Access for All?

The 2013 FDIC National Survey of Unbanked and Underbanked Households was released yesterday, and the number of unbanked and underbanked households in the U.S. hasn’t budged much in the last two years (the total percentage has declined slightly, to just under 28 percent, since 2011). Just under eight percent are unbanked–almost 1 million households. Of these:

  • Almost half (46 percent) have had a bank account in the past.
  • Seventeen percent currently don’t have a bank account due in part to their credit history.

Not surprisingly, the unbanked are highly reliant on alternative financial products:

  • 27 percent of the unbanked used prepaid cards, compared to 12 percent of households overall. Two-thirds of those that used prepaid cards in the last 30 days are unbanked or underbanked.
  • More than half used money orders in the last 30 days, versus less than 10 percent of all households.
  • Thirty-nine percent used checking cashing services, compared to just three percent of all households.

The FDIC and and the Consumer Financial Protection Bureau have been pretty vocal about the fact that they want to decrease consumer use of alternative financial services. Will these regulators make a move to ensure that more Americans have access to a bank account? Last summer, New York Attorney General Eric Schneiderman convinced Capital One Financial Corp. to amend its use of ChexSystems, a database used by many banks to screen applicants for fraud and credit risk. A 2009 report from the FDIC found that almost 90 percent of banks use a credit-screening database like ChexSystems, and one-quarter reject an account application due to a negative result. Earlier this month, Richard Cordray addressed the CFPB’s areas of concern on the matter, which boil down the three areas:

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The Changing Face of the Consumer

ClockUnspash

The Pew Research Center just released some fascinating research on the The Next America, detailing the demographic changes they expect to occur in the U.S. through 2060. It’s really great, engaging information that I think anyone should read, but bankers in particular should note how the customer of today will become the customer of the future. While Pew’s research looks almost 50 years ahead, the information is based on trends that are happening now.

So what do bankers — and anyone in business, really — need to know?

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Following up on yesterday’s post: The Huffington Post just released results of a survey conducted with YouGov they conducted from February 7-9, 2014 to gauge American opinion on the U.S. Postal Services proposed expansion into financial services. Their survey found that:

  • Just shy of half have a favorable opinion on banks, while 74 percent have a favorable opinion on the USPS, but…
  • Seventy-nine percent of those polled are satisfied with the banking and financial services currently available to them.
  • Forty-four percent favor the USPS offering services like check cashing, bill pay and small loans (but not checking or savings accounts). That said…
  • Less than 10 percent say that they would use these services often, and one-quarter say that they would “sometimes” use these services.

You’ll find the complete results here.

Will Banking Keep the USPS Afloat?

toyboatsI’m absolutely fascinated by the latest idea (though not an old one) that the United States Postal Service should offering banking services, but can’t help but think that this is more about keeping the USPS afloat than helping the unbanked. That doesn’t mean it won’t work, but banking ain’t easy, y’all. As Billy Beale, CEO of Union First Market Bankshares Corp., said at Bank Director’s Acquire or Be Acquired Conference last month: “Banking isn’t complicated. It’s complex.”

The USPS has been bleeding money for years, suffering from the dual challenges of keeping pace with an increasingly technological population relying less and less on traditional mail coupled with its obligation to contribute $5.6 billion to retiree health care benefits–a payment the agency failed to make last year. The USPS ended 2013 with a net loss of $5 billion, and has posted losses for 7 consecutive years.

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I have thoughts on the “USPS Bank” issue that I hope to share later, but this piece from Time’s Martha C. White takes a pretty balanced view.

Business & Money

Go to the post office, send a package, pick up some stamps and deposit your paycheck or pay a bill? That’s the newest idea for rescuing the cash-strapped USPS floated in a report published by the U.S.P.S. Office of Inspector General. 

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Bluebird of (Un)Happiness?

So, the big news last week: after years of attempts, Walmart finally got into the banking business.

For those of you catching up, big-box retailer Walmart has teamed with American Express to offer what essentially boils down to a really fancy prepaid debit card.

Daniel Eckert, VP of Financial Services for Walmart, states that customers are simply tired of fees, or at least the lack of transparency surrounding them, claiming that “Bluebird solves this problem and we believe it’s the best product on the market to help customers affordably manage their everyday finances.”

Are bankers concerned? They should be, since Walmart has a long track record of putting businesses out of business, and particularly if they want to reach that underbanked population that relies on products liked prepaid debit cards. And this isn’t your standard prepaid card, oh no. It’s gone mobile y’all.

So what does Bluebird offer that bankers can learn from?

Bluebird is easy for consumers to understand.
No minimum balance. No fees. No overdrafts – once you’ve spent what’s on the card, it’s gone. American Express plans to generate revenue from the card via processing fees.

Accessibility.
Customers can use the card wherever American Express is accepted, as well as at a network of 22,000 ATMs. It also includes a digital wallet with P2P payments via AMEX’s Serve platform. You can also use it for electronic bill payment.

Want to pass some money to the kids? Busy moms can control sub accounts for family members. Prepaid cards are growing in use among the young. Not only can parents use them to control a child’s spending, but the cards (particularly one that you can integrate with your phone, like Bluebird) appeal to tech-savvy youngsters.

Money can be added several ways. Aside from the expected direct deposit method, Bluebird’s mobile app offers RDC – or you can take cash to your local Walmart.

It’s more than just banking.
Everything that’s standard with an American Express card – fraud protection, roadside assistance, and more – is available with Bluebird.

Of course, Bluebird isn’t FDIC insured. But for the underbanked, that probably won’t matter.


Insights into the Prepaid Card Market from The Financial Brand.

Gauging consumer sentiment via social media – a chance for bank marketers to learn more about their customer.

Should the big banks be broken up?

Everyone else thinks housing is turning around – but not Citigroup.

Wanna Reach the Unbanked?

Last week two very interesting items crossed my eye: this look at content marketing for financial services, and CNN Money’s map of the unbanked.

“Insights from the Content Marketing World”, from Financial Marketing News, suggests going beyond the standard newsletters and seminars (though still vital) to visual methods, like infographics and video.

A great example of video (featured here before) shows PanAmerican Bank’s outreach to the underbanked, including the next generation of bank customers.

Of course, being the social media fan that I am, I L-O-V-E this infographic from Capitec Bank of  South Africa.  They polled their customer base via social media to come up with this infographic:

Make Smart Credit Decisions | Capitec Bank

So how does this tie into that unbanked map? Gaining those customers that are underserved will come in two ways: offering the right product mix, and educating the public about those offerings. Infographics and video – along with more traditional content marketing methods, like newsletters and seminars – are a great way to educate your community, and gain some customers along the way.

More around the web:
A digital wallet for the unbanked
Fewer directors & officers are getting sued, and the pace of bank failures has slowed.
Social media lessons from banking insiders – from KPMG