Effectively Serving the Underserved
Zoot, a provider of instant credit decisioning and loan origination solutions, has announced the release of a new white paper, “Giving Credit Where Credit is Due: Serving the Underserved in the United States through Insight into the European Credit Culture.” The paper discusses technology and business strategies credit risk managers and community reinvestment officers should consider when they attempt to reach this overlooked market.
Dennis Moroney is a research director of bank cards at TowerGroup and has completed research on the unbanked and underbanked market segments. He has observed that, “A financial institution can expect the estimated lifetime revenue of a credit card to range between $250 - 400. Consequently a financial institution that has the tools to successfully identify and convert similar card customers from the unbanked and underbanked US market, estimated at 70 million total consumers, has the potential to generate substantial revenue for their institution. Success in these consumer segments has the potential to add millions in profits to their bottom line.”
The misconception that the underserved are a bad credit risk is a result of this population not establishing credit through traditional means. The white paper examines the importance of understanding why the underserved do not utilize conventional banking channels and how they value credit. This knowledge is crucial for banks to effectively acquire new customers from this largely untapped population.
“Portfolio growth is top of mind in good economic times and bad. Being able to offer services that resonate with new segments of the population, without incurring undue risk is even more essential today,” said Dennis Dixon, president of Zoot. “Zoot’s proven technology provides financial institutions with the tools to make better credit decisions and respond effectively to emerging markets.”
Key takeaways from the paper include providing financial education to increase consumer understanding of credit products and implementing technology that supports online and mobile banking channels and access to alternative data sources. Utilizing alternative data provides a holistic view of the underserved individual and aids financial institutions in establishing new credit models.
Zoot’s white paper series reflects dedication to the financial services industry through education and awareness. To read abstracts and download a complimentary copy, visit Zoot’s white papers Web page.
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