Magazine article American Banker

Mobile, Prepaid Are Best Ways to Reach Unbanked

Magazine article American Banker

Mobile, Prepaid Are Best Ways to Reach Unbanked

Article excerpt

Byline: Ron Davis

More banks should think about how to attract consumers who rely heavily on alternative financial providers like check cashers and payday lenders, two recent studies suggest.

This underserved market generated $103 billion in revenue in 2013, an increase of 7.1% over the previous year, according to a report by the Center for Financial Services Innovation and Core Innovation Capital.

And, importantly, the unbanked and underbanked aren't as opposed to using mainstream financial services as you might think, based on a Federal Deposit Insurance Corp. survey. Nearly half of unbanked households -- 46% -- say they have had bank accounts in the past. Of those, 49% say they expect to open an account again within a year, with that jumping to 75% for the ones who recently had an account. A quarter of households that have never been banked also expect to open an account.

Both the CFSI and FDIC research suggests that mobile phones and prepaid cards present opportunities for banks to reach these potential customers. Underbanked households are more likely to use smartphones than bank branches, computers or telephones to access money and accounts -- and they're much more likely to do so than even fully banked households.

"Since more and more consumers access their bank account through their phone, thinking about your apps for your bank is important," says CFSI research analyst Eva Wolkowitz. "Is it something that is designed primarily to be used through the phone and not just a laptop, with a smaller and different interface? …

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