CFSI Releases Underbanked Consumer Study

The CFSI Underbanked Consumer Study defines eight underbanked consumer segments and uncovers new facts about these consumers’ preferences and attitudes about financial services. Attendees at yesterday’s pre-conference workshop got a first look at the data, which will also be covered in Director Jennifer Tescher’s opening remarks this morning. Tomorrow, the conference closes with a discussion by study sponsor MasterCard Worldwide on how this new information will transform their underbanked strategy.

“The ability to go beyond a general sense of 40 million underbanked households is invaluable for service providers to profitably reach this latent market,” said Michael Herrmann, Research Director, Center for Financial Services Innovation. “To build specific product, marketing, distribution, and risk management programs that help develop customers from the underbanked market requires a deep understanding of these consumers. By breaking this market into a series of actionable segments the CFSI Underbanked Consumer Study can give firms a unique depth of knowledge and a place to start.”

The study, co-sponsored by CFSI, Citi, Fidelity National Information Services, H&R Block and MasterCard, gathered information on underbanked consumer’s attitudes, behaviors, preferences, needs and desired experiences. Experian Consumer Research executed the study, collecting results from almost 3,000 un- and underbanked consumers with a median household income of $26,390 across the country via phone and mail surveys.

This new information gives financial services providers a better understanding of the needs and behaviors of underbanked consumers by identifying eight unique consumer groups, ranging from current banking consumers utilizing supermarkets, convenience stores, and drug stores for many financial transactions (“Borrowers”), to those who are largely cash based and frequently operating outside the financial mainstream (“Cash is King”).

In addition to the creation of these consumer segmentations, the study reveals a number of additional groundbreaking facts around underbanked consumers’ preferences for product distribution, product characteristics and features, attitudes towards the vast array of financial service providers, and the credit score data of these consumers. The conducted survey also allows for further dimensioning of the consumers and data by race, gender, age, financial goals, banked and savings status, economic status, home ownership status, and borrowing habits.

The study linked survey respondents to their credit scores to better understand the credit profiles of the underbanked. While a solid group has prime credit scores, almost half have no score. Twenty-six percent have a prime credit score, 32 percent are considered subprime, and 42 percent had thin or no credit file. The study also revealed that consumers’ perceptions of their credit profile largely mirrored their actual profile.

By creating detailed behavior profiles that outline market size, current use of financial products and services, propensity for using financial products, desired marketing and communication approaches, and rich credit profiles, the financial services industry has the data it needs to actualize the opportunities in this largely untapped market. Understanding the needs and use of financial products creates a significant opportunity for financial service providers to recapture these customers.

"MasterCard is co-sponsoring the CFSI Underbanked Consumer Study to better understand and more effectively reach millions of underbanked US consumers," said Patrick Dwyer, vice president, consumer and public policy, MasterCard Worldwide. "Welcoming the underbanked into the financial mainstream with innovative and efficient products provides a tremendous opportunity for MasterCard customers, as well as for the consumers that will then be able to enjoy the convenience, security, and economic benefits that electronic payments and financial services provide."

"Our clients are increasingly turning to us for guidance and solutions to help better serve the underbanked market," said Kay Nichols, Executive Vice President, Decision Solutions for Fidelity National Information Services. "The results of this survey and the data that are behind it do just that, significantly increasing our ability to help clients understand the dynamics of this segment and build profitable, long-term relationships."

"At Citi, we know that there are tremendous opportunities within unbanked and underserved communities. CFSI's segmentation research is critical to unlocking the potential of this emerging customer base and will support our continuing efforts to provide innovative and affordable products and services to better serve low- and moderate-income communities," said Natalie Abatemarco, Director, North America Community Programs, Global Community Relations, Citi.

A CFSI Underbanked Customer Study Fact Sheet outlining these initial results can be downloaded from CFSI’s website: http://www.cfsinnovation.com/research-paper-detail.php?article_id=330366.