Underbanked and Unbanked Consumers in the U.S.: Successfully Targeting Consumers of Alternative Financial Services
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Underbanked and Unbanked Consumers in the U.S. provides market size, industry and product revenue forecasts and analyzes the legislative and regulatory challenges driving the growth of alternative financial services (AFS). Increasingly, these products are seen as a viable alternative to banks by the 26% of U.S. households that are underbanked or unbanked.
This report analyzes the retail financial services activities and the macro and micro economic trends that have resulted in the percentage of households that are unbanked to rise for the first time since the Federal government began tracking consumer banking relationships. It also provides detailed demographic portraits of both underbanked and unbanked consumers while diving deeply into their financial behaviors and consumer psychographics. These consumers, buffeted by both the economy and the profit maximization strategies of retail banks, have been prime targets of non-traditional financial services providers offering transparent pricing, convenient retail locations and bespoke products that can be used according to the consumers’ needs and preferences.
The report examines the efforts of banks and non-banks to market to underbanked and unbanked consumers and provides analysis of AFS pure-play and retailer product introductions, feature enhancements and pricing strategies.
The report also delves deeply into AFS initiatives in international markets and focuses on the technologies, new products, marketing and branch-level strategies realizing success abroad and transforming vendors and institutions into must-knowns to U.S. bank executives, AFS strategists and industry regulators.
Underbanked and Unbanked Consumers in the U.S. presents historical data and 5-year revenue forecasts for the alternative financial services market and each major AFS product: Prepaid cards, remittances, money orders, check cashing and payday lending. We anticipate those revenues increasing from $338 billion in 2010 to $520 billion in 2015.
Single User PDF: US$ 3,750.00
Departmental Site License (one location, up to 10 users): US$ 5,995.00
Global Site License: US$ 7,500.00
Underbanked and Unbanked Consumers in the U.S. provides market size, industry and product revenue forecasts and analyzes the legislative and regulatory challenges driving the growth of alternative financial services (AFS). Increasingly, these products are seen as a viable alternative to banks by the 26% of U.S. households that are underbanked or unbanked.
This report analyzes the retail financial services activities and the macro and micro economic trends that have resulted in the percentage of households that are unbanked to rise for the first time since the Federal government began tracking consumer banking relationships. It also provides detailed demographic portraits of both underbanked and unbanked consumers while diving deeply into their financial behaviors and consumer psychographics. These consumers, buffeted by both the economy and the profit maximization strategies of retail banks, have been prime targets of non-traditional financial services providers offering transparent pricing, convenient retail locations and bespoke products that can be used according to the consumers’ needs and preferences.
The report examines the efforts of banks and non-banks to market to underbanked and unbanked consumers and provides analysis of AFS pure-play and retailer product introductions, feature enhancements and pricing strategies.
The report also delves deeply into AFS initiatives in international markets and focuses on the technologies, new products, marketing and branch-level strategies realizing success abroad and transforming vendors and institutions into must-knowns to U.S. bank executives, AFS strategists and industry regulators.
Underbanked and Unbanked Consumers in the U.S. presents historical data and 5-year revenue forecasts for the alternative financial services market and each major AFS product: Prepaid cards, remittances, money orders, check cashing and payday lending. We anticipate those revenues increasing from $338 billion in 2010 to $520 billion in 2015.
- CHAPTER 1: EXECUTIVE SUMMARY
- Scope and Methodology
- Report Methodology
- Characteristics of Underbanked and Unbanked Consumers
- Who Are the Unbanked?
- Which Unbanked Households Can Become Banked?
- Why Don’t Unbanked Have a Bank Account?
- The Growing Ranks of the Unbanked
- Who Are the Underbanked?
- Spotting the Underbanked
- Baby Boomers and Seniors Heavily Represented Among Underbanked
- Alternative Financial Services Products Used by Underbanked
- Banking Industry Trends Drove the Growth in the Number of Underbanked Households?
