Overview:

The unbanked and the underbanked together spend around $10.4 billion on more than 324 million alternate financial services (AFS) products. With a population base of nearly 43 million people, the underbanked offer an immense, untapped consumer segment for federally-insured banks. ‘Wooing the Underbanked’ is a market research study designed specifically to understand the financial needs of the underbanked. The report offers vital market data for banks intending to tap this consumer segment, identifying the most profitable ways to ensure its economic inclusion into the traditional banking cycle.

Wooing the Underbanked – With a special focus on prepaid cards is a market research study designed specifically to profile underbanked populace/households. The aim of this report is to analyze the reasons behind the low adoption of traditional banking products by underbanked and their preference for alternate financial services (AFS) and products (transaction/credit).

The underbanked are educated and employed but are reluctant to use traditional banking products such as debit / credit cards and short term loans primarily due to the fear of hidden costs and convenience issues. They make little use of the services provided by mainstream financial institutions; and are limited to traditional banking where they usually have a checking / savings account. They also frequently use AFS offered by non-banking institutions. AFS products are non-bank money orders, payday lending, check cashing facilities, rent-to-own agreements, and refund anticipation loans.

The objective of the report is to provide vital marketing information about the underbanked that also use AFS products; and the traditional and novel banking and financial services that banks can render to them. The report will provide new insights and give recommendations for banks intending to capitalize on this untapped market segment. Intensive bifurcation of the underbanked customers on the lines of income, age, education, region, race, etc. will enable product development and provide a roadmap to the future of novel banking practices for the underbanked.

Scope of the report : 

Strategy formulation :

This section seeks to provide a schematic of the marketplace under study; and to enable the report user to determine their competitiveness and positioning in the market. Through our in-depth understanding of the financial services industry, we size the market, identify the trends and drivers, and develop the right framework for strategy formulation to help users maintain or enhance their market position.

Business Model :

This section seeks to identify the already existing business models; and to optimize these models in order to help FIs enter new and lucrative markets.

Vendor Selection :

This section seeks to profile the companies supporting the market under study. We profile the top vendors and analyze user perspectives to help you make the best decision for your financial institution. Every report includes in-depth reviews of the top vendors.

What makes our report unique?

A strong heritage of providing cutting-edge research: 
MarketsandMarkets provides clients with ground breaking marketing research.  M&M’s unique research methodology and expert analytical capabilities will provide you the tools to apply the best marketing practices to your Financial Institution. 

Ensure that your strategy is viable : 

Our study will help you examine the breadth of possibilities you may encounter when planning future strategies and product launches.  It will help you create plans that are resilient enough to meet the full range of unanticipated events. 

Discover new opportunities : 

This market research study will forecast the future roles, uses, and acceptances of new products, services, and applications emerging in the marketplace. It will identify opportunities where companies can get a leg up on the competition. 

Key questions answered :

1. Which are the high-growth segments and how is the market segmented on the basis of products, services and stakeholders?
2. What are market estimates and forecasts; which markets are doing well and which are not?
3. Where are the gaps and opportunities; what factors are driving market growth?
4. Which are the key playing fields and winning-edge imperatives?
5. What is the competitive landscape; who are the main players in each segment; what are their strategic directives, operational strengths, key selling products, and product pipelines? Who is doing what?

Powerful Research and analysis :

The analysts working with MarketsandMarkets come from renowned publishers and market research firms globally, adding their expertise and domain understanding. We get the facts from over 22,000 news and information sources, a huge database of key industry participants and draw on our relationships with more than 900 market research companies.

EXECUTIVE SUMMARY
WHY TARGET THE UNDERBANKED?
AFS USE BY UNDERBANKED
PRODUCT INNOVATION TO PENETRATE THE UNDERBANKED MARKET
CHALLENGES & STRATEGIC INITIATIVES
INTRODUCTION OF A NEW FINANCIAL VEHICLE TO FOSTER RELATIONSHIP

