CHICAGO (12/12/14)--In a study of the underserved community, the Center for Financial Services Innovation (CFSI) found that underserved consumers paid $103 billion in 2013 in fees and interest revenue, generated from $1.3 trillion in financial activity.
|The underserved demographic continues to expand in the financial services industry, growing 7.1% in 2013. (Center for Financial Services Innovation Graphic)|
Roughly $20 billion in interest and fees was spent on subprime auto loans alone.
The study also found that the market for underserved consumers expanded by 7.1% in 2013, which could translate into opportunities for credit unions and others invested in developing high-quality and affordable solutions.
In 2014, the demographic is expected to grow by 4.6%, with a total revenue of $107 billion.
"The underserved comprise a diverse and growing market," said Jennifer Tescher, CFSI president/CEO. "Our goal with this study is to help financial services providers better understand and identify the complex financial needs of this marketplace as they launch safe, affordable, high-quality financial products and services to improve consumer financial health."
The Federal Deposit Insurance Corp. estimates more than 68 million U.S. adults fall into the underserved market, which includes people with poor credit, thin or no credit files, or those grappling with low-to-moderate income levels or income volatility.
Those consumers are the most likely to use alternative financial services such as check cashing and payday loans.
In that vein, CFSI's study identified a number of key trends fueling the growth of the products the underserved market traditionally access, including prepaid cards, installment loans and checking accounts.
Those trends include:
The study was performed in collaboration with Core Innovation Capital and received input from Morgan Stanley and the Ford Foundation.