Jul 25, 2013 Sean Albert
Getting by in America without participating in the modern financial system is close to impossible. Whether it's the need for a consumer credit score to make important purchases or the simple fact that carrying large amounts of cash isn't convenient, not having a bank account can create a hassle if people don't have access to alternatives. Money might not bring happiness, but having a way to manage it effectively can certainly make life easier.
Despite the fact that it's so difficult to get by without using a traditional bank, there are many consumers in the United States who are unbanked or underbanked, meaning they do not have access to bank accounts due to extenuating circumstances or their personal preferences. But as companies and financial institutions recognize the significant population of these individuals that exists, more options are beginning to crop up to help them get access to the products and services they need in everyday life without needing a bank account.
Connecting the unbanked
According to ATM Marketplace, a recent study by the Federal Reserve Bank of Philadelphia found that in many cases, prepaid options such as ACH cards are fast usurping the role that cash once had in daily life for unbanked and underbanked consumers. The source reported that researchers discovered these payment methods are increasingly being used to make basic purchases such as groceries and gas, but they are also filling other roles as well. For example, ACH cards can help those who don't use traditional banks avoid pricey money orders, and the electronic payments tools can also fulfill the role of a checking account in many cases.
Bank Systems & Technology noted that today's underbanked population is approximately 68 million people strong, and this figure amounts to one in every five American households. The news provider explained that until recently, these consumers did not have many options for how to keep track of their finances, but they are now increasingly going more mainstream. The source reported that in a recent study by the Federal Reserve, it was revealed that beyond just ACH cards, the unbanked and underbanked are opting to use mobile payments technologies to solve some of their most important issues. In fact, these individuals are adopting mobile payments at a 5 percent higher rate than the rest of the American population. Bank Systems & Technology pointed out that in some other studies, it has been shown that the underbanked use mobile banking tools eight percent more than other U.S. consumers.
The news source emphasized that for any firms that offer financial services, the unbanked and underbanked represent a huge opportunity as long as companies know their desires. While it's easy for some businesses to assume that these individuals want something entirely unique from other customers, this isn't necessarily true. While they may be using certain tools for separate reasons than the average consumer, they still want added value and new, novel, highly differentiated experiences. Bank Systems & Technology emphasized that financial services organizations must combine this demographic's preference for cash with their enthusiasm for mobile, as doing so will both help customers and improve the enterprises' results.
A market for alternatives
No matter whether the unbanked and underbanked are making transactions and managing their money through mobile payments or ACH cards, it's clear that as the portion of the American populace that eschews traditional banks grows, so will the market for alternative financial services. Giving consumers what they require and want is the job of any customer-facing organization, and those that work diligently to fill emerging needs will see a profound impact on their bottom lines and in terms of loyalty as well.