Do you still have a bank account? For a growing number of Americans, the answer to this simple question is no. According to The Washington Post, 821,000 households completely opted out of the banking system between 2009 and 2011, growing the unbanked population to 8.2 percent of U.S. households. Equally shocking is that 17 million adults are without a checking or savings account and another 51 million use a bank in combination with payday lenders or rent-to-own services. This second group, known as the underbanked, has grown to 20.1 percent of U.S. households.
To understand these growing segments, The Integer Group® recently conducted research among the underbanked across the U.S. to see their perspective as shoppers of financial services. We discovered that the underbanked have a love/hate relationship with banking. They love how banks treat them like respected customers; while alternative financial services companies, like check cashing stores and payday lenders, often treat them as inferior. For example, with prepaid cards, banks often strive to put the customer’s full name on the card. The same prepaid card from an alternative financial institution might print only the default “valued customer” title on the card. It’s hard to feel valued when your name isn’t even used. On the other hand, underbanked customers often felt there was a lack of transparency from banks. They understood the bank’s need for fees and minimums with various services; however, they can’t stand a fee they did not expect and account for in their budget. They demand transparency up front from the bank. Respect and transparency are two key elements the underbanked are shopping for when dealing with banks.
Simple steps can be taken to capitalize on the large opportunity that has arisen with the underbanked. By understanding how the underbanked are shopping for financial services, we are better able to comprehend their approach to the category both functionally and emotionally.
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