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

DIGITAL EDITION BONUS FEATURE Five consumer types among the underbanked The survey determined that there are five broad customer categories among the underbanked, “each with very different expectations in terms of what customers want in a checkcashing experience and how open they would be to a traditional banking relationship.” The five categories: convert to bank accounts if the bank’s check cashing service is efficient and consistent,” the study reports. 4. 5. 1. “Price-sensitive converters.” Price-conscious consumers whose chief concern is how much they will have to spend to cash checks. They would respond to price discounts or to loyalty programs that lower rates for customers who cash frequently at the same office. “Employee-relationship transactors.” Consumers who were most concerned with having “warm, respectful interactions” with employees when cashing their checks. Interestingly, while they use check cashers, 64% of this group have checking accounts. “Service-oriented transactors.” These people don’t care much about price. Instead, they prize respect and the feeling that they won’t be rejected, a feeling that reinforces use of check cashing services. They put a premium on convenient office location. “This segment should be easy to “Engaged convertibles.” While these people are interested in many aspects of a good financial services experience, they care the most about confidentiality, trust, respect, and feeling safe at the provider’s location. Stressing safety and security, while providing efficient check cashing service, could bring many such consumers into banks. 2. 3. “Disengaged resistors.” These people have the least interest in a banking relationship, although many do have a checking account (58%) or a savings account (49%). They have little concern over the quality of the customer experience, and care most about confidentiality of their information and being able to pay bills. These people have mental and emotional barriers to dealing with banks that would have to be overcome to draw their business, the study says. They might be influenced by marketing that stresses some valuable benefit to dealing with a bank, such as offering a gift if they sign up for check cashing service, or a second chance—having gotten into trouble in the past—at more banking services if they complete a financial training course. BJ Cultural challenge makes banking Minneapolis’ Somalis difficult Firm Islamic rules pose a challenge to serving this segment B anking the growing Somali immigrant community of the Minneapolis-St. Paul area isn’t for lack of interest. Actually, it’s the presence of interest that makes it nigh impossible to reach these unbanked people in a conventional banking setting. Perhaps no banker in the area knows this better than Farooq Bhatty. He is a veteran banker. He is also a Muslim. So are most of the Somalians who come to this country. In fact, though he is a business banker for Associated Bank Minnesota, and has taken part in loan evaluation and approval for numerous loans to Somalis in the area, his bank hasn’t made any of these. The bank can’t. Muslim Somalis are forbidden by their religion from paying or receiving interest, and thus most conventional banking practices can’t generally meet their needs. By Steve Cocheo, executive editor 38c SEPTEMBER 2007/ABA BANKING JOURNAL A religious barrier The issue is Shariah, Muslim law, sometimes spelled “Shar’iah” or “Share’a.” All forms of financing involving interest, or usury, called “reba” or “riba” in Islam, are forbidden to the orthodox. Any pre-determined return on a contract is barred. Documentary sources explain the thinking here: It is not right for one with wealth to withhold the benefits of that wealth from the community by charging for it. Hence, paying of reba, or receiving it in the form of interest on a bank account, violates Shariah. Additional implications arise through Shariah. To receive the profits of businesses or activities that violate Shariah likewise are banned. Thus any venture that somehow touches wine or liquor; casinos or other gambling; pork processing; or pornography violates Shariah. For any strict follower of Islam, Bhatty explains, then, traditional Western banking products aren’t permitted. www.ababj.com/subscribe.html

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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