Engaging the unengaged, or unbanked: CFSI profiles, Part 2

August 26, 2015

CHICAGO (8/26/15)--A lack of engagement with a traditional financial institution not only leads to poor financial choices--it also leads to severe vulnerability for those who are suddenly faced with a financial shock, the Center for Financial Services Innovation (CFSI) has found.

That’s especially concerning, as a whopping 39 million--or 16%--of Americans fall into what the CFSI calls “The Financially Unengaged” category, meaning they have either very little or no relationship with a financial institution. 

This week, News Now is covering research by the CFSI that breaks down the four types of American consumers who are struggling financially, including “The Financially At Risk,” “The Financially Unengaged,” “The Financially Tenuous” and “The Financially Striving.”

CFSIIn addition to leaving themselves vulnerable to financial crises, those found in The Financially Unengaged category face a variety of financial challenges, such as low levels of savings, poor budgeting habits and an overall lack of confidence in financial skills.

By the numbers:

  • Only one in three plan ahead for large, irregular expenses;
  • 62% don’t know how long they could make ends meet in the event of a sudden drop in income;
  • Only 22% have a regular savings habit; and
  • Less then one-third believe they have the knowledge and skills to manage their finances properly.

The CFSI also found that individuals who are financially unengaged are the least likely to have a checking account (more than a quarter don’t), a savings account (50% don’t), or a credit card (55% don’t).

Further, “individuals in this segment are among the least likely to perform financial transactions at a bank branch, ATM, online, or via mobile channels,” the CFSI said.

To make a connection with this group, the CFSI offers several steps credit unions and other financial institutions could take.

First, a financial institution could partner with organizations that already have relationships with these consumers, such as schools, service organizations or faith-based organizations.

Next, increasing awareness about products that would meet the needs of the members of this group could show the benefits of engaging with a traditional financial institution.

And finally, offering credit-building products and credit-counseling services could make a deep impression on the typical financially unengaged consumer--an individual who has demonstrated a general misunderstanding or apathy toward their credit situation.