By: Bryan Clagett, CMO at Geezeo, and Adele Glenn, Emerging Channels Innovation Architect at San Antonio Federal Credit Union (SACU).
According to experts, one in four American households is considered unbanked or underbanked. That’s approximately 50 million individuals.* Credit unions are uniquely positioned to tackle the toughest issues facing these individuals and make a positive impact on their quality of life.
Two experts who have dedicated their careers to researching and creating tools to serve these segments: Bryan Clagett, CMO at Geezeo, and Adele Glenn, Emerging Channels Innovation Architect at San Antonio Federal Credit Union (SACU), shared some key insights with us.
What are the demographic and psychographic characteristics of the financially underserved?
The behavioral data shows that whether these members are unbanked, underbanked, or financially struggling, they exist across all age groups and all demographic groups.
We refer to the unbanked as living in a “prepaid economy” because they are reliant on using prepaid cards with no traditional account structure. Psychographic data shows that those who are financially struggling have difficulty managing their finances from day to day. The inability to build a financial cushion leads to not having access to affordable credit; which ultimately inhibits them from building up the long-term savings necessary to achieving their aspirational goals.
Bryan: There are places in the United States where roughly 20% of residences have no bank accounts. Some examples of the regions are: Miami, Florida; Detroit, Michigan; the Bronx in New York, and several counties in Texas. It seems that urban areas and areas in the mid-south are the geographic regions with the highest percentage of unbanked.
Why are so many people in the United States outside of traditional banking channels in 2017?
Bryan: There are several reasons, but if we were to boil it down I’d start with:
- Many immigrants, millennials, and others do not trust financial institutions, including credit unions.
- Credit unions need to be more proactive when it comes to educating their members on financial literacy and actually show members the opportunities/options credit unions have available.
- The typical underbanked consumer is working long hours with long commutes and often lives paycheck to paycheck.
- They do not have the time or money to wait for checks to clear nor are they able to visit the brick-and-mortar branches.
- The hard reality is that payday lenders exist because some financial institutions do not offer affordable products to consumers with limited resources.
For a more in-depth conversation, listen to the first podcast in this series with Bryan and Adele: “Key Issues Credit Unions Need to Know about the Nation’s Underbanked – Part 1 (Podcast)”
Geezeo is the NAFCU Services Preferred Partner for Personal Financial Management (PFM). More educational resources and contact information are available at www.nafcu.org/Geezeo.
Image source: FDIC July 2014 The Financial Brand