Aug 16, 2013 Dave King
The underbanked and unbanked populations continue to grow in the United States, as more consumers and households shift away from traditional financial services and toward alternative options. These demographics now account for an estimated 68 million consumers, highlighting the importance of penetrating these markets to drive revenues in the coming years.
While prepaid cards and alternative loans have been among the most popular options for these households, other types of consumers are beginning to use these products as well. However, businesses should consider cultivating prepaid card strategies to take advantage of the tens of millions of potential customers who are currently unbanked and underbanked.
FactorTrust, an aggregator of unbanked and underbanked related data, recently released its latest Underbanked Index that revealed some of the behaviors of consumers who fall into these categories. According to the study, the quarterly analysis recorded average credit scores among underbanked consumers, as well as common loan amounts requested and approval ratings.
Approval rates hit roughly 43.6 percent, while the average loan requested was $490 and credit scores revolved around 701, according to the data compiled by the firm.
"The FactorTrust Index paints a detailed and accurate picture of behaviors tied to this very valuable but underserved segment because we've compiled the industry's most comprehensive data on it," Greg Rable, CEO of FactorTrust, explained. "We know lenders need to be innovative every single day, especially with the challenges of reaching the underbanked. This data enlightens lenders as to who these people are and how to best accommodate that market segment."
This report also highlights just how innovative alternative lenders are becoming in light of the thriving underbanked and unbanked populations. Since these parties will be more difficult to assess upon a request for loans, lenders must leverage advanced web-based technology to get accurate portrayals of each customer.
Companies that are providing prepaid cards should adhere to similar strategies to ensure behaviors are evaluated before releasing a product.
Making prepaid fun
The New York Times recently reported that American Express has tied its prepaid card products to an online video game in a partnership with Riot Games. The news provider stated that consumers will get a certain number of points in the game when they register for the prepaid card and load money onto it - providing yet another indication of how effective gamification can be.
This strategy is a strong example of how prepaid card providers can increase engagement and visibility among younger consumers, as well as unbanked households.