Raising the Mobile Banking Bar to Reach "Underbanked," According to Javelin
Javelin Identifies the “Mobile Underbanked Consumer” as Strategic Market Segments
Javelin Strategy & Research’s latest report - “Reaching the Underbanked and Unbanked Consumers in 2012: Strategies for Connecting with Mobile Financial Services” - delves into the world of the underbanked and unbanked, identifying future profitable consumers and revenue opportunities for financial institutions (FIs). Javelin defines the underbanked as U.S. adults without a checking account, while unbanked consumers do not have a banking account. Comprising an estimated 35 million US adults (or 15% of the US population), underbanked are typically young, ethnically diverse, and more likely to use the “computer in their pocket” (i.e. their mobile phones) to conduct their banking. Javelin’s report provides key recommendations on the specific types of mobile financial services FIs need to offer the underbanked in order to connect with this underserved market segment.
FIs can engage the underbanked through mobile transfers. The U.S. underbanked are prime consumers for wire transfers and remittances. Twice as many underbanked consumers sent wire transfers as the average consumer, a market that totaled $48 billion in outflows from the U.S. Underbanked consumers make twice as many person-person transfers than the average mobile consumer. Further, one in three underbanked consumers are likely to conduct international mobile money person-to-person (P2P) transfers, taking a lion’s share of the $501 billion global remittance flow in 2011.
Prepaid accounts will be another important offering, as prepaid cards are second to cash as the choice by the underbanked as their top-of-wallet payment method. FIs can focus their efforts on leveraging mobile P2P transfers and prepaid accounts to build the foundation of a relationship with the underbanked. By offering simple, easily understood mobile banking services, FIs can save the underbanked consumer time and expense at check cashers, and develop positive new relationships with these younger customers.
“Mobile banking can be used to reach out to the underbanked segments for financial inclusion,” said Mary Monahan, EVP and Research Director at Javelin."Smaller banks have a lower fee structure for traditional banking in place that is more appealing to this segment, but aren’t as likely to have mobile banking services. Larger banks are more likely to have the mobile banking infrastructure, but also charge higher fees on average than the smaller banks.”
“FIs need to zero in on the youth and the tech habits of the underbanked who have the fastest growing income potential ahead of them,” said Jim Van Dyke, President, Javelin. “FIs need to connect with the underbanked and unbanked where they live and work and how they prefer to transact. Our report will help FIs understand the broad needs of the underbanked and unbanked, how to meet these needs, and develop revenue-generating relationships.”
Selected Key Report Findings – Reaching the Underbanked and Unbanked Consumers in 2012