities and themacro and micro economic trends that have resulted in the percentage of households thatare unbanked to rise for the first time since the Federal government began trackingconsumer banking relationships. It also provides detailed demographic portraits of bothunderbanked and unbanked consumers while diving deeply into their financial behaviors andconsumer psychographics. These consumers, buffeted by both the economy and the profitmaximization strategies of retail banks, have been prime targets of non-traditional financialservices providers offering transparent pricing, convenient retail locations and bespokeproducts that can be used according to the consumers’ needs and preferences.Browse All: Banking and Financial Services Market Research ReportsThe report examines the efforts of banks and non-banks to market to underbanked andunbanked consumers and provides analysis of AFS pure-play and retailer productintroductions, feature enhancements and pricing strategies.The report also delves deeply into AFS initiatives in international markets and focuses onthe technologies, new products, marketing and branch-level strategies realizing successabroad and transforming vendors and institutions into must-knowns to U.S. bankexecutives, AFS strategists and industry regulators.
  • Underbanked and Unbanked Consumers in the U.S. presents historical data and 5-yearrevenue forecasts for the alternative financial services market and each major AFS product:Prepaid cards, remittances, money orders, check cashing and payday lending. We anticipatethose revenues increasing from $338 billion in 2010 to $520 billion in 2015.About the Author: Elizabeth Rowe was the Group Director of Banking Advisory Services atMercator Advisory Group, a banking and payments consultancy. Previously, she was thesenior banking consultant at Guideline, Inc., a consultancy/business advisory firm. For thepast 17 years, she has worked with the nations largest banks, retailers and solutionsproviders as they assess emerging consumer, technological, regulatory and competitivechallenges, trends and opportunities. She has taught at the ABA School of Bank CardManagement and frequently speaks at industry, federal regulator and client conferences.She has been widely quoted in the financial press including The Economist, The Wall StreetJournal, American Banker, Forbes, Independent Banker and CNN.TABLE OF CONTENTSChapter1:ExecutiveSummaryScopeandMethodologyReportMethodologyCharacteristicsofUnderbankedandUnbankedConsumersWhoAretheUnbanked?WhichUnbankedHouseholdsCanBecomeBanked?WhyDon’tUnbankedHaveaBankAccount?TheGrowingRanksoftheUnbankedWhoAretheUnderbanked?SpottingtheUnderbankedBabyBoomersandSeniorsHeavilyRepresentedAmongUnderbankedAlternativeFinancialServicesProductsUsedbyUnderbankedBankingIndustryTrendsDrovetheGrowthintheNumberofUnderbankedHouseholds?StateoftheEconomyIsGrowingtheRanksoftheUnderbankedEconomicPressuresonWorkingAmericansHaveIncreasedLong-TermUnemploymentHealthInsuranceCostsAreRisingBankruptcyForeclosuresDecliningRealIncomesNumberofAmericansLivingPaycheck-to-PaycheckIncreases53%TheOverallU.S.Economy-2011andBeyondBanksTargetingtheUnderbanked/UnbankedProductsBanksCanMarkettoUnderbankedandUnbankedConsumersBB&TLinksItsPhysicalFootprintWithPrepaidCardLargeU.S.RetailBanksOfferMoreLocationsthanRetailersBanksTackleSmallDollarLoansEveninProgramsTargetingUnderbankedorUnbanked,BankersDeterminedtoBuildTraditionalBankingRelationshipswithParticipants