- State of the Economy Is Growing the Ranks of the Underbanked
- Economic Pressures on Working Americans Have Increased
- Long-Term Unemployment
- Health Insurance Costs Are Rising
- Bankruptcy
- Foreclosures
- Declining Real Incomes
- Number of Americans Living Paycheck-to-Paycheck Increases 53%
- The Overall U.S. Economy - 2011 and Beyond
- Products Banks Can Market to Underbanked and Unbanked Consumers
- BB&T Links Its Physical Footprint With Prepaid Card
- Large U.S. Retail Banks Offer More Locations than Retailers
- Banks Tackle Small Dollar Loans
- Even in Programs Targeting Underbanked or Unbanked, Bankers Determined to Build Traditional Banking Relationships with Participants
- Serving Underbanked Consumer While Hitting Fee Income Generation Targets
- Regulatory Changes Increase Banks’ Pressure on Fee Income
- How Banks Became Dependent on Fee Income From Retail Customers
- Overdraft Fee Income - Yesterday’s Cash Cow
- Growth of Overdraft Fee Income Spurred Consumer Dissatisfaction With Banks and Banking Industry
- Bank of America Adds High Checking Account Service Charges and Fees to Use Bank Tellers
- Chase Bank Adds Service Charges for Low-Income Customers and Those Who Are Not Active Debit Card Users
- Citibank Keeps Free Checking for Customers Who Perform 5 Types of Transactions a Month
- Consumers Are Opting Out of Overdraft Protection
- Debit Card Rewards Programs Are Vanishing
- Savings Strategies of Underbanked
- Prize-Linked Savings
- Consumer Interest in PLS Accounts
- Why Would PLS Accounts Be Attractive to Banks?
- Barriers to Widespread Deployment of PLS
- What If Consumer Savings Were Prioritized?
- Michigan Credit Unions Partner to Offer PLS
- How Successful Are the Michigan Programs in Growing Savings?
- Can Banks Offer the Products Unbanked and Underbanked Consumers Want?
- Cashing Payroll Checks Is Important to the 27% of Employees Not Using Direct Deposit
- Bill Payment
- Introduction
- Check Cashing
- Checks Still a Popular Choice on Payday
- Ace Cash Express
- Ace Cash’s New Partnerships and New Services
- Dollar Financial
- Chexar - Bring Check Cashing to Small Retailers
- Wal-Mart - Transformer of Check Cashing Fees
- Profitability of Payday Lending Business
- Payday Lending Legislation
- Federal Payday Lending Legislation
- Payday Lending Regulations at the State Level
- Impact of Banning Payday Loans on Consumers’ Debt Management Behaviors
- Payday Lending Regulations in Hawaii - A Contrasting Experience
- Fragmented, Embattled Industry May Benefit From Turmoil in Banking Industry
- Advance America
- QC Holdings
- Prepaid Cards
- Challenges Facing the Prepaid Card Industry
- Green Dot
- Netspend
- Remitters Are Satisfied With Their Current Money Transfer Provider
- Remittances and Emerging Technologies: Can Price Drive Channel Adoption?
- How Much Are Individuals in the U.S. Sending Abroad?
- Structural and Regulatory Challenge Hinder the Use of New Remittance Channels
- Global Wire Transfer Trends
- Global Remittance Volumes
- Remittance Flows Are Critical to the Economies of Many Nations
- MoneyGram
- MoneyGram Bill Payment Services
- Western Union
- Western Union Takes on Wal-Mart
- Western Union Experiments with Mobile Technology
- Challenging the Spread
- Remittance Channels
- Hampering the Uptake of New Channels in the U.S
- Western Union’s Account-to-Account Remittances
- Western Hemisphere Banks Bypass U.S. MTOs to Facilitate Remittances
- U.S. Postal Service Is Largest Seller of U.S. Money Orders
- Where Are the Banks?
- International Leaders Offer Roadmaps for U.S. Service Providers
- U.S. Bankers Face Structurally Endemic Challenges as They Consider Future Customers
- U.S. Bank Branch Network Build for Previous Generation of Banking Customers
- Meeting Mass Market Financial Services Needs in Africa
- Smart Phones and SMS Capability Fuel Growth of Retail Financial Transaction in Africa
- Mobile Payments: The Intersection of Cards, Banks and the Unbanked
- Cash + Mobile = Economic Growth
- Mobile Remittances Threaten African Banks
- Airtel / MasterCard and M-Pesa / Visa: Virtual Payment Cards
- Central Bank Mobile Payments Platform May Increase Mobile Competition in Kenya
- M-Pesa: Biography of a Market Leader
- Mass Market Savings Strategies
- British Premium Bonds - Mainstream Prize-Linked Savings
- South African Million-a-Month PLS
- Rethinking the Branch: Hub-and-Spokes Organization Should Be Considered
- Capitec - Profits From the Previously Unbanked
- The Shot Heard Round the Cape: Capitec Raises the Performance Bar for Its Competitors
- First National Bank Uses Product-Branches Branches to Sell Specific Products
- WIZZIT Uses Its Independent Sales Force and Door-to-Door Sales to Sign Up New Bank Customers
- South African Regulators Create KYC and AML Exemptions to Allow Providers to Target Low-Balance Customers
- Table 2-1: Banked, Underbanked and Unbanked Status of U.S. Households, 2009
- Who Are the Unbanked?
