Emerging Banking Markets - US - March 2007

Table of Contents

• Scope and Themes
• What you need to know
• Scope of this report
• Abbreviations and terms
• Abbreviations
• Terms
• Executive Summary
• Overview--The Emerging Banking Markets
• Summary of un/underbanked population
• Who are the unbanked?
  • Figure 1: Proportion of unbanked population, by gender, 2006
  • Figure 2: Proportion of unbanked population, by age, 2006
  • Figure 3: Population with no bank account by income, 2006
  • Figure 4: Percentage of population with no bank account, by race/ethnicity, 2006
  • Figure 5: Population with no bank account, by education, 2006
  • Figure 6: Single parents as a percentage of the unbanked, by gender, 2006
• Immigration
  • Figure 7: Percentage of immigrant heads of household who have a checking or savings account in the U.S.,
• Market Drivers--Demographics
• Summary of immigrant populations
  • Figure 8: Number of foreign-born population from all countries, 1995-2005
  • Figure 9: Growth in immigrant populations in the U.S. by regions of the world, 1990-2000
  • Figure 10: Growth in immigration, by region, 1995-2005
  • Figure 11: Countries that sent most immigrants, 1995-2005
• Geographical distribution of immigrants
  • Figure 12: Immigrants to "gateway" states, 1995-2000
  • Figure 13: Top ten states with most foreign-born population, 1990-2005
  • Figure 14: Top ten states with greatest percentage change in foreign-born population, 1990-2005
• Undocumented immigrants
• Where do undocumented immigrants live?
  • Figure 15: Undocumented immigrants by state, 2002
• Hispanics
• Market size and economic power
  • Figure 16: Actual and projected percentage of U.S. population by race/Hispanic origin, 2000-50
  • Figure 17: Age cohorts for all consumers, unbanked consumers, and unbanked Hispanic consumers, 2006
  • Figure 18: Estimated buying power, 1990-2011
• Where are the largest Hispanic markets?
  • Figure 19: Top ten states with most Hispanic buying power, 2006
  • Figure 20: Top ten states ranked by growth of Hispanic buying power, 1990-2006
• Asians
• Asian buying power
  • Figure 21: Countries of origin for Asian foreign-born populations with 500,000 or more immigrants,
• Single parents
• Market Drivers--Challenges to Attracting the Un/Underbanked
• Why don' t they use banks?
  • Figure 22: Reasons people report not having a checking account, 2001
• Attitudes of the unbanked toward financial services
  • Figure 23: Attitudes toward financial services, overall and unbanked, by gender, 2006
  • Figure 24: Attitudes toward financial services, unbanked by age, 2006
  • Figure 25: Attitudes toward financial services, unbanked by race/ethnicity, 2006
• Consequences of having limited or no bank relationship
• No opportunity to build savings
• Must pay high costs to access basic financial services
• Vulnerability to predatory lenders
• Social consequences
• Obstacles to un- and underbanked becoming banked
• Weak customer demand
• Attitudes toward banks
• Lack of identification
• Lack of income for saving
  • Figure 26: Number of people in household, 2006
• Lack of interest in checking accounts
• Lack of financial liquidity
• Language and cultural barriers
• Inconvenience
• Negative perceptions of credit unions
• Effectiveness of alternative service providers (ASPs)
• Competitive Landscape--Alternative Service Providers
• Overview--What the unbanked do now
  • Figure 27: How unbanked cash checks and pay bills, May 2006
  • Figure 28: Method of paying bills for unbanked, Spring 2006
  • Figure 29: Types of alternative service providers and the services they provide, 2005
• Check cashers
• ACE CashExpress
• Check-cashing ATM
• Remittances
  • Figure 30: How money was sent, for respondents who have sent money in the last twelve months, overall and unbanked, 2006
  • Figure 31: Hispanics who have sent money outside the U.S. in the last 12 months, how sent, by income, January-September 2005
  • Figure 32: Hispanics that used a bank to send money to friends or relatives in the last six months, by nativity and primary language spoken, May 2006
• Bank of America
• Alpha Financial Services
• Payday loans and lenders
  • Figure 33: Income of payday loan consumers vs. income of all adults, 2001
  • Figure 34: Age of payday loan consumers vs. age of all adults, 2001
  • Figure 35: Marital status of payday loan consumers vs. age of all adults, 2001
• Payday lenders stay competitive
• North Side Community Federal Credit Union
• Retail stores
  • Figure 36: Department stores shopped by unbanked consumers, past 30 days, 2006
• Wal-Mart
• Competitive Landscape--Banks and Credit Unions
• Bank initiatives to reach the un- and underbanked markets
• Helping consumers build credit
• PRBC
• CompuCredit
• Providing credit cards to people without social security numbers
• Bank of America
• Credit Unions' interest in reaching the un- and underbanked markets
  • Figure 37: Credit unions' attitudes towards the importance of serving the Hispanic/Latino market by asset size, 2006
  • Figure 38: Whether plans are in place by percentage of potential membership that is Hispanic/Latino, 2006
• Payday loan alternatives
• BECU
• North Carolina State Employees Credit Union (SECU)
• North Side Community Federal Credit Union
• Second Chance Checking
• Get Checking
• Prepaid cards/stored value cards/payroll card
• University Bank
• Credit card companies
  • Figure 39: Proportion of unbanked that have or use a credit card, 2006
  • Figure 40: Type of credit card owned or used, 2006
• Building community partnerships
• Building customer trust and credibility
• Citibank
• El Banco Financial Services
• Assistance in developing more attractive products
• KeyBank
• H&R Block
• Tax preparation partnerships
• H&R Block
  • Figure 41: How taxes were prepared in last 12 months, overall and unbanked, 2006
• Chase/Bank One
• ShoreBank
• Refund splitting
• Individual Development Accounts (IDAs)
• The Future--What Institutions Should Consider
• Products offered vs. opportunities
  • Figure 42: Products offered to underbanked consumers, June 2006
  • Figure 43: Product that offers the highest potential for creating relationships with un/underbanked,
• Know the market
• Create a product mix designed to meet the unique needs of the market
• Check cashing
• Example--El Banco de Nuestra Comunidad
• Money transfer
• Example--Unity One Federal Credit Union
• Create an environment where the customer feels comfortable
• Build trust with high quality customer service
• Create and leverage partnerships
• Un/underbanked insurance needs likely to increase
  • Figure 44: Proportion of all respondents and unbanked who have P&C, life or health insurance, 2006
  • Figure 45: Type of insurance owned, for those that own property or vehicle insurance,
• What the largest companies are doing
• Bank of America
• Wells Fargo
• Citibank
• Appendix: Industry Associations