Unbanked, Underbanked and Sub-prime Market

Insights

• According to a 2017 survey by the Federal Deposit Insurance Corp., 6.5 percent of 129.3 million U.S. households (represents about 8.4 million U.S. households) were considered “unbanked,” which means they don’t have a checking or savings account.
• In addition, 18.7 percent of U.S. households were underbanked in 2017, meaning they do not have sufficient access to mainstream financial services and products typically offered by retail banks. They rely more on retail outlets for financial services instead of using banks and credit unions.
• In the U.S., retail and commercial banks typically have cost-to-income ratios in the 55-65% range, while digital banks can enjoy ratios as low as 25-35%. This additional revenue creates huge opportunity for the digital banks to reach out to the un/underbanked.
•  78 percent of full-time workers in U.S. live paycheck-to-paycheck and 71 percent of U.S. workers live in debt, therefore it is not surprising that any sudden life event can plunge a solid credit consumer from prime to subprime within months.

Emerging Market Players

• Europe’s popular fintech startup, Revolut, plans to attract unbanked consumers in U.S. through their popular service of connecting the debit cards to an application. This allows users to either store or spend their currencies at inter bank exchange rates and low cost.
•  SurgePays™ Marketplace Network for convenience stores, bodegas and community markets that provide products to the underbanked has now integrated with ECS’s prepaid wireless business and software platform. This offering will be well suited for those in rural areas where there aren’t many prepaid options.

Challenges

• The major problems that financial institutions face while entering these markets is regarding how to tailor their existing offerings to successfully achieve profitable financial inclusion.
• Banks have problems in onboarding people who have never had access to banks or credit and getting them to trust banks with their money.
• Effective financial inclusion will require a “bricks-and-clicks” distribution model, including physical branch presences to build trust and confidence.

Summary Of Early Findings

• Through the initial hour of research we have indentified the basic overview for Unbanked, Underbanked and Sub-prime market, their current goals, financial challenges and financial service institutions working in this market.
• Pease select one or more of the options provided in the proposed scoping section below.