I’ve noticed a growing trend among bankers to capture the unbanked; just the other night Regions aired an ad for their new “Regions Now” banking program:
So who are the unbanked (and don’t forget the underbanked)? Per a 2009 FDIC survey, they’re the approximately 9 million households – 17 million adults – that just don’t bank in the traditional sense. According to the website Unbanked Trends, that number might be even higher – 106 million in the United States, a number which includes the underbanked. Instead of going to a bank, this segment of the population utilizes check cashing services, prepaid credit cards, and the like. So why aren’t they with a bank? Per the article “Check Cashing 101” at Unbanked Trends (bold is my emphasis):
- Bad banking or credit history means banks won’t accept their account
- Don’t have social security number or other documentation required
- Dislike of undisclosed bank fees – whereas check cashers prominently post fees so consumers know what they are paying in advance
- Don’t trust banks
- Not enough money to open / maintain a bank account
- Fees for check cashing may work out to be cheaper than bank account when you factor in all the fees those accounts can trigger
- One stop service – many of these establishments offer check cashing, bill pay, prepaid cards, money orders, etc. So consumers can do all their financial services at one location.
- Language barriers – non native English speakers often prefer to transact in their own language. While some banks are specifically targeting Hispanics or other demographics, it’s not always available.
- Can’t get to a bank during banking hours. Check cashing establishments and grocery stores are often open extended hours and on weekends
- Immediate access to cash – no holds or other mysterious rules
- Can’t overspend/overdraw cash in a wallet
The reality for the unbanked, per a recent Forbes article, is that, due to their lack of any banking relationship, these potential clients are less likely to have savings, will have little or no credit, and are more exposed to theft and fraud. They’ll also spend around $1200 annually on fees from ‘Alternative Financial Services’. Makes Bank of America’s $5 checking fee look like a drop in the bucket, huh?
Obviously, bankers are working to reach these millions of Americans, and doing so in some interesting ways. Alabama-based Regions is doing so through their Regions Now program:
The program, called Now Banking, gives customers the ability to cash any check, perform money transfers and reload prepaid debit cards.
Customers also can secure short-term loans, more commonly called payday loans, directly through Regions in a program called Ready Advance.
“We found that our customers had to go to an alternative financial service provider to get those services, and that was an eye opener for us,” said John Owen, senior executive vice president and head of consumer services for Regions. “We are trying to reach a broader audience.”
BBVA Compass Bank, also based in the South, also offers a pre-paid Visa called SafeSpend to reach the unbanked. And watch out bankers – Walmart is a big recipient of this business, allowing consumers to cash checks, pay bills, and transfer money – and they’re in the prepaid debit business with their MoneyCard.
Another way for banks to reach the unbanked? Work with communities to reach – and educate – this population. That’s what BankOn does. BankOn works with financial institutions, local governments, and community organizations to provide free or low-cost bank accounts as well as access to financial education.
PNC Bank offers a second chance checking program, Foundations Checking. From the Bradenton Herald:
“Our goal is to help everybody be bankable,” said Annie Spain, branch manager at the Baltimore PNC branch where Pagan-Franco now banks.
PNC officials say the program is open to people who lack a strong credit history or who have a negative report on ChexSystems – as long as it doesn’t involve fraud.
Consumers must take a free money management class that teaches budgeting, saving, reducing debt, how to handle a checking account and how to avoid overdrafts. The classes are run by bank employees or staffers at nonprofits who have been trained by PNC.
After completing the class, participants get a provisional checking account for 90 days that costs $5 a month. They aren’t allowed to withdraw more than $100 a day from an ATM, and debit transactions can’t exceed $100 a day.
If consumers manage the account without overdrawing for three months, they graduate to a free regular checking account. Sixty percent of participants graduate, Spain said. Those who don’t get another 90-day trial, she said.
Big bad bankers offering a step up to those down on their luck – and gaining customers in the process? Sounds like a winning combination.