ABA Banking Journal - September 2007 - (Page 38B)

Research about the “underbanked” “Banks make me feel poor,” was an attitude uncovered. Most “underbanked” consumers are “open” or “very open” The report suggests that bank compensation policies, based to establishing a relationship with a bank—indeed, in spite of on the volume of business generated rather than the effort stereotypes, only 24% of underbanked consumers surveyed required to generate it, tend to bring few rewards to those recently deal exclusively with a check casher. working in branches serving the underbanked. This can However, banks wishing to attract more such customers undercut efforts to serve this market. must readjust their thinking from traditional channels, because the underbanked, as a group, make financial deci• Comfort in environment. Plush carpets, desks, securisions differently than do mainstream, mass-market banking ty guards, and velvet ropes for customer lines may be tradiconsumers. So reports The Power of Experience in tional, but they put off the underbanked. Many people surUnderstanding the Underbanked Market, a new report on veyed don’t feel at ease in institutional settings and prefer to this market. do their financial business in a less-formal environment. “Financial institutions have begun to recognize the enor- Again, they find comfort in the neighborhood. Branches can mous potential in serving underbanked households…,” the be made friendlier by adding very clear signage and adding study states. “But it is becoming clear that greeters to the mix, the report suggests. attracting underbanked consumers is no simple task. While underbanked consumers differ • Insistence on respect. Respect comes in from their banked counterparts, they also difmany forms, and to these consumers, it shows fer among themselves. Indeed, they represent in convenient hours and locations; friendly many different markets, based on their likes employees; and clear information about and dislikes, attitudes, behaviors, financial sitcharges and other policies. The report found uations, and other factors. To attract underthat the underbanked tend to home in on banked consumers and win their trust, banks many subtle practices and behaviors. The need to deliver experiences that are desirable report suggests that simply making followup to each different market.” calls to make sure these customers were satisThe study, released in June 2007, was fundfied with the way a transaction or problem was ed by the Center for Financial Services handled can accomplish much. Innovation, a nonprofit affiliate of communi- Center for Financial Services Notably, the underbanked take a bank’s ty development institution ShoreBank Corp., Innovations Jennifer Tescher involvement in the community as a sign of predicts “day of reckoning” for Chicago, and KeyBank, Cleveland, with the fee-based overdraft checking. respect. Activities such as sponsoring neighFord Foundation. The research was conductborhood events, putting up prizes for local ed among 760 underbanked consumers across the country by contests, and sending bank representatives to community Market Innovations, Inc. The full paper based on the study centers, libraries, and other key locations helps. can be found at www.cfsinnovation.com/research-paperdetail.php?article_id=330182. • Need for the unorthodox. “Underbanked consumers The study contains findings about the market in general, as may not be served by traditional products,” the study well as specific segments. reports. “Banks may need to think about how to offer check cashing, money orders, and low-cost remittances.” The latter Broad findings about the underbanked aren’t included in the typical bank’s menu. The study’s key findings about the broad market in general: But the report warned against trying to meet this market’s needs by offering “stripped-down” versions of what main• Comfort in the neighborhood. Many underbanked stream customers receive. Rethinking of the products with consumers, confused by mainstream banking institutions and the needs of the unbanked or underbanked segment being their policies, take comfort in the “informal economy.” This addressed will go further for the bank, the survey says. consists of borrowing from friends, family, and community members, and cashing checks at the local check cashers. • Need for atypical financial training. While financial “This is the ultimate ‘relationship banking’,” the report literacy training and education are often cited as critical solustates, “just not with banks.” tions to the issues of the underbanked and unbanked, simply While check cashers, payday lenders, and sub-prime mort- providing a traditional seminar may not cut it. The study says gage lenders charge high fees, the study found the under- the underbanked want to learn more about finance, but may banked often feel “they are like me.” By contrast, they take lack time for traditional classes. Alternatives such as peer identification requirements as discriminatory, while over- coaching and online courses may be viable alternatives, the draft fees they see as a betrayal. report suggests. (Continued on next page.) www.ababj.com/subscribe.html ABA BANKING JOURNAL/SEPTEMBER 2007 38b http://www.cfsinnovation.com/research-paper-detail.php?article_id=330182 http://www.cfsinnovation.com/research-paper-detail.php?article_id=330182 http://www.cfsinnovation.com/research-paper-detail.php?article_id=330182 http://www.cfsinnovation.com/research-paper-detail.php?article_id=330182

Table of Contents Feed for the Digital Edition of ABA Banking Journal - September 2007

Contents Editor's Column Briefing: Why Money Sense is a Top Priority Briefing: Sleight of Mind Briefing: Snapshot: What the First Half Tells Us About the Second Half Briefing: ABA Resources ABA Chairman’s Position Briefing: Get Away and Get Ahead: ABA's Banking Leaders Forum Community Banking: Trim the Fat: Winning the "Battle of the Buck" Community Banking: Pass the Aspirin Cover Story: Meeting the Challenge of the "Unbanked" Bank Marketing: Don't Miss the Boom! On the Job: Time to Power Up Your Presentations? Insurance Sales: The Art & Craft of Cross Selling Tech Topics: The Price is Right? Tech Topics: Security: Protect Information First Tech Topics: Hackers for Hire? You Bet'cha Tech Topics: Case in Point: Tellers Scan, Too, at First Federal Compliance Clinic: Adverse Action Clarified The Economy Banker’s Mart To Advertise/Index of Advertisers

ABA Banking Journal - September 2007

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