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The Unbanked and Underbanked - US - June 2016

Published By :

Mintel

Published Date : Jun 2016

Category :

Banking

No. of Pages : N/A

Un- and underbanked Americans are underserved by traditional financial institutions because many don’t have the identification or money to qualify to open accounts. Instead, they are increasingly serviced by alternative financial services companies and are often limited to products that are more restrictive and have higher fees. While some of these consumers will voluntarily remain outside the banking mainstream, many will ultimately decide – and qualify – to enter it. Mainstream institutions need to focus marketing efforts on these customers as they begin to explore their banking options, paying special attention to their technology preferences and working toward dislodging the relationships many already have with alternative companies.

Table of Content

Overview

What you need to know
Definition

Executive Summary

The issues
Young people are most likely to be un- and underbanked
Figure 1: Share of unbanked, underbanked, and banked, by age, March 2016
Underbanked are not necessarily low income
Figure 2: Share of unbanked, underbanked, and banked, by household income, March 2016
Unbanked consumers believe they don’t need an account
Figure 3: Unbanked reasons for not having an account, March 2016
Use of alternative financial products and services
Figure 4: Use of alternative financial products and services, by banking status, March 2016
The opportunities
Bitcoins
Figure 5: Alternative financial services used, by banked status, March 2016
Mobile services are key
Figure 6: Importance of online/mobile services, by banked status and demographics, March 2016
USPS and postal banking
Peer-to-peer lenders may make inroads
Figure 7: Use of P2P loan product, by banked status, March 2016
What it means

The Market – What You Need to Know

The underserved market is huge
Aging of America
Growth of Hispanic population
CFPB putting pressure on large banks
NYC ID cards are turned away
Continued growth of online disruptors
Push to allow USPS offer basic banking services

Market Size

The underserved market is big – and getting bigger

Market Factors

Aging of America
Figure 8: Growth of US population, by age, 2015, 2060
Hispanic population continues to grow
Figure 9: Growth of US population by Hispanic origin, 2015-60

Market Perspective

CFPB putting pressure on large banks
NYC ID cards are turned away
Continued growth of online disruptors
Push to allow USPS offer basic banking services

Key Players – What You Need to Know

Banks are offering accounts targeted to the un- and underbanked
Mission Asset Fund
Coin Cloud
Financial literacy is a problem
Startups are beginning to focus on underbanked

What’s Working?

Key Bank
Spring Bank
Fifth Third Bank
MAF
Coin Cloud
Abra

What’s Struggling?

Financial literacy is a problem
Figure 10: Understanding of credit score, by banked status, March 2016

What’s Next?

Increased financial literacy efforts may help
Bank of the West teams up with University of California – Berkeley
Figure 11: Bank of the West print ad, 2015
Startups are beginning to focus on underbanked
US Treasury launches mobile app

The Consumer – What You Need to Know

The Unbanked vs the Underbanked
Fees are a major reason unbanked Millennials don’t have an account
Traditional banks and credit unions split new accounts from underbanked
Underbanked consumers are drawn to mobile banking
Consumers trust traditional banks more than online-only banks
Underbanked are concerned about their level of debt

The Unbanked

Who are the unbanked?
What financial products do they use?
Figure 12: Financial products owned, unbanked, March 2016
Use of alternative financial products and services
Figure 13: Use of alternative financial products and services, unbanked, March 2016
Opportunity among some unbanked segments
Figure 14: Use of alternative financial products and services, unbanked, by demographics, March 2016
Reasons for not having a bank account
Figure 15: Unbanked reasons for not having a bank account, March 2016
Fees too high for unbanked Millennials
Figure 16: Unbanked reasons for not having bank account, by generation, March 2016
Discover’s free checking
Figure 17: Discover direct mail ad, 2015

The Underbanked

Who are the underbanked?
What financial products do they use?
Figure 18: Financial products used, underbanked, March 2016
Use of alternative financial products and services
Figure 19: Use of alternative financial products and services, underbanked, March 2016
Underbanked Millennials are an opportunity for online-only banks
Figure 20: Location of primary account, underbanked, by generation, March 2016
High income underbanked have researched alternative financial services companies
Figure 21: Researched alternative financial services companies, underbanked, by household income, March 2016

Experience with Banks and Bank Accounts

Opportunities for banks and credit unions
Figure 22: Plans to open new accounts, by banked status, March 2016
Mobile banking is important to underbanked
Figure 23: Financial habits, by banked status, March 2016

Attitudes toward Banks and Banking

Traditional banks are in a good spot
Figure 24: Attitudes toward banks and banking, by banked status, March 2016
Underbanked men are a challenge for banks
Figure 25: Attitudes toward banks and banking, underbanked by age and gender, March 2016
Online and mobile services are crucial to underbanked
Figure 26: Attitudes toward banks and banking, by banked status, March 2016
Underbanked are most concerned about their level of debt
Figure 27: Attitudes toward personal financial situation, by banked status, March 2016
Key Bank’s focus on money management tools
Figure 28: Key Bank email ad, 2016
Millennials are particularly optimistic
Figure 29: Believe financial situation will improve, Millennials, by banked status, March 2016

Appendix

Among underbanked, married men who live in cities are most likely to plan to use traditional banks
Figure 30: Opening new accounts, by banked status – CHAID analysis March 2016
Figure 31: Experience with banks and bank accounts – CHAID – Table output, March 2016
CHAID analysis methodology

Appendix – Data Sources and Abbreviations

Data sources
Consumer survey data
Direct marketing creative
Abbreviations
Terms
Generations

List of Table

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