The Un-And Underbanked: Incl Impact Of COVID-19 - US - August 2020

The Un-And Underbanked: Incl Impact Of COVID-19 - US - August 2020

  • Mintel
  • August 2020
  • Banking
  • 0 pages

Report Description

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The un- and underbanked are more vulnerable to economic uncertainty, and the COVID-19 pandemic will have made it much more difficult for many of these folks to make ends meet. Further compounding matters, Hispanic and Black consumers are both more likely to be un- and underbanked and more likely to suffer worse health outcomes from COVID-19. Banks and financial brands that say "We're all in this together" now have a golden opportunity to help make a real difference.

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Table of Contents

OVERVIEW

What you need to know
Key issues covered in this Report
Definition

EXECUTIVE SUMMARY
Market overview
Impact of COVID-19 on the un- and underbanked
Figure 1: Short, medium and longer term impact of COVID-19 on the Financial Services Industry, July 2020
Key takeaways
Almost 1 in 10 consumers are unbanked, with a quarter underbanked
Figure 2: Share of banked, unbanked, and underbanked population, March 2020
The unbanked need a convincing value proposition
Figure 3: Reasons for not having bank account, March 2020
Direct deposit is the best foot in the door for converting the unbanked
Figure 4: Underbanked financial attitudes, March 2020
What it means/what’s next

IMPACT OF COVID-19 ON THE UN- AND UNDERBANKED
Figure 5: Short, medium and longer term impact of COVID-19 on the Financial Services Industry, July 2020
Opportunities and Threats
Stimulus checks provided opportunity and incentive to become banked
The response from neobanks added to the pressure on established banks
Figure 6: Chime, tweet about stimulus payments, April 2020
Figure 7: Direct Deposit with PayPal, May 2020
The mere prospect of future payments (stimulus or otherwise) can spur new banking originations
Figure 8: PenFed Access America Checking, acquisition email May 2020
During lockdown, proper documentation was hard to acquire
Broader shifts in consumer behavior will emphasise the importance of financial inclusion
The shift to digital will reduce the barriers for some – but will alienate others
Mintel’s Global Consumer Trend Drivers provide lens into mind of the unbanked
Get rid of fees to attract unbanked consumers
Figure 9: Motivation for unbanked to become banked, May 2020
Figure 10: Credit Sesame, Sesame Cash acquisition email, May 2020
More people are acting with an awareness of Rights
How the COVID-19 crisis will affect the un- and underbanked
An overlap between the unbanked and the groups most exposed to COVID-19
Healthcare costs will put even greater strains on vulnerable consumer groups’ finances
Expiry of the CARES Act will further impact consumers’ financial position
Figure 11: Unemployment rate, by race and Hispanic origin, May 2007 – May 2020
How a COVID-19 recession will reshape the future of the financial services industry
Learnings from the Great Recession are still relevant
Figure 12: Financial opinions of the un- and underbanked, March 2020
COVID-19: US context

THE MARKET – WHAT YOU NEED TO KNOW
FDIC’s unbanked numbers leave large question mark
Unemployment threatens to keep more folks unbanked

MARKET SIZE AND FACTORS
“Status unknown” clouds official data on the un- and underbanked
Figure 13: Banking status of US households, 2013-17
Sustained unemployment will inhibit new account growth, may threaten existing membership
Figure 14: Unemployment rate, May 2007 – June 2020
COVID-induced recession stands to hit the unbanked particularly hard
Figure 15: Employment status of the un- and underbanked, March 2020

KEY TRENDS – WHAT YOU NEED TO KNOW
The history of race in America echoes in today’s financial world
Technology can redefine financial inclusion
Non-bank companies will continue to challenge traditional financial institutions