- Table 2-2: Percentages of Major Racial and Ethnic Groups That Are Unbanked, 2010
- Table 2-3: Race, Ethnicity, Income and Household Types of Unbanked, 2010
- Which Unbanked Households Can Become Banked?
- Table 2-4: Previously Banked Status of Unbanked Households, 2009
- Figure 2-1: Number of Adults Living in Unbanked Households by Previously Banked Status, 2009
- Why Don’t Unbanked Have a Bank Account?
- Figure 2-2: Leading Reasons Cited For Not Owning A Checking Account, 1989-2007
- The Growing Ranks of the Unbanked
- Who Are the Underbanked?
- Table 2-5: Percent of Households Underbanked, by Race/Ethnicity, 2009
- Spotting the Underbanked
- Table 2-6: Percent of Households Underbanked by Marital Status of Householder, 2009
- Baby Boomers and Seniors Heavily Represented Among Underbanked
- Figure 2-3: Oldest Americans Most Likely to Be Unbanked/Underbanked Than Baby Boomers
- Baby Boomers Joining Ranks of Unbanked and Underbanked
- Seniors Are More Likely To Be Underbanked and Unbanked Than Other Cohorts
- Alternative Financial Services Products Used by Underbanked
- Table 2-7: Alternative Financial Services Products Used by the Underbanked
- Figure 2-4: AFS Products Used by Underbanked Households
- Banking Industry Trends Drove the Growth on the Number of Underbanked Households?
- Economy Is Growing the Ranks of the Underbanked
- Since 2007, Economic Pressures on Working Americans Have Increased
- Long-Term Unemployment
- Figure 2-5: Slow Growth GDP Linked to High Rates of Unemployment, 2005-2015
- Health Insurance Costs Are Rising
- Figure 2-6: Rising Cost of Employee Participation in PPO Healthcare Plans, 2007-2011
- Table 2-8: Employer and Employee Medical Costs Allocation, PPO Plans, 2007-2011
- Bankruptcy
- Figure 2-7: Personal Bankruptcy Filings Show CAGR of 25.6%, 2007-2010
- Soaring Number of Senior Citizen Bankruptcies Fueled by Medical Expenses
- Foreclosures
- Figure 2-8: Foreclosure Filings, 2005-2010
- Declining Real Incomes
- Figure 2-9: Real Median Household Income, 1999-2009
- More Americans Living Paycheck-to-Paycheck
- Table 2-9: Since 2006, the Number of Americans Living Paycheck-to-Paycheck has Increased 53%
- Household Strategies for Dealing With Financial Insecurity
- Figure 2-10: Median Value of Transaction Accounts for Families with Holdings, 1989-2007
- The Overall U.S. Economy - 2011 and Beyond
- Conclusion
- Introduction
- Table 3-1: Types of Payment Instruments Used by Banked, Unbanked and Underbanked Consumers
- Bankers’ Messages About the Importance of Credit Increasingly Falling on Deaf Ears
- Products Banks Can Market to Underbanked and Unbanked Consumers
- BB&T Links Its Physical Footprint With Prepaid Card
- Large U.S. Retail Banks Offer Many More Locations than Even the Largest Retailers
- Table 3-2: Comparison of the Convenience of Bank Braches and ATM Locations versus the Location of Major U.S. Retail Locations
- Banks Tackle Small Dollar Loans
- Even in Programs Targeting Underbanked or Unbanked, Bankers Determined to Build Traditional Banking Relationships with Participants
- Serving Underbanked Consumers While Hitting Fee Income Generation Targets
- Table 3-3: Issues Retail Banking Executives are Focusing on in the Next 2 Years
- Regulatory Changes Increase Banks’ Pressure on Fee Income
- Table 3-4: Bankers’ Greatest Challenges in Serving or Targeting Underbanked and Unbanked Consumers
- How Banks Became Dependent on Fee Income From Retail Customers
- Overdraft Fee Income - Yesterday’s Cash Cow
- Growth of Overdraft Fee Income Spurred Consumer Dissatisfaction With Banks and Banking Industry
- Table 3-5: How Check Clearing Order Affects the Number of Overdrafts For Items Received on the Same Day
- Bank of America Adds High Checking Account Service Charges and Fees to Use Bank Tellers
- Chase Bank Adds Service Charges for Low-Income Customers and Those Who are Not Active Debit Card Users
- Citibank Keeps Free Checking for Customers Who Perform 5 Types of Transactions a Month
- Consumers Are Opting Out of Overdraft Protection
- Table 3-6: Number of Noncash Payments
- Debit Card Rewards Programs Are Vanishing
- Savings Strategies of Underbanked
- Figure 3-1: Snapshot of Piggymojo App
- Prize-Linked Savings
- Consumer Interest in PLS Accounts
- Why Would PLS Accounts Be Attractive to Banks?
