How to Serve the Unbanked without Sacrificing Profits

By Freund, William C.; Weil, Clive | American Banker, February 10, 1999 | Go to article overview

How to Serve the Unbanked without Sacrificing Profits


Freund, William C., Weil, Clive, American Banker


BY WILLIAM C. FREUND and CLIVE WEIL

More than 10 million American families have no deposit relationship with a bank. The reason is not simply a matter of costs. For example, millions of low-income families do business with high-cost check cashing outlets.

Banking services can be provided to low-income families in new ways while reaping an adequate return on invested capital. But banks will have to do more than offer low-cost accounts.

They must offer more convenient services and deliver them in ways that are less intimidating than the austere bank buildings to which customers normally must go. Automated teller machines will have to be made less complicated.

A model for banking the unbanked has been operating in-of all places- South Africa, a country with unfavorable political and economic circumstances. This model has been enormously successful, providing mass marketing for the poor, meeting customer needs for friendly and convenient service-and all at a satisfactory profit.

The E Bank model, developed by Standard Bank of South Africa Ltd., was driven both by customer demand and, more particularly, by a squeeze on banking margins and profits.

Market research revealed an urgent need for greater convenience, superior user friendliness, faster transactions, and above all a very high degree of safety and security for customers in a country ridden by crime.

The plan set up E Bank, an independent, electronic card-based operation. The strategy was to open hundreds of electronic branches, conveniently located in supermarkets, shopping centers, and other sites, to suit the needs of the masses.

Kiosks were designed in warm colors, with ethnic music playing. These kiosks were staffed by a personal assistant to help customers feel at home with card-based electronic banking.

The customer is given a card with an ID photo. This image, together with fingerprints and other biometric identification, is stored on its memory chip. When the card is inserted into the ATM, the personal E Bank assistant can make sure that the person identified on the screen is the person engaging in the transaction.

Because PIN numbers are easily lost, stolen, or forgotten and illiteracy rates are high, the images and biometric details are stored in a central computer data base. For those who have trouble reading, all screens are highly graphic, and a staff member is available to help. …

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