  • ServingUnderbankedConsumerWhileHittingFeeIncomeGenerationTargetsRegulatoryChangesIncreaseBanks’PressureonFeeIncomeHowBanksBecameDependentonFeeIncomeFromRetailCustomersOverdraftFeeIncome-Yesterday’sCashCowGrowthofOverdraftFeeIncomeSpurredConsumerDissatisfactionWithBanksandBankingIndustryBankofAmericaAddsHighCheckingAccountServiceChargesandFeestoUseBankTellersChaseBankAddsServiceChargesforLow-IncomeCustomersandThoseWhoAreNotActiveDebitCardUsersCitibankKeepsFreeCheckingforCustomersWhoPerform5TypesofTransactionsaMonthConsumersAreOptingOutofOverdraftProtectionDebitCardRewardsProgramsAreVanishingSavingsStrategiesofUnderbankedPrize-LinkedSavingsConsumerInterestinPLSAccountsWhyWouldPLSAccountsBeAttractivetoBanks?BarrierstoWidespreadDeploymentofPLSWhatIfConsumerSavingsWerePrioritized?MichiganCreditUnionsPartnertoOfferPLSHowSuccessfulAretheMichiganProgramsinGrowingSavings?CanBanksOffertheProductsUnbankedandUnderbankedConsumersWant?CashingPayrollChecksIsImportanttothe27%ofEmployeesNotUsingDirectDepositBillPaymentAlternativeFinancialServicesIntroductionCheckCashingChecksStillaPopularChoiceonPaydayAceCashExpressAceCash’sNewPartnershipsandNewServicesDollarFinancialChexar-BringCheckCashingtoSmallRetailersWal-Mart-TransformerofCheckCashingFeesPaydayLendingProfitabilityofPaydayLendingBusinessPaydayLendingLegislationFederalPaydayLendingLegislationPaydayLendingRegulationsattheStateLevelImpactofBanningPaydayLoansonConsumers’DebtManagementBehaviorsPaydayLendingRegulationsinHawaii-AContrastingExperienceFragmented,EmbattledIndustryMayBenefitFromTurmoilinBankingIndustryAdvanceAmericaQCHoldingsPaymentsPrepaidCardsChallengesFacingthePrepaidCardIndustryGreenDotNetspend
  • RemittancesRemittersAreSatisfiedWithTheirCurrentMoneyTransferProviderRemittancesandEmergingTechnologies:CanPriceDriveChannelAdoption?HowMuchAreIndividualsintheU.S.SendingAbroad?StructuralandRegulatoryChallengeHindertheUseofNewRemittanceChannelsGlobalWireTransferTrendsGlobalRemittanceVolumesRemittanceFlowsAreCriticaltotheEconomiesofManyNationsRemittanceOperatorsMoneyGramMoneyGramBillPaymentServicesWesternUnionWesternUnionTakesonWal-MartWesternUnionExperimentswithMobileTechnologyChallengingtheSpreadRemittanceChannelsHamperingtheUptakeofNewChannelsintheU.SWesternUnion’sAccount-to-AccountRemittancesWesternHemisphereBanksBypassU.S.MTOstoFacilitateRemittancesMoneyOrdersU.S.PostalServiceIsLargestSellerofU.S.MoneyOrdersWhereAretheBanks?InternationalLeadersOfferRoadmapsforU.S.ServiceProvidersU.S.BankersFaceStructurallyEndemicChallengesasTheyConsiderFutureCustomersU.S.BankBranchNetworkBuildforPreviousGenerationofBankingCustomersMeetingMassMarketFinancialServicesNeedsinAfricaSmartPhonesandSMSCapabilityFuelGrowthofRetailFinancialTransactioninAfricaMobilePayments:TheIntersectionofCards,BanksandtheUnbankedCash+Mobile=EconomicGrowthMobileRemittancesThreatenAfricanBanksAirtel/MasterCardandM-Pesa/Visa:VirtualPaymentCardsCentralBankMobilePaymentsPlatformMayIncreaseMobileCompetitioninKenyaM-Pesa:BiographyofaMarketLeaderMassMarketSavingsStrategiesBritishPremiumBonds-MainstreamPrize-LinkedSavingsSouthAfricanMillion-a-MonthPLSRethinkingtheBranch:Hub-and-SpokesOrganizationShouldBeConsideredCapitec-ProfitsFromthePreviouslyUnbankedTheShotHeardRoundtheCape:CapitecRaisesthePerformanceBarforItsCompetitorsFirstNationalBankUsesProduct-BranchesBranchestoSellSpecificProductsWIZZITUsesItsIndependentSalesForceandDoor-to-DoorSalestoSignUpNewBankCustomersSouthAfricanRegulatorsCreateKYCandAMLExemptionstoAllowProviderstoTargetLow-BalanceCustomersChapter2:CharacteristicsofUnderbankedandUnbankedConsumersTable2-1:Banked,UnderbankedandUnbankedStatusofU.S.Households,2009WhoAretheUnbanked?
