According to a recent report by the Pew Health Group, "Half of low-income families in Greater Los Angeles turn to costly and unregulated alternative financial services (AFS) rather than banks to meet their monetary needs."

Roughly one-third (29%) of the unbanked conduct all financial transactions in cash. The project estimates that there are 300,000 people operating in the cash-economy in Los Angeles alone.

The Center for Financial Services Innovation (CFSI) has written to Rep. Barney Frank and Senator Chris Dodd asking that prepaid cards – including government benefits cards, general purpose prepaid cards, payroll cards – be exempt from the fee determination set by the Federal Reserve Board under pending legislation. In its letter, CFSI said that "prepaid cards and, more importantly, the underbanked consumers using these products would be substantially harmed if the products were subject to interchange fee limits. The product structure, which makes them a viable option for consumers to use and for providers to offer, distinguishes them from other debit card products." READ MORE »

CGAP's Claudia McKay and Mark Pickens have shared a global pricing study they've completed that examines pricing for services targeting unbanked and underbanked poor people in 10 countries. Their conclusion: "mobile banking and other forms of branchless banking are cheaper than traditional banking, but the gap between the two may not be as wide as some may think. On average, branchless banking is 19% cheaper than banks." A PDF of their presentation is available online. See also this article by Jim Rosenberg on the CGAP blog.

The Center for Financial Services Innovations has published a new research paper titled "How Should We Serve the Short-Term Credit Needs of Low-Income Consumers?". From the abstract: "Well-structured credit is essential to support a household’s ability to save, build a considerable credit history, and to facilitate crucial investments that can provide a foundation for other wealth-building activities. Unfortunately, there is a shortage of high-quality, small-dollar, short-term credit products in the marketplace today that help consumers to accomplish these goals. This paper explores the challenges these types of products face in order to identify business strategies and public policies that support the development of an efficient marketplace for premium short-term credit."

One of Glenbrook's rules about innovating in payments is that "convenience is trump" when it comes to consumer adoption.

Reading Nicole Sturgill's post titled "The Underbanked – Are we making cross-selling efforts or are they just not working?" on the Counting on Currency blog this morning about the FDIC's recently issued report on the Un/Underbanked brings this into focus again:

"The #1 reason the underbanked participants cited was that it was easier to get a payday loan or borrow from a pawn shop than it was to get a bank loan."

The Federal Deposit Insurance Corporation (FDIC) has released the findings of its FDIC National Survey of Unbanked and Underbanked Households, "breaking new ground in gaining understanding of which Americans remain outside the banking system. The survey, conducted on behalf of the FDIC by the U.S. Bureau of the Census, was a supplement to the Census Bureau's Current Population Survey during January 2009. The study, which is the most comprehensive survey to date of the unbanked and underbanked, reveals that more than one quarter (25.6 percent) of all households in the United States are unbanked or underbanked and that those households are disproportionately low-income and/or minority." READ MORE »

The Center for Financial Services Innovation (CFSI) has announced that it will welcome more than 30 senior executives from a broad cross-sector of the financial industry in Chicago today for a joint meeting of its Innovators and Responsible Credit Roundtables. The gathering seeks to provide insight and actionable ideas for companies, advance their individual efforts in developing new projects and business models, and identify opportunities for industry-wide action. READ MORE »

NetSpend has announced the availability of the first “virtual” card to be tied to an existing prepaid debit card account and a suite of online financial management and budgeting tools including a visual spending history report, online budgeting application and budgeting “report card.” NetSpend says these new products and applications "provide a level of convenience and security currently not provided to the estimated 50-100 million underbanked consumers in the United States." READ MORE »

The Federal Reserve has published a new staff working paper titled And Banking for All? by Michael S. Barr, Jane K. Dokko, and Benjamin J. Keys. From the abstract: "This paper presents data from a new survey of low- and moderate-income households in Detroit to examine bank account usage and alternative financial service (AFS) products. We find that for the vast majority of households, annual outlays on financial services for transactional and credit products are relatively small, around 1% of annual income. This estimate is lower than those extrapolated by previous work using the posted fees of financial services alone, suggesting that LMI households do not always choose the most expensive financial services option."

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. READ MORE »

The Center for Financial Services Innovation (CFSI) has released its latest research, “One Size Does Not Fit All: A Comparison of Monthly Financial Services Spending,” at the 4th Annual Underbanked Financial Services Forum in Dallas. The paper is an investigation into how much prepaid cardholders spend each month to conduct essential financial transactions, compared to what they would spend if they used only a checking account or check cashing services. READ MORE »

CFSI’s Innovators and Responsible Credit Roundtables meet today in Chicago, joined by four new participating organizations, Green Dot Corporation, Meta Payment Systems, LexisNexis Risk & Information Analytics Group, and NetSpend. This convening marks the second time these groups have met together to move forward on developing innovative ways to serve underbanked consumers. READ MORE »

CGAP, a microfinance group based at the World Bank, has announced it is supporting WIZZIT Bank, a division of the South African Bank of Athens Limited, to deliver banking services to poor people in South Africa's small towns and rural areas. READ MORE »

The Network Branded Prepaid Card Association (NBPCA) and the Center for Financial Services Innovation have partnered to release what they are calling "the first large, in-depth survey of underbanked consumers currently using reloadable prepaid cards. It found that 96 percent of users said the cards were useful and 94 percent would recommend a reloadable prepaid card to someone else." READ MORE »

The Center for Financial Services Innovation is holding a webinar hosted by Jennifer Tescher next Tuesday, March 17, 2009 from 1-2 PM CST on the subject of "Prepaid Perspectives: Underbanked Consumers to Industry Executives".

