Banks have an opportunity to grow by serving millions of unbanked and underbanked people. Get fintech marketing insights to the unbanked and learn how to attract them.

In 2017, the FDIC ran their last survey of unbanked and underbanked Americans. Unbanked refers to the 8.4 million American households that do not rely upon banks or credit unions at all. This population doesn’t have bank accounts, credit cards, and other kinds of bank loans or investments. In contrast, almost 50 million U.S. adults had a bank account but still relied on non-bank services for many financial needs.

Banks can do more to understand why these people don’t access banks.  In turn, banks can use these insights to work with a financial services marketing agency to develop and promote services to more people. Helping these people benefit from banking services will give the banks a chance to grow.

Insights on the un- and under-banked from a financial services marketing agency

American Banker recently explored available research on people who rely upon non-bank, alternative financial services. With their research, they also offered some suggestions that banks could use for product and fintech marketing.

People who don’t use banks still spend plenty of money on financial services

According to the FDIC, alternative financial services can include payday loans, prepaid debit cards, onsite financing for cars, rent-to-own deals, check cashing or money order counters, P2P loans, and more. They say that more than 13,000 of these alternative financial businesses operate in the United States.

For some examples, the FDIC provided these estimates about common bank alternatives:

• They charge fees to cash at least $58 billion in checks each year.
• They sell at least $17.6 billion in money orders.
• They process over 58 million bill-pay transactions.
• They also sell hundreds of billions worth of pre-paid debit cards.

As just one example, people who got checks cashed at a check cashing service had an average check value of about $400 and typically paid over three percent of that to get their money. In other words, they had to pay about $12 to get their modest checks cashed. They also pay for such other services as money orders, paying bills, and funding prepaid debit cards.

The un- and under-banked have various reasons to use alternative financial services

People who rely upon banks a lot, use them a little, or avoid them entirely have many of the same financial requirements. They need a way to save and access money, pay bills, and sometimes, get loans. People who understand and use banking services frequently would probably say that their bank provides them with the best solution. So, why do so many other people avoid banks entirely?

According to American Banker, over half of the unbanked don’t believe they have enough money to use a bank. A smaller percentage say that banks don’t keep convenient hours or lack services that they need. Others don’t believe that banks can serve them because they have a lower income and perhaps, credit challenges.

Also, almost 30 percent of the people who used to have a bank said that they closed the account because they lost their source of income. As an example, some banks waive fees when customers have paychecks deposited directly from an employer or maintain a minimum balance. When their direct deposit ended or funds got low, the unemployed people didn’t want to incur extra fees.

As a note, American Banker also found that these populations tended to have greater percentages of unbanked and underbanked households:

• Low income or unemployed people
• Young families
• Some ethnic groups

How to Improve digital marketing for financial services

A basic checking account at a bank already includes many of the services that the unbanked pay for from alternative financial services. A bank account can also provide a more convenient option.

For some fintech marketing examples:

• Many banks even have apps that let people deposit their checks by phone and pay bills. They have ATMs, debit cards, and often, offer credit cards to customers.
  
• Typically, banks will also provide money orders to account holders without an extra charge. They also offer the ability to write checks or use debit cards and even with modest credit, apply for credit cards and loans.

People who understand and frequently use banks would probably say that their financial institution offers them lower costs and more convenience than many alternatives. In general, even people who don’t use banks have mobile phones that they could use to take advantage of mobile and phone banking services.

A bank marketing agency might suggest some tactics to help banks reach the unbanked by capitalizing upon the resources they already offer. Some examples include:

• Look for ways to maintain ties with people who have had changes in economic status: As an example, some bankers have suggested waiving fees for people who use their accounts to pay bills, even if they don’t have direct deposit or a specified minimum balance. In other cases, banks might encourage the use of the most efficient methods to get services, like ATM, phone, or electronic banking by limiting the number of more expensive services each month for basic accounts.
  
• Promote mobile banking: Banks should engage in some fintech marketing to show how such mobile features as text alerts, balance checks, scanned check deposits, and even bill paying can help save time and manage accounts better.
  
• Promote banking services as better solutions than bank alternatives: As an example, compare spending $12 to cash a check to simply depositing the check in a bank ATM and getting cash without having to pay. Perhaps, banks could also consider offering small loans at reasonable interest rates, even for customers with some credit challenges, that can serve as a better choice than payday loans.

Mostly, people with bank accounts generally enjoy more convenience and lower fees than the unbanked do. Banks can work with a financial services marketing agency to find the unbanked and underbanked and clearly demonstrate that the obstacles to dealing with banks are more a perception than a reality — and how banks provide better solutions.