Meeting needs of the underbanked is challenge met by variety of financing tools
Dec 03, 2012 Sean Albert
The FDIC recently reported that more than 10 percent of Alabama's households - about 193,000 - don't have a checking or savings account, making the state one of the most unbanked in the country. Nearly 29 percent are considered underbanked, meaning they have at least one bank account but essentially rely on alternative financing services - non-bank money orders, check cashing services, short term loans and rent-to-own services – to pay their usual expenses. However, such alternatives, particularly prepaid stored value cards, have also grown in popularity with employed middle-class Americans who have traditional banking services. Time noted that only five percent of that group of Americans don't have a traditional account, but about 20 percent of them still take advantage of alternative financing found outside banks and other financial institutions. Convenience, the magazine reported, is the reason why. Finding the right financing tools for an individual's particular needs is the key to providing services that can be used by those who can't afford account-related fees at their local banks. "If they can find products that do that, without undue regulation from the new Consumer Financial Protection Bureau, that would be a win-win for everyone," Stephen Yoder, assistant professor at the University of Alabama at Birmingham's School of Business, told the Birmingham Business Journal.