Hear Jennifer share results from CFSI research in interviewing industry leaders across the spectrum of participants in the prepaid value chain, along with interviews from underbanked consumers. She will also discuss results from a research project completed by CFSI and Paybefore.com to conduct an Internet poll of industry executives. Join us for this webinar, so you can better understand the current trends in general purpose reloadable (GPR) prepaid cards and chart a path forward in this growing industry.

The Center for Financial Services Innovation (CFSI) has announced research results finding that "80 percent of polled prepaid industry executives see underbanked consumers as important or very important to the future growth of the prepaid industry, according to its latest survey of prepaid industry executives. Survey results are detailed in a new white paper, “The Industry Forecast for Prepaid Cards, 2009,” released today at the Prepaid Card Expo." READ MORE »

Despite regulatory challenges and the financial crisis, policymakers are embracing mobile banking as a means of providing financial access to the unbanked poor. More than a billion people worldwide lack bank accounts, but do have mobile phones, providing a dramatic opportunity to achieve greater financial inclusion, according to officials meeting near London today. READ MORE »

First Data and Urban Trust Bank have announced that Urban Trust Bank will offer the Money Network payroll card and related prepaid products to businesses and consumers. READ MORE »

The Center for Financial Services Innovation (CFSI) has announced the availability of the complete CFSI Underbanked Consumer Study for purchase. Included will be the full study results and tailored business recommendations for serving the underbanked population from CFSI, the leading expert on the underbanked market. READ MORE »

Walmart has announced that it is "stepping up efforts to provide affordable access to essential money services for the growing number of underserved Americans, including the millions who are not using traditional checking accounts to manage their finances. Dubbed "Operation Main Street: Money Management," the program includes a $3 Rollback price on the Walmart MoneyCard and a focus on financial literacy." READ MORE »

eCommLink, and Rechargeplus Global have announced a "global alliance that combines the companies’ prepaid debit platforms with mobile and merchant applications to serve the needs of the growing international money transfer market. Hundreds of billions of dollars are sent home each year by migrant workers, often to places with little or no banking and technology infrastructure. Providing a means for the recipient to access and utilize these funds can be a challenge, especially when there may not be a local bank or money transfer store for hundreds of miles." READ MORE »

The Federal Reserve Bank of Chicago's latest Profitwise News and Views addresses the subject of immigrant participation in mainstream (retail) financial service markets. "Immigrants tend to be less "banked" (i.e., use alternative and more costly financial service providers, such as check cashers and payday lenders) than the native population across income levels, though transaction account use correlates positively with higher income. The 2000 Survey of Income Program Participation reveals that 53 percent of Mexican immigrants and 37 percent of other Latin American immigrants remain unbanked, compared to about 9 percent of the total U.S. population." The article was written by Katy Jacob and Carrie Jankowski.

In a very interesting article titled "Check Cashers, Redeemed", Douglas McGray writes for the New York Times Sunday Magazine about check cashers, pay day loans and banks.

McCray writes that about how the combined collection of check cashers and pay day lenders have "more outlets, in total, than all the McDonald’s restaurants in the United States plus all the Starbucks coffee shops. Inside, it’s like banking turned upside down. Poor customers are commodities, deposits are irrelevant, bad credit makes for a good loan candidate and recessions can be boom times."

In particular, he looks at Nix Check Cashing, a southern California-based company that was acquired last year for $45 million by one of the country’s largest credit unions, Kinecta.

Privier , a charlotte, NC-based company, has announced ATMSend, calling it "the world's 1st 'no-card', 'no-bank account', cash-to-cash ATM remittance service ... aimed at targeting the U.S 106 million unbanked users." READ MORE »

Obopay and Grameen Solutions have announced what they're calling "a unique, first-of-its-kind alliance to use mobile technology to deliver banking services to a billion of the world’s poorest people by 2018. The Grameen-Obopay Bank A Billion Initiative will provide access to affordable financial services, including cross-border remittances, money transfer, payments, savings and credit accounts. By empowering life and work endeavors with mobile technology that is ubiquitous even in the most impoverished and remote corners of the world, Grameen-Obopay are bringing the full power of banking to those who need it most." READ MORE »

NovoPayment, a Latin America prepaid card service provider and program manager, has announced "new regional forecasts for general purpose spending cards – the classification given to branded payment cards similar in function to debit cards, but that require no underlying banking account." READ MORE »

Rebecca Buckman writes for the Wall St. Journal that NetSpend's founders, Roy and Bertrand Sosa, have started a $100 million investment fund named MPower Ventures to make investments in new startups pursuing the unbanked market.

The Center for Financial Services Innovation (CFSI) has released initial findings from its national segmentation study of the underbanked market at the 3rd Annual Underbanked Financial Services Forum, continuing through Tuesday, June 10th, in Miami. A fact sheet about the study is available online. READ MORE »

The Pew Charitable Trusts have announced a new project aimed at 'helping America's workers underserved by mainstream financial institutions secure access to safe, affordable, fair, and empowering bank accounts. The Pew Safe Banking Opportunities Project, a two-year $2.1 million initiative, will develop and promote standards for bank accounts so that moderate- and low-income households that are new to or have been left out of the mainstream banking system are less likely to have to rely on overly expensive, income-stripping financial products.' READ MORE »

Marianne Crowe, Vice President, Emerging Payments Research Group, at the Federal Reserve Bank of Boston, gave a presentation last week titled "Emerging Payments - The Changing Landscape" to the Maine Association of Community Banks and to the New Hampshire Community Bankers Association. Crowe's presentation discusses the growth in debit card payments, the emergence (and potential threats to banks) of decoupled debit cards, prepaid cards for the unbanked, and the use of the Internet for bill payment, ecommerce purchases, and person-to-person or account-to-account money transfers. She also discusses contactless payments and mobile banking.