Javelin Study Assesses Under-banked Market Potential
As a result of the financial crisis and stringent new regulations, financial institutions have to develop new sources of revenue and growth. The under-banked and unbanked have always represented a theoretical new source of revenue but recent information is creating more clarity just what this could mean.
A new Javelin Strategy and Research report, “Reaching Underbanked and Unbanked Consumers in 2012: Strategies for Connecting with Mobile Financial Services” sheds new light and hope for a new, profitable segment for retail banks.
Javelin defines the under-banked as those without a checking account as opposed to the unbanked who have no bank relationship. The group is comprised of about 35 million adults – about 15 percent of the population. They are generally young, ethnically diverse, and more likely to use smart phones to bank. Thus, Javelin’s report has ideas on the specific potential mobile financial services. They also note that Gen Y income is on the rise and that soon Gen Y and Gen X incomes will outpace those of all other generations. Specifically, by 2025 Gen Y will represent almost half of personal income.
Clearly, this is a market worthy of further analysis. This population is largely excluded from benefitting from traditional credit, but very well may be credit worthy and would benefit and use credit should it be afforded them. Additionally, the cumulative wealth and potential fee income associated with utilization patterns of this population create interesting opportunities for retail banks searching for ways to grow their business.
However, getting to the under-banked will require new information, flexible systems, and an iterative approach to marketing and product development as banks gain more experience. As Javelin shows, the under-banked will have different channel preferences and product interests. This group will be characterized by unique risk profiles and a lack of traditional information, requiring banks to look to alternative data sources and flexible custom analytics as they create new products and services that appeal to this segment of the population
Utility, phone, and cable payment history, employment history, etc. are good ways to get new insights for you to better identify the profitable segments in the under banked community and serve them. These can be analyzed and easily added to your existing processes with the latest software available in the market. This provides a complete solution that can deliver better decisions for deposit accounts and other retail banking products for all segments of the population, and particularly this underserved and potentially highly profitable under-banked population.
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This post was contributed by: Lee Grice.
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