Serving the Underserved in the Era of Mobile
According to a new study by the FDIC, nearly three in 10 adult Americans are either "unbanked” (meaning they have no accounts at banks or credit unions) or “underbanked” (meaning that they may have a savings account, but also use check cashers and payday lenders to meet their banking needs). While these numbers have improved slightly since 2013, they still reflect a significant number of Americans, who without traditional banking relationships, are at risk of never bettering their financial condition by building savings or improving their credit profiles.
Americans choose to be unbanked or underbanked for any number of reasons. Some don’t like or don’t trust banks. For others it’s a cost issue – they live paycheck to paycheck and can’t run the risk of overdraft and NSF charges. For others it’s simply a matter of convenience. There are entire swaths of the working population who don’t have the option of direct deposit, and even more who don’t have access to nearby bank branches or transaction-free ATMs.
Then there are millennials. According to a report by First Data Corp. more than a fifth have never written a check to pay a bill and a staggering sixty-three percent of adult millennials don’t even have credit cards.
Mobile platforms for prepaid cards and omni-channel merchant capture are just a few of the innovative technologies community banks can leverage to establish traditional banking relationships with these segments. Scalable cloud-based solutions make it affordable for even the smallest banks to compete with large banks and with nonbank financial services competitors, such as check cashers.
The near ubiquity of smart phones means that community bank prepaid issuers can build recognition and trust by providing prepaid cardholders with a first-rate mobile banking experience.
Mobile is a must, because while Americans may choose to be unbanked for any number of reasons, few choose to go without smartphones and/or tablets. This is particularly true among millennials – that generation of 80 million Americans, seemingly always on the go, that is forecast to control $7 trillion in liquid assets by 2020.
The financial services marketplace is changing, and millennials are at the forefront of that change. Millennials are driven by technology and innovation. They are the app generation, and as they mature and acquire wealth, financial apps assume even greater importance.
Prepaid is a solution that community banks can harness to take advantage of these market-place changes. To succeed they must be able to help cardholders manage their financial lives, on the go, with meaningful interactions and minimal disruptions. Those that do will be best positioned to win the cardholder loyalty challenge going forward.