Abstract
For many Americans, to use or not use a bank is never a major consideration. As we come of age,
we open a checking account, learn about savings, enroll in multiple credit card programs, and expand
financial relationships with banks with educational, car, mortgage, and small business loans. This
is "mainstream" America, which tends to be heavily credit leveraged through a complicated
web of relationships with many types of financial institutions.
Meanwhile, there is a huge sector of Americans who have infrequent or nonexistent relations with
financial institutions. This group of "unbanked" Americans comprises more than 13 percent
of the 105 million households in the United States. The unbanked are typically immigrants, ethnic
minorities, the youth, widows, divorc馥s without credit histories in their own names, and
people who have filed for bankruptcy and are re-building their credit-worthiness.
At first glance, the unbanked may seem like an unattractive market, and banks until the last few
years have for the most part ignored them, leaving them to rely on alternative financial service
providers, such as check-cashing outlets.
Banks are now paying attention to the huge opportunity that the unbanked market represents. The
"mainstream" already-banked market is thoroughly saturated with financial products and
services, so much so that mailboxes have become filled with credit card offers, and various loyalty
programs by financial vendors to retain and add-value to existing customers. Financial institutions
are looking for a new frontier of customers, and they are easily finding it in the unbanked.
This study focuses on unbanked immigrants and ethnic minorities, whose spending on financial
products and services will increase by 94 percent in next 4 years. It describes the unbanked as a
market segment and explores the reasons why this segment has been reluctant to develop relationships
with banks. The rise of immigrant and ethnic banking in the last decade will be explored, as well as
innovations in credit-scoring models that can include the unbanked in FICO scoring, allowing them to
build credit. A wide range of financial services and products targeting the unbanked are identified,
as well as how they are marketed. The research concludes with recommendations about how financial
institutions can increase the effectiveness of marketing to the unbanked, as well as how to measure
that marketing investment.
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