Unbanked and underbanked consumers represent the last remaining “white space” in financial services—an uncharted territory where credit unions have a rare opportunity to serve an underserved market.
Approximately 68 million U.S. adults are either unbanked or underbanked. Revenue from serving these unbanked and underbanked consumers totaled $78 billion in 2011 and $85 billion in 2012.
During the past 20 years, an entire industry has emerged to fill the void left by traditional financial institutions. These alternative financial service providers or “fringe bankers” include check-cashing outlets, payday loan stores, and Internet payday lenders.
By charging exorbitant interest rates that can create a cycle of indebtedness, these profiteers act against the best interests of their customers under the veil of providing a helping hand at a time of need.
Credit unions can meet the underserved’s needs by offering appropriate services and building relationships.
A low-income designation, combined with a clear strategic plan, can enhance your ability to enter and serve low- to moderate-income markets. Tools that can help your credit union engage these consumers include check cashing, remittances, and bill pay. The path to asset building starts with a single transaction.
The discussion boards on CUNA’s Compliance Community featured an interesting discussion last week: what is the difference between the terms “share draft” and “checking account”? The correct use is important since credit unions pay dividends, not interest.