1 INTRODUCTION
1.1REPORT PURPOSE
1.1.1REPORT CATALYST
1.1.2REPORT STRUCTURE
1.2RESEARCH OBJECTIVES
1.3STUDY METHODOLOGY

2 MARKET OVERVIEW
2.1KEY FINDINGS
2.1.1CHARACTERISTICS OF THE UNDERBANKED
2.2MARKET DEFINITION
2.2.1REASONS FOR BANKS TO TAP THE UNDERBANKED
2.2.2NEED FOR EFFECTIVE DIFFERENTIATION
2.2.3USE OF ALTERNATE FINANCIAL SERVICES
2.2.4DEMOGRAPHIC CHARACTERISTICS OF UNDERBANKED HOUSEHOLDS
2.2.4.1Underbanked households by race and ethnicity
2.2.4.2Underbanked households by household type
2.2.4.3Underbanked households by education, income and age
2.3DRIVERS & OPPORTUNITIES
2.3.1EASE OF TAPPING THE UNDERBANKED
2.3.2HIGH COST OF AFS PRODUCTS
2.3.3GROWTH OF MINORITIES
2.4RESTRAINTS
2.4.1LOW CREDIT SCORES & PROFITABILITY ISSUES
2.4.2COMPETITION FROM AFS-PROVIDERS

3 STRATEGY FORMULATION
3.1KEY FINDINGS
3.2INTRODUCTION
3.3CHALLENGES IN SERVING THE UNDERBANKED
3.4OVERCOMING CHALLENGES
3.4.1EFFECTIVE PRODUCT DEVELOPMENT TO TACKLE PROFITABILITY ISSUES
3.4.2STRATEGIC ALLIANCE WITH AFS TO AVOID FRAUDS
3.4.3KIOSKS IN RETAIL STORES TO MITIGATE COST OF CUSTOMER ACQUISITION
3.5REACHING THE UNDERBANKED
3.5.1AWARENESS PROGRAMS
3.5.2TARGETED MARKETING PRACTICES
3.5.3OTHER STRATEGIES TO CATER TO THE UNDERBANKED
3.6IDENTIFYING SWEET SPOT FOR BANKS TO WOO THE UNDERBANKED
3.6.1PREPAID CARDS HAS MAXIMUM POTENTIAL
3.6.2UNDERBANKED SEGMENTS AND PRODUCT MATCHING
3.6.2.1Cash supreme
3.6.2.2Defaulters
3.6.2.3The aggressors
3.6.2.4Active money managers
3.6.2.5Opinionated
3.6.2.6The learner
3.6.2.7Nearly there
3.6.2.8To Borrow
3.7PREPAID CARDS – FINANCIAL VEHICLE TO ENABLE ECONOMIC INCLUSION
3.7.1OPEN-LOOP CARDS TO SURPASS CLOSED-LOOP CARDS
3.7.2BANKS TO MINIMIZE COST
3.7.3CREDIT BUILDER ASPECT OF PREPAID CARDS
3.7.4SMALL DOLLAR LOANS AVAILABLE THROUGH PREPAID CARDS

4 BUSINESS CASE STUDIES
4.1KEY FINDINGS
4.2PREPAID SOLUTIONS – TAPPING THE UNDERBANKED WITH RELOADABLE PREPAID CARDS
4.2.1OBJECTIVES
4.2.2LEVERAGING INFRASTRUCTURE OF AFS-PROVIDERS FOR PREPAID CARDS
4.2.3BENEFITS ACHIEVED BY PIGGYBACKING ON CHECK CASHING CENTERS
4.2.4SUCCESSFUL VENDOR RELATIONSHIP WITH FIS
4.2.5CONCLUSION
4.3USE OF WAL-MART FLOOR SPACE TO CROSS-SELL FINANCIAL SERVICES
4.3.1OBJECTIVES
4.3.2WAL-MART OFFERS A DIVERSIFIED PRODUCT SET AT COMPETITIVE PRICES
4.3.3CUSTOMER ACCEPTANCE THROUGH SPECIAL FOCUS ON CONVENIENCE
4.3.4INTRODUCTION OF WAL-MART PREPAID CARDS
4.3.5CONCLUSION

