Community banks and credit unions that want to cater to underbanked Americans may have a greater chance of doing so through online and mobile technology, a new analysis contends.
A recent article in Bank and Technology Systems found that roughly 68 million Americans are considered underbanked and rely on alternative and typically high-fee non-banking solutions to meet their needs. This includes payday lenders, check cashing services and pawn shops. However, the majority of these consumers do own and utilize smartphones, iPads and other remote devices, giving financial institutions the chance to offer cost-effective financial solutions to these individuals.
For example, promoting the use of remote check deposit may attract more underbanked consumers, as most banks and credit unions offer this service free of charge, while check-cashing services typically impose a fee. In addition, underbanked Americans can better manage their budgets and cash through online and mobile banking features, such as balance inquiry, fund transfers and bill pay. This may help individuals with limited access to branches avoid unnecessary fees, such as overdraft and minimum balance requirements.
As community banks and credit unions compete with larger institutions for new customers, mobile banking strategies are likely to play a bigger role in acquisition. The underbanked segment represents sizable opportunities for all institutions, and the personalized services local banks and credit unions provide coupled with their mobile platforms may give them a competitive advantage with this demographic.