- Barriers to Widespread Deployment of PLS
- What If Consumer Savings Were Prioritized?
- Michigan Credit Unions Partner to Offer PLS
- How Successful Are the Michigan Programs in Growing Savings?
- Can Banks Offer the Products Unbanked and Underbanked Consumers Want? Check Cashing
- Table 3-7: Banks Offering Products/Services to Unbanked/Underbanked Consumers
- Most Banks Will Only Cash On-Us Checks or Payroll Checks for Their Own Customers
- Cashing Payroll Checks Is Important to the 27% of Employees Not Using Direct Deposit
- Table 3-8: Why Do You Choose Against Direct Deposit?
- Bill Payment
- Table 3-9: How Do Unbanked/Underbanked Consumers Pay Their Bills?
- Introduction
- The Market for Alternative Financial Services Product, 2007-2015
- Table 4-1: AFS Industry Revenues by Product Line, 2007-2015
- Check Cashing
- Checks Still a Popular Choice on Payday
- Ace Cash Express
- Ace Cash’s New Partnerships and New Services
- Table 4-2: Ace Cash Express Store Growth, 2006-2011
- Dollar Financial
- Table 4-3: Dollar Financial’s Check Cashing Income, 2006-2010
- Competitors in the Check Cashing Sector
- Chexar - Bring Check Cashing to Small Retailers
- How Chexar Works
- Wal-Mart - Transformer of Check Cashing Fees
- Table 4-4: Use of Payday Loans by Banked Status, 2009
- Table 4-5: Among Users of Payday Loans, Frequency of Use by Banked Status, 2009
- Profitability of Payday Lending Business
- Table 4-6: PDA Revenue, Cost and Profit (pre-tax basis), 2009
- Payday Lending Legislation
- Federal Payday Lending Legislation
- Payday Lending Regulations at the State Level
- Payday Lending Regulations in Mississippi
- Payday Lending Regulations in Colorado
- Impact of Banning Payday Loans on Consumers’ Debt Behaviors
- Payday Lending Regulations in Washington State
- Payday Lending Regulations in Hawaii - A Contrasting Experience
- Figure 4-1: Revenues of Publicly-Traded Payday Lenders, 2006-2010
- Table 4-7: Revenues of Publicly-Traded Payday Lenders, 2006-2010 ($ in Millions)
- Fragmented, Embattled Industry May Benefit From Turmoil in Banking Industry
- Table 4-8: Number of Retail Locations of Largest Payday Lenders, 2010
- Advance America
- QC Holdings
- Figure 4-2: Payday Loan Industry Revenues, 2006-2015 (public companies)
- Table 4-9: Number of Noncash Payments
- Prepaid Cards
- Figure 4-3: Prepaid Card Load Volumes, 2008-2012
- Challenges Facing the Prepaid Card Industry
- Entry Points Into Prepaid Market
- Green Dot
- Figure 4-4: Green Dot: Key Business Metrics, Quarterly, and 2010
- Table 4-10: Green Dot: Quarterly Key Business Metrics, 2009 and 2010 (in millions)
- Netspend
- Table 4-11: Netspend, Total Revenues, 2006-2010 ($ in millions)
- International Remittances Originating in the U.S.— Who Is Sending Money and How Often?
- Table 4-12: Number of Times Money Transferred to Relatives and Friends Outside the U.S. During the Previous 12 Months, by Nativity of Household
- Table 4-13: Total Dollars Remitted to Relatives and Friends During Previous 12 Months
- Table 4-14: How Immigrants in the U.S. Send Money Home
- Remitters Are Satisfied With Their Current Money Transfer Provider
- Table 4-15: Satisfaction Levels With Remittance Channels, 2010
- Remittances and Emerging Technologies: Can Price Drive Channel Adoption?
- How Much Are Individuals in the U.S. Sending Abroad?
