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The Underbanked - Canada - February 2016

Published By :

Mintel

Published Date : Feb 2016

Category :

Banking

No. of Pages : N/A

Disruptive start-ups have the potential to poach future generations of banking customers by offering them lower-cost alternatives to conventional services and becoming a trusted alternative. Conversely, this could also lead to alliances with mainstream financial institutions.

Table of Content

Overview

Regional classifications
Definitions
Income

Executive Summary

The issues
Who are the unbanked?
Figure 1: Unbanked, reasons for not having a bank account, November 2015
Use of alternative financial services providers
Figure 2: Use of alternative financial providers, unbanked and underbanked vs overall population, November 2015
Unbanked and unbanked under-index on product ownership
Figure 3: Product ownership at bank or credit union, unbanked and underbanked vs well-banked, November 2015
Unbanked have fewer financial priorities
Figure 4: Financial priorities, unbanked and underbanked vs well-banked, November 2015
Underbanked have lower amounts of investments but their debt levels are fairly similar to the well-banked
The opportunities
Potential solutions for servicing the unbanked and underbanked
Alternative financial services providers: servicing a short-term need at a high cost
Alternative financial users are less financially sophisticated but more open to new products
Figure 5: Attitudes of alternative financial services users vs overall population, November 2015
Online disruptors may pose a competitive threat
What it means

The Market – What You Need to Know

Canada’s population is expected to age in the coming years
The population is growing and ethnically diverse
Proportion of highly indebted households continues to rise
IMF downgrades 2017 economic forecast for Canada

Market Factors

Canada’s population is expected to age in the coming years
Figure 6: Population aged 65 years and over in Canada, historical and projected (% of total), 1971-2061
Figure 7: Projected trends in the age structure of the Canada population, 2014-19
The population is growing and ethnically diverse
Growth of the LGBT community
Proportion of highly indebted households continues to rise
IMF downgrades 2017 economic forecast for Canada

Market Perspective

Ontario proposing changes to payday loans and debt collection
New financial literacy initiatives rolling out across Canada
Nudging consumers towards better financial habits
Bank of the West partners with University of California (UC) – Berkeley for financial literacy education
Figure 8: UC Berkeley partnership with Bank of the West
Spend more wisely with a prepaid card
Figure 9: Navy Federal Credit Union prepaid card
Discover helps customers understand credit and take control
Figure 10: Discover credit card member support site
CreditSecure provides advanced monitoring and financial tools
Figure 11: American Express credit monitoring service

Key Players – What You Need to Know

EQ Bank launches mobile app and announces 3% interest rates
Tangerine announces the launch of secure chat
Mogo and Postmedia announce a strategic collaboration
New mobile bank Koho set to join Canada’s FinTech crowd
Chase and Bank of America to roll out ATMs that won’t require a card

What’s New

Tangerine celebrates hard-working Canadians
EQ Bank launches mobile app and announces 3% interest rates
Mogo and Postmedia announce a strategic collaboration
Tangerine announces the launch of secure chat
The growth of Credit Karma in the US
Start-ups focus on alternative models of credit scoring
Credit scoring companies test the use of alternative data to determine “new” credit scores
New mobile bank Koho set to join Canada’s FinTech crowd
Chase and Bank of America to roll out ATMs that won’t require a card

The Consumer – What You Need to Know

Who are the unbanked and reasons for not having a bank account
Use of alternative financial services providers
Unbanked and underbanked have fewer financial priorities
Underbanked have lower amounts of investments but their debt levels are fairly similar to the well-banked
Alternative financial users are less financially sophisticated but more open to new products

Unbanked

Who are the unbanked?
About a third of the unbanked prefer not to disclose reasons for not having a bank account
Figure 12: Unbanked: reasons for not having a bank account, November 2015
Potential solutions for servicing the unbanked
Unbanked Canadians are less likely to be knowledgeable about their finances
Figure 13: Attitudes related to financial sophistication (% agree), unbanked and underbanked vs well-banked, November 2015
Younger consumers more inclined to look for guidance and be influenced by friends/family
Unbanked are less inclined to look for the best deals
Unbanked are less interested in online/mobile services but, at the same time, are more likely to use virtual banks
Figure 14: Attitudes related to use of financial institutions (% agree), unbanked and underbanked vs well-banked, November 2015
Using mobile technology to service the underbanked

Product Ownership

Who are the underbanked?
Significant opportunities for product pick-up among the underbanked
Figure 15: Product ownership at bank or credit union, unbanked and underbanked vs well-banked, November 2015
Credit cards, lines of credit and savings accounts have significant potential
Unbanked over-index on ownership of prepaid cards
Banks/credit unions strongly favoured by the underbanked for lines of credit
Figure 16: Bank/Credit union usage index for each product owned, November 2015
Online disruptors more likely to target underbanked and unbanked consumers
A third of the well-banked have six or more financial products
Figure 17: Repertoire of financial product ownership at all financial institutions, November 2015

Use of Alternative Financial Providers

Around one in six Canadians, including a third of the unbanked, have used an alternative provider in the past three years
Figure 18: Use of alternative financial providers, unbanked and underbanked vs overall population, November 2015
Who are alternative financial services users?
Reasons for the use of alternative financial services providers
Alternative financial users are less financially sophisticated but more open to new products
Figure 19: Attitudes of alternative financial services users vs overall population, November 2015
Uncomfortable with their debt levels and find it harder to get loans from banks
Lack of financial sophistication tied to higher usage

Financial Priorities

Unbanked and underbanked have fewer financial priorities
Figure 20: Financial priorities, unbanked and underbanked vs well-banked, November 2015
Buying a home and paying off credit card balances are the top priorities for the unbanked
Paying off/reducing credit card debt and building an emergency savings account are the top priorities for the underbanked
Paying off credit card balances, contributing to a retirement account and building an emergency savings account are the top priorities for the well-banked
A third of the unbanked are looking to open a new bank account
Figure 21: Attitudes related to personal finances (% agree), unbanked and underbanked vs. well-banked, November 2015

Financial Snapshot

Underbanked have lower amounts of investments…
Figure 22: Amount of household savings/investments, unbanked and underbanked vs well-banked, November 2015
and their debt levels are fairly similar to the well-banked
Figure 23: Amount of household debt, unbanked and underbanked vs. well-banked, November 2015

Appendix – Data Sources and Abbreviations

Data sources
Consumer survey data
Consumer qualitative research
Abbreviations and terms

List of Table

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