5 VENDOR SELECTION
5.1VENDOR BENCHMARKING
5.1.1FUNCTIONAL BENCHMARKING
5.1.2OPERATIONAL BENCHMARKING
5.1.3TECHNOLOGICAL BENCHMARKING
5.1.4COMMERCIAL BENCHMARKING
5.2VENDOR SELECTION FOR PREPAID CARDS
5.2.1ECOMMLINK
5.2.1.1Product & Service
5.2.1.2Recent Developments
5.2.2FIDELITY NATIONAL INFORMATION (FIS)
5.2.2.1Product & Service
5.2.2.2Recent Developments
5.2.3FIRST DATA
5.2.3.1Product & Service
5.2.3.2Recent Developments
5.2.4FSV PAYMENT SYSTEMS
5.2.4.1Product & Service
5.2.4.2Recent Developments
5.2.5GREEN DOT
5.2.5.1Product & Service
5.2.5.2Recent Developments
5.2.6I2C INC.
5.2.6.1Product & Service
5.2.6.2Recent Developments
5.2.7NETSPEND
5.2.7.1Product & Service
5.2.7.2Recent Developments
5.2.8TSYS
5.2.8.1Product & Service
5.2.8.2Recent Developments
5.2.9TXVIA
5.2.9.1Recent Developments

APPENDIX

LIST OF TABLES

TABLE 1FULFILLING BANK OBJECTIVES WHILE SERVING THE UNDERBANKED
TABLE 2 AGE-WISE PREFERENCE FOR AFS/BANKING PRODUCTS
TABLE 3 PRODUCTS WITH RELATIVE ATTRACTIVENESS
TABLE 4 TOP U.S. ISSUERS OF PREPAID CARDS,  BY PURCHASE VOLUME (2008)
TABLE 5 VOLUME OF LOADED AMOUNT IN PREPAID CARDS ($BILLION)
TABLE 6 PRICE COMPARISON OF PREPAID CARDS
TABLE 7 PRICE COMPARISON OF MONEY SERVICES (JUNE 2007)
TABLE 8 ROLES OF PROFILED VENDORS
TABLE 9 BANK ACCOUNTS WITH SPECIAL INTEREST FOR THE UNDERBANKED
TABLE 10LOANS FOR THE UNDERBANKED
 
LIST OF FIGURES

FIGURE 1U.S. HOUSEHOLDS’ BANKING STATUS
FIGURE 2IDENTIFYING SWEET SPOT FOR BANKS
FIGURE 3AFS PRODUCTS USAGE BY UNDERBANKED HOUSEHOLDS
FIGURE 4 UNDERBANKED HOUSEHOLDS BY RACE AND ETHNICITY
FIGURE 5 U.S. HOUSEHOLDS VS UNDERBANKED HOUSEHOLDS, BY RACE AND ETHNICITY
FIGURE 6 UNDERBANKED HOUSEHOLDS BY TYPE
FIGURE 7 UNDERBANKED HOUSEHOLDS BY EDUCATION
FIGURE 8UNDERBANKED HOUSEHOLDS BY INCOME
FIGURE 9UNDERBANKED HOUSEHOLDS BY AGE
FIGURE 10 CROSS-SELL AND UP-SELL STRATEGIES TO TAP THE UNDERBANKED
FIGURE 11 CHALLENGES FACED BY BANKS
FIGURE 12MARKETING FINANCIAL PRODUCTS TO UNDERBANKED
FIGURE 13 STRATEGIES TO ATTRACT UNDERBANKED CONSUMERS
FIGURE 14 CHECK CASHING FOREMOST DEMANDED SERVICE
FIGURE 15 RELATIVE IMPACT OF BANKING PRODUCTS
FIGURE 16 UNDERBANKED CUSTOMER SEGMENTS AND PRODUCT SELECTION
FIGURE 17 POSITIONING THE SAME PRODUCT TO DIFFERENT MARKET SEGMENTS
FIGURE 18 SHIFT IN THE PREPAID CARD INDUSTRY (2008-2014)
FIGURE 19 VENDOR BENCHMARKING, BY MAJOR END-USER SERVICES
FIGURE 20 VENDOR BENCHMARKING, BY VALUE-ADDED SERVICES
FIGURE 21 VENDOR BENCHMARKING, BY OPERATIONAL STRENGTH
FIGURE 22 VENDOR BENCHMARKING, BY TECHNOLOGY DEVELOPMENTS
FIGURE 23 RELOADS ON GENERAL PURPOSE PREPAID CARDS