  • Table2-2:PercentagesofMajorRacialandEthnicGroupsThatAreUnbanked,2010Table2-3:Race,Ethnicity,IncomeandHouseholdTypesofUnbanked,2010WhichUnbankedHouseholdsCanBecomeBanked?Table2-4:PreviouslyBankedStatusofUnbankedHouseholds,2009Figure2-1:NumberofAdultsLivinginUnbankedHouseholdsbyPreviouslyBankedStatus,2009WhyDon’tUnbankedHaveaBankAccount?Figure2-2:LeadingReasonsCitedForNotOwningACheckingAccount,1989-2007TheGrowingRanksoftheUnbankedWhoAretheUnderbanked?Table2-5:PercentofHouseholdsUnderbanked,byRace/Ethnicity,2009SpottingtheUnderbankedTable2-6:PercentofHouseholdsUnderbankedbyMaritalStatusofHouseholder,2009BabyBoomersandSeniorsHeavilyRepresentedAmongUnderbankedFigure2-3:OldestAmericansMostLikelytoBeUnbanked/UnderbankedThanBabyBoomersBabyBoomersJoiningRanksofUnbankedandUnderbankedSeniorsAreMoreLikelyToBeUnderbankedandUnbankedThanOtherCohortsAlternativeFinancialServicesProductsUsedbyUnderbankedTable2-7:AlternativeFinancialServicesProductsUsedbytheUnderbankedFigure2-4:AFSProductsUsedbyUnderbankedHouseholdsBankingIndustryTrendsDrovetheGrowthontheNumberofUnderbankedHouseholds?EconomyIsGrowingtheRanksoftheUnderbankedSince2007,EconomicPressuresonWorkingAmericansHaveIncreasedLong-TermUnemploymentFigure2-5:SlowGrowthGDPLinkedtoHighRatesofUnemployment,2005-2015HealthInsuranceCostsAreRisingFigure2-6:RisingCostofEmployeeParticipationinPPOHealthcarePlans,2007-2011Table2-8:EmployerandEmployeeMedicalCostsAllocation,PPOPlans,2007-2011BankruptcyFigure2-7:PersonalBankruptcyFilingsShowCAGRof25.6%,2007-2010SoaringNumberofSeniorCitizenBankruptciesFueledbyMedicalExpensesForeclosuresFigure2-8:ForeclosureFilings,2005-2010DecliningRealIncomesFigure2-9:RealMedianHouseholdIncome,1999-2009MoreAmericansLivingPaycheck-to-PaycheckTable2-9:Since2006,theNumberofAmericansLivingPaycheck-to-PaycheckhasIncreased53%HouseholdStrategiesforDealingWithFinancialInsecurityFigure2-10:MedianValueofTransactionAccountsforFamilieswithHoldings,1989-2007TheOverallU.S.Economy-2011andBeyondConclusionChapter3:BanksTargetingtheUnderbanked/UnbankedIntroductionTable3-1:TypesofPaymentInstrumentsUsedbyBanked,UnbankedandUnderbankedConsumersBankers’MessagesAbouttheImportanceofCreditIncreasinglyFallingonDeafEars
  • ProductsBanksCanMarkettoUnderbankedandUnbankedConsumersBB&TLinksItsPhysicalFootprintWithPrepaidCardLargeU.S.RetailBanksOfferManyMoreLocationsthanEventheLargestRetailersTable3-2:ComparisonoftheConvenienceofBankBrachesandATMLocationsversustheLocationofMajorU.S.RetailLocationsBanksTackleSmallDollarLoansEveninProgramsTargetingUnderbankedorUnbanked,BankersDeterminedtoBuildTraditionalBankingRelationshipswithParticipantsServingUnderbankedConsumersWhileHittingFeeIncomeGenerationTargetsTable3-3:IssuesRetailBankingExecutivesareFocusingonintheNext2YearsRegulatoryChangesIncreaseBanks’PressureonFeeIncomeTable3-4:Bankers’GreatestChallengesinServingorTargetingUnderbankedandUnbankedConsumersHowBanksBecameDependentonFeeIncomeFromRetailCustomersOverdraftFeeIncome-Yesterday’sCashCowGrowthofOverdraftFeeIncomeSpurredConsumerDissatisfactionWithBanksandBankingIndustryTable3-5:HowCheckClearingOrderAffectstheNumberofOverdraftsForItemsReceivedontheSameDayBankofAmericaAddsHighCheckingAccountServiceChargesandFeestoUseBankTellersChaseBankAddsServiceChargesforLow-IncomeCustomersandThoseWhoareNotActiveDebitCardUsersCitibankKeepsFreeCheckingforCustomersWhoPerform5TypesofTransactionsaMonthConsumersAreOptingOutofOverdraftProtectionTable3-6:NumberofNoncashPaymentsDebitCardRewardsProgramsAreVanishingSavingsStrategiesofUnderbankedFigure3-1:SnapshotofPiggymojoAppPrize-LinkedSavingsConsumerInterestinPLSAccountsWhyWouldPLSAccountsBeAttractivetoBanks?BarrierstoWidespreadDeploymentofPLSWhatIfConsumerSavingsWerePrioritized?MichiganCreditUnionsPartnertoOfferPLSHowSuccessfulAretheMichiganProgramsinGrowingSavings?CanBanksOffertheProductsUnbankedandUnderbankedConsumersWant?CheckCashingTable3-7:BanksOfferingProducts/ServicestoUnbanked/UnderbankedConsumersMostBanksWillOnlyCashOn-UsChecksorPayrollChecksforTheirOwnCustomersCashingPayrollChecksIsImportanttothe27%ofEmployeesNotUsingDirectDepositTable3-8:WhyDoYouChooseAgainstDirectDeposit?BillPaymentTable3-9:HowDoUnbanked/UnderbankedConsumersPayTheirBills?Chapter4:AlternativeFinancialServices
  • IntroductionTheMarketforAlternativeFinancialServicesProduct,2007-2015Table4-1:AFSIndustryRevenuesbyProductLine,2007-2015CheckCashingChecksStillaPopularChoiceonPaydayAceCashExpressAceCash’sNewPartnershipsandNewServicesTable4-2:AceCashExpressStoreGrowth,2006-2011DollarFinancialTable4-3:DollarFinancial’sCheckCashingIncome,2006-2010CompetitorsintheCheckCashingSectorChexar-BringCheckCashingtoSmallRetailersHowChexarWorksWal-Mart-TransformerofCheckCashingFeesPaydayLendingTable4-4:UseofPaydayLoansbyBankedStatus,2009Table4-5:AmongUsersofPaydayLoans,FrequencyofUsebyBankedStatus,2009ProfitabilityofPaydayLendingBusinessTable4-6:PDARevenue,CostandProfit(pre-taxbasis),2009PaydayLendingLegislationFederalPaydayLendingLegislationPaydayLendingRegulationsattheStateLevelPaydayLendingRegulationsinMississippiPaydayLendingRegulationsinColoradoImpactofBanningPaydayLoansonConsumers’DebtBehaviorsPaydayLendingRegulationsinWashingtonStatePaydayLendingRegulationsinHawaii-AContrastingExperienceFigure4-1:RevenuesofPublicly-TradedPaydayLenders,2006-2010Table4-7:RevenuesofPublicly-TradedPaydayLenders,2006-2010($inMillions)Fragmented,EmbattledIndustryMayBenefitFromTurmoilinBankingIndustryTable4-8:NumberofRetailLocationsofLargestPaydayLenders,2010AdvanceAmericaQCHoldingsFigure4-2:PaydayLoanIndustryRevenues,2006-2015(publiccompanies)PaymentsTable4-9:NumberofNoncashPaymentsPrepaidCardsFigure4-3:PrepaidCardLoadVolumes,2008-2012ChallengesFacingthePrepaidCardIndustryEntryPointsIntoPrepaidMarketGreenDot
  • Figure4-4:GreenDot:KeyBusinessMetrics,Quarterly,and2010Table4-10:GreenDot:QuarterlyKeyBusinessMetrics,2009and2010(inmillions)NetspendTable4-11:Netspend,TotalRevenues,2006-2010($inmillions)RemittancesInternationalRemittancesOriginatingintheU.S.—WhoIsSendingMoneyandHowOften?Table4-12:NumberofTimesMoneyTransferredtoRelativesandFriendsOutsidetheU.S.DuringthePrevious12Months,byNativityofHouseholdTable4-13:TotalDollarsRemittedtoRelativesandFriendsDuringPrevious12MonthsTable4-14:HowImmigrantsintheU.S.SendMoneyHomeRemittersAreSatisfiedWithTheirCurrentMoneyTransferProviderTable4-15:SatisfactionLevelsWithRemittanceChannels,2010RemittancesandEmergingTechnologies:CanPriceDriveChannelAdoption?HowMuchAreIndividualsintheU.S.SendingAbroad?Table4-16:RemittanceSizingEstimatesSignificantlyVaryFromOneU.S.GovernmentAgencyandNGOtoAnotherStructuralandRegulatoryChallengeHindertheUseofNewRemittanceChannelsGlobalWireTransferTrendsTable4-17:GlobalRemittanceVolumestoDevelopingCountries,2005-2015($billion)Figure4-5:RemittanceInflowstoDevelopingCountries,2005-2015WhereDoestheMoneyFlow?Table4-18:CountriesReceivingMostRemittances,2010RemittanceFlowsAreCriticaltotheEconomiesofManyNationsRemittanceOperatorsMoneyGramTable4-19:MoneyGram,TotalRevenueandGrossProfits,2006-2010($inmillions)Cash-to-VisaMoneyGramBillPaymentServicesWesternUnionTable4-20:WesternUnion,TotalRevenueandGrossProfits,2006-2010($inmillions)WesternUnionTakesonWal-MartTable4-21:ComparisonofFeesChargedbyWal-MartMoneyCardandWesternUnionMoneyWiseCardWesternUnionExperimentswithMobileTechnologyChallengingtheSpreadRemittanceChannelsHamperingtheUptakeofNewChannelsintheU.S.WesternUnion’sAccount-to-AccountRemittancesFigure4-6:WesternUnionRemainsPreferredRemitterforU.S.Hispanics