- Table 4-16: Remittance Sizing Estimates Significantly Vary From One U.S. Government Agency and NGO to Another
- Structural and Regulatory Challenge Hinder the Use of New Remittance Channels
- Global Wire Transfer Trends
- Table 4-17: Global Remittance Volumes to Developing Countries, 2005-2015 ($ billion)
- Figure 4-5: Remittance Inflows to Developing Countries, 2005-2015
- Where Does the Money Flow?
- Table 4-18: Countries Receiving Most Remittances, 2010
- Remittance Flows Are Critical to the Economies of Many Nations
- MoneyGram
- Table 4-19: MoneyGram, Total Revenue and Gross Profits, 2006-2010 ($ in millions)
- Cash-to-Visa
- MoneyGram Bill Payment Services
- Western Union
- Table 4-20: Western Union, Total Revenue and Gross Profits, 2006-2010 ($ in millions)
- Western Union Takes on Wal-Mart
- Table 4-21: Comparison of Fees Charged by Wal-Mart Money Card and Western Union MoneyWise Card
- Western Union Experiments with Mobile Technology
- Challenging the Spread
- Remittance Channels
- Hampering the Uptake of New Channels in the U.S.
- Western Union’s Account-to-Account Remittances
- Figure 4-6: Western Union Remains Preferred Remitter for U.S. Hispanics
- Western Hemisphere Banks Bypass U.S. MTOs to Facilitate Remittances
- U.S. Postal Service Is Largest Seller of U.S. Money Orders
- Table 4-22: U.S. Postal Service Money Orders, 2000-2010 (Processed by the Federal Reserve)
- Table 4-23: Size of Non-Bank U.S. Money Order Market, 2007-2015
- Western Union’s Money Order Business Adversely Effected by End of IPS Partnership
- Table 4-24: Financials of Western Union’s Money Order Business Unit, 2008-2010 ($Millions)
- Where Are the Banks?
- Conclusion
- Introduction
- Table 5-1: Income Equality in Selected Countries (Gini Coefficient)
- U.S. Bankers Face Structurally Endemic Challenges as They Consider Future Customers
- U.S. Bank Branch Network Build for Previous Generation of Banking Customers
- Meeting Mass Market Financial Services Needs in Africa
- Figure 5-1: African Banking Industry, Changing Revenue Structure, 2009-2020
- Smart Phones and SMS Capability Fuel Growth of Retail Financial Transaction in Africa
- Mobile Payments: The Intersection of Cards, Banks and the Unbanked
- Figure 5-2: Number of African Countries with Mobile Penetration Rates Above 50%
- Table 5-2: Number of African Countries with Mobile Penetration Rates Above 50%, 2005-2012
- Cash + Mobile = Economic Growth
- Figure 5-3: African Money Vendors’ Employment Advertising
- Mobile Remittances Threaten African Banks
- Airtel / MasterCard and M-Pesa / Visa: Virtual Payment Cards
- Central Bank Mobile Payments Platform May Increase Mobile Competition in Kenya
- Table 5-3: Market Share of Mobile Operators in Kenya, 2011
- Figure 5-4: Number of African Countries with Mobile Penetration Rates Above 50%, 2005-2012
- Table 5-4: Number of African Countries with Mobile Penetration Rates Above 50%, 2005-2012
- M-Pesa: Biography of a Market Leader
- Mass Market Savings Strategies
- British Premium Bonds - Mainstream Prize-Linked Savings
- South African Million-a-Month PLS
- Rethinking the Branch: Hub-and-Spokes Organization Should Be Considered
- Capitec - Profits From the Previously Unbanked
- Table 5-5: Total Consumer Unsecured Lending, Capitec and South African Banking Industry, 2007 and 2011
- Figure 5-5: Capitec’s Unsecured Load Portfolio Has Grown Almost Four Times Faster Than That of Its Peers
- The Shot Heard Round the Cape: Capitec Raises the Performance Bar for Its Competitors
- First National Bank Uses Product-Branches Branches to Sell Specific Products
- Table 5-6: Financial Inclusion Rates Are Slowly Increasing in South Africa, 2008-2010
- Figure 5-6: Financial Inclusion in Africa
- WIZZIT Uses Its Independent Sales Force and Door-to-Door Sales to Sign Up New Bank Customers
- Figure 5-7: WIZZkids’ Method for Marketing the Bank’s Services in the Community and Workplace
- Conclusion
- Figure 5-8: South African Regulators Create KYC and AML Exemptions to Allow Providers to Target Low-Balance Customers