So you’ve heard me rail on about the unbanked and underbanked for the last couple of weeks and I’m not quite ready to let it go. In addition to outlining the results of the FDIC study, I’d also like to give one final thought on what we as banks do about it.
There have been lots of programs to reach the unbanked and underbanked but all of those efforts have revolved around getting this group of consumers to open bank accounts. Once you open a DDA, you can pay bills by check or through online banking, you have a debit card for ATM withdrawals and payments, and of course you have a safe place to hold your money. But there is a problem…we’re always working from the base of a bank account. Once you have the bank account, we make it easier to use all of the other services.
What if we approached the unbanked and underbanked from the opposite direction? Instead of requiring the bank account, what if we offered the services on a fee basis? This group is already paying transaction-based fees. They’re comfortable with it. What if we offered them what they are already buying from non-bank competitors, with the end goal that we someday move them to a bank account? This addresses concerns on both sides – the bank gets more comfortable with the customer and their habits before opening the account and the customer has time to build up trust in the bank before committing.
Many banks have some fee-based services but there isn’t necessarily a guided philosophy around them and what they can mean to the bank in the long-term. I’m not deluded enough that I think we can change philosophies tomorrow. (Some of you may think I am but I promise I’m not!) But why not consider it? We certainly have a revenue hole to fill in 2010 so we can’t afford to dismiss these consumers.
A final note….I have really enjoyed contributing to Counting on Currency in 2009 and look forward to many more conversations with you in 2010. Happy holidays and best wishes for a happy, healthy and prosperous 2010!S
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I agree with Bob. Many of these folks know the reporting requirements banks are under and want to avoid showing up on any radar. At the same time, most of the top 20 banks are too intimidated by their Regulators and Compliance directors to even consider anything out of the norm.
Both of these conditions are the result of government being way to involved in this industry. While most in Washington are screaming for more regulation it is unlikely that banks will have the freedom to do something this responsive to market demands.
I like your idea of banks offering services that are more convenient and standardized. I wonder out loud if bank regulations such as The Gramm-Leach-Bliley Act make it difficult for the bank to start that way – are they subject to reporting requirements? The local drug stores and remitters don’t have any reporting. And as I read more and more about the upcoming US Census, I see articles about local and state government concern that many will avoid the census out of fear of government reporting. Is this same group also close to the unbanked group?
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