  • WesternHemisphereBanksBypassU.S.MTOstoFacilitateRemittancesMoneyOrdersU.S.PostalServiceIsLargestSellerofU.S.MoneyOrdersTable4-22:U.S.PostalServiceMoneyOrders,2000-2010(ProcessedbytheFederalReserve)Table4-23:SizeofNon-BankU.S.MoneyOrderMarket,2007-2015WesternUnion’sMoneyOrderBusinessAdverselyEffectedbyEndofIPSPartnershipTable4-24:FinancialsofWesternUnion’sMoneyOrderBusinessUnit,2008-2010($Millions)WhereAretheBanks?ConclusionChapter5:InternationalLeadersOfferRoadmapsforU.S.FinancialServicesProvidersIntroductionTable5-1:IncomeEqualityinSelectedCountries(GiniCoefficient)U.S.BankersFaceStructurallyEndemicChallengesasTheyConsiderFutureCustomersU.S.BankBranchNetworkBuildforPreviousGenerationofBankingCustomersMeetingMassMarketFinancialServicesNeedsinAfricaFigure5-1:AfricanBankingIndustry,ChangingRevenueStructure,2009-2020SmartPhonesandSMSCapabilityFuelGrowthofRetailFinancialTransactioninAfricaMobilePayments:TheIntersectionofCards,BanksandtheUnbankedFigure5-2:NumberofAfricanCountrieswithMobilePenetrationRatesAbove50%Table5-2:NumberofAfricanCountrieswithMobilePenetrationRatesAbove50%,2005-2012Cash+Mobile=EconomicGrowthFigure5-3:AfricanMoneyVendors’EmploymentAdvertisingMobileRemittancesThreatenAfricanBanksAirtel/MasterCardandM-Pesa/Visa:VirtualPaymentCardsCentralBankMobilePaymentsPlatformMayIncreaseMobileCompetitioninKenyaTable5-3:MarketShareofMobileOperatorsinKenya,2011Figure5-4:NumberofAfricanCountrieswithMobilePenetrationRatesAbove50%,2005-2012Table5-4:NumberofAfricanCountrieswithMobilePenetrationRatesAbove50%,2005-2012M-Pesa:BiographyofaMarketLeaderMassMarketSavingsStrategiesBritishPremiumBonds-MainstreamPrize-LinkedSavingsSouthAfricanMillion-a-MonthPLSRethinkingtheBranch:Hub-and-SpokesOrganizationShouldBeConsideredCapitec-ProfitsFromthePreviouslyUnbankedTable5-5:TotalConsumerUnsecuredLending,CapitecandSouthAfricanBankingIndustry,2007and2011Figure5-5:Capitec’sUnsecuredLoadPortfolioHasGrownAlmostFourTimesFasterThanThatofItsPeersTheShotHeardRoundtheCape:CapitecRaisesthePerformanceBarforItsCompetitorsFirstNationalBankUsesProduct-BranchesBranchestoSellSpecificProductsTable5-6:FinancialInclusionRatesAreSlowlyIncreasinginSouthAfrica,2008-2010Figure5-6:FinancialInclusioninAfricaWIZZITUsesItsIndependentSalesForceandDoor-to-DoorSalestoSignUpNewBankCustomers
  • Figure5-7:WIZZkids’MethodforMarketingtheBank’sServicesintheCommunityandWorkplaceConclusionFigure5-8:SouthAfricanRegulatorsCreateKYCandAMLExemptionstoAllowProviderstoTargetLow-BalanceCustomersAbout Us:ReportsnReports is an online library of over 100,000+ market research reports and in-depthmarket research studies & analysis of over 5000 micro markets. We provide 24/7 online andoffline support to our customers. Get in touch with us for your needs of market researchreports.Follow us on Twitter: http://twitter.com/marketsreportsOur Facebook Page: http://www.facebook.com/pages/ReportsnReports/191441427571689Contact:Mr.Priyank7557 Rambler road,Suite727,Dallas,TX75231Tel: +1-888-989-8004E-mail: sales@reportsandreports.comhttp://www.reportsnreports.comVisit our Market Research Blog