WHAT’S STRUGGLING
A clear picture of who needs help
America must reckon with its past crimes
1865-1874: Freedman’s Savings Bank sets a precedent of mistrust
1934 (officially) – present: Redlining systemically denies Black and Hispanic consumers access to credit
2020: Black and Hispanic consumers are twice as likely to be unbanked
Figure 16: Unbanked rate, by race and ethnicity, March 2020
Figure 17: Chase Instagram post regarding George Floyd, June 2020

WHAT’S DRIVING CONSUMER BEHAVIOR?
Technology is changing the nature of community, experiences, and surroundings
Sweepstakes pull at basic human urges
Figure 18: Credit Karma, $20,000 sweepstakes, July 2020
Figure 19: Chime, July 2020
“Path to Apple Card” program plants seeds for financial success
Figure 20: Apple Card path to approval, June 2020

WHAT TO WATCH
Walmart MoneyCenter is a one stop shop for financial services
Figure 21: Un- and underbanked attitudes toward banking, March 2020
Figure 22: Walmart money center, July 2020
Changing attitudes toward cash further threaten the unbanked
Figure 23: Attitudes toward cash, July 2019
Fintech can bring greater access to credit to the un- and underbanked
Figure 24: Attitudes toward personal loan attributes, by age, September 2019
Figure 25: Zest AI, July 2020

THE CONSUMER – WHAT YOU NEED TO KNOW
Who are the un- and underbanked consumers?
Why unbanked? No need, no money
Many of the un- and underbanked say they plan to open accounts
Direct deposit is a strong incentive to become banked

THE UN- AND UNDERBANKED CONSUMER
The un- and underbanked population skews young and multicultural
Figure 26: Generational composition of the un- and underbanked, March 2020
Figure 27: Banking status, by race and ethnicity, March 2020
The underbanked utilize a wide variety of non-bank products
Figure 28: Non-bank financial products, March 2020
Figure 29: Earnin Youtube video, july 2020

UNBANKED RATIONALE
Lack of need, lack of money maintain the unbanked status quo
Figure 30: Reasons for not having bank account, March 2020
Figure 31: USAA stimulus check email, May 2020
Reasons for remaining unbanked, TURF Analysis
Figure 32: TURF Analysis – Reasons for not having bank account, March 2020
Figure 33: Table - TURF Analysis – Reasons for not having bank account, March 2020
TURF Methodology
Lack of fees is the greatest incentive
Figure 34: Incentives for opening a bank account, March 2020

FINANCIAL CHALLENGES AND PLANS
The underbanked are more aspirational, while the unbanked focus on the day-to-day
Figure 35: current financial challenges, by banking status, March 2020
Significant amounts of the un- and underbanked plan to open an account
Figure 36: Plans to open bank account, by current banking status, March 2020
Figure 37: Dave homepage, July 2020

FINANCIAL ATTITUDES AND BEHAVIORS
One third of the unbanked use cash exclusively
Figure 38: Financial habits, by current banking status, March 2020
Bank satisfaction is high, direct deposit is a strong incentive
Figure 39: Underbanked financial attitudes, March 2020
The un- and underbanked are optimistic, but wish things were easier
Figure 40: Un- and underbanked attitudes toward banking, March 2020

APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Consumer survey data
Direct marketing creative
Abbreviations and terms
Abbreviations

APPENDIX – THE MARKET
Household type
Figure 41: Percent of households that are unbanked and underbanked, by household type, 2013-17
Race and Hispanic Origin
Figure 42: Percent of households that are unbanked and underbanked, by race and Hispanic origin, 2013-17
Age of Householder
Figure 43: Percent of households that are unbanked and underbanked, by age of householder, 2013-17
Employment status
Figure 44: Percent of households that are unbanked and underbanked, by employment status, 2013-17
Household income
Figure 45: Percent of households that are unbanked and underbanked, by family income, 2013-1
Region
Figure 46: Percent of households that are unbanked and underbanked, by geographic region, 2013-17

APPENDIX – TREND DRIVERS
Figure 47: Mintel Trend Drivers and Pillars

 

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