Unbanked and Underbanked Consumers in the U.S., 4th Edition

Chapter 1: Executive Summary

Report Scope

Report Summary

Unbanked and underbanked usage trends

Our topline findings

Impact

Income, age and race/ethnicity

Unbanked but bankable?

Drilling down: Hispanics

Hispanics: loan usage, by banked status

Drilling down: Millennials

Prepaid and PayPal

18-34s: demographics and loan usage, by banked status

Bill payment methods

Alternative financial services trends

Banks: trends & innovation

Why are the unbanked important to banks?

Bank account usage motivators

Bank account usage challenges

Degree of bank distrust on the rise

Commercial banks gain share amid account usage declines

Why not go with a large, branch-based bank?

Fee and expense trends

“Checkless” checking coming to more banks

Leadership: Citi Access Account

Leadership: PaySound

Small-dollar credit

Leadership: Key Basic Line of Credit

The retailer connection: trends & innovation

Supermarket, discount and club stores

Leadership: Kroger

Convenience stores and drug stores

Leadership: 7-Eleven

Remittances & payday lending: trends & innovation

Unbanked and underbanked remitters

Remittance retail channels

Leadership: Xoom

Payday and pawn loans

A dimmer future ahead

Debt trap, begone?

Reloadable prepaid accounts: trends and innovation

Market opportunity

Unbanked and underbanked fueling growth

Reasons for use

Top cards

Regulatory checkup

Leadership: Bluebird

The mobile connection: trends and innovation

Unbanked but connected

Mobile banking engagement

Chapter 2: Unbanked and Alternative Financial Services Usage Trends 2008-2015 unbanked trends

43% of unbanked have not used banking institution in past 12 months

These “institution unbanked” consumers represent almost 1 in 6 adults

Percentage of “institution unbanked” declines

Bottom line: less prevalent need for basic accounts

Table 2-1: Unbanked and Institution Unbanked, 2008-2015

Lower incomes tie to being unbanked, but high-income consumers joining the ranks

Table 2-2: Unbanked Consumers, by Demographic, 2008-2015

Percentage of “institution unbanked” declines across demographic groups

Table 2-3: Institution Unbanked Consumers, by Demographic, 2008-2015

Share analysis

Table 2-4: Banked, Unbanked and Institution Unbanked: Share, by Demographic, 2015

Unbanked but bankable?

Graph 2-1: All, Banked, Unbanked and Institution Unbanked: by Vantage 3.0 Score, 2015

Casting a different net results in finding “credit invisibles”

Loan usage among unbanked

Loan usage falls off a cliff

Table 2-5: All, Banked, Unbanked and Institution Unbanked: Loans Have, by Loan Type, 2015

Consistent patronage across lending institutions

Table 2-6: All, Banked, Unbanked and Institution Unbanked: Loans Have, by Lending Institution Type, 2015

Drilling down: Hispanics

Trending Hispanic unbanked over time

Table 2-7: Hispanic Unbanked and Institution Unbanked, 2008-2015

Hispanics: demographics, by banked status

Table 2-8: Hispanic Banked, Unbanked and Institution Unbanked: Share by HH Income and Age, 2015

Language preference

Table 2-9: Hispanic Banked, Unbanked and Institution Unbanked: Share by Language Spoken in Home, 2015

Hispanics: loan usage, by banked status

Table 2-10: Hispanics: All, Banked, Unbanked and Institution Unbanked: Percent Having Loans, by Loan Type, 2015

Language preference

Table 2-11: Unbanked Hispanics: Percent Having Loans, by Loan Type and Language Spoken in Home, 2015

Unbanked Hispanic loan use at commercial banks and credit unions

Table 2-12: Hispanics: All, Banked, Unbanked and Institution Unbanked: Percent Having Loans, by Loan Type, 2015

Drilling down: Millennials

Trending unbanked age 18-34 over time

Table 2-13: Unbanked and Institution Unbanked Age 18-34, 2008-2015

Prepaid and PayPal

18-34s: demographics, by banked status

Table 2-15: 18-34s: Banked, Unbanked and Institution Unbanked: Share, by HH Income and Race/Ethnicity, 2015

18-34s: loan usage, by banked status

Table 2-16: 18-34s: All, Unbanked and Institution Unbanked: Percent Having Loans, by Loan Type, 2015

Type of financial institution

Table 2-17: 18-34s: All, Banked, Unbanked and Institution Unbanked: Percent Having Loans, by

Lending Institution Type, 2015

Bill payment methods and forms of payment

Bill payment methods

Bank accounts play enormous role in facilitating bill payments

Unbanked bill payment methods suggest mobile and P2P

Table 2-18: Methods Used to Pay Bills: Banked, Unbanked and Institution Unbanked, by All, Hispanic and 18-34s, 2015

Bill payment forms of payment

Cash stubbornly hangs on

Table 2-19: Always Use Cash to Pay Bills: Unbanked, 2008-2015

. . . especially among Hispanic and smartphone-enabled unbanked

Table 2-20: Always Use Cash to Pay Bills: Banked, Unbanked and Institution Unbanked: All, 18-34s,

Hispanics, and Smartphone Users, 2015

Alternative financial services trends

The topline

Reasons for using AFS

Transaction-based AFS

Table 2-21: Household Use of Transaction-Based Alternative Financial Services, by HH Income and Race/Ethnicity 2013

Credit-based AFS

Table 2-22: Household Use of Credit-Based Alternative Financial Services, by Demographic, 2013

Usage of alternative financial services, by type

Table 2-23: Alternative Financial Services Household Use in Past 12 Months: Unbanked, Underbanked and Both, by Type of Service, 2013

Underbanked use: trending over time

Table 2-24: Underbanked Household Use of Alternative Financial Services, by Type: Use in Last 12 Months, 2011-2013

Unbanked use: trending over time

Table 2-25: Unbanked Household Use of Alternative Financial Services, by Type: Ever Use vs. Use in Last 12 Months, 2011-2013

Chapter 3: Banks: Trends & Innovation

Why is a bank account important?

Electronic banking affects need for banking account

Banking status is dynamic

Bank account usage motivators

Ease of use, simplicity, and security

Local community support, financial advice and references

Graph 3-1: Factors Important When Opening a Bank Account: Banked vs. Unbanked, 2015

Bank account usage challenges

Money and fees

Documentation

Graph 3-2: Why Unbanked Households Do Not Have Accounts: Reason and Main Reason, 2013

Trust and privacy

Demographic analysis: HH income

Table 3-1: Main Reason Why Unbanked Households Do Not Have Accounts, by HH Income, 2013

Demographic analysis: race/ethnicity

Table 3-2: Main Reason Why Unbanked Households Do Not Have Accounts, by Race/Ethnicity, 2013

Demographic analysis: Nativity and Spanish-only spoken in home

Table 3-3: Main Reason Why Unbanked Households Do Not Have Accounts: U.S.-born vs. Foreign-Born

Hispanic, 2013

Degree of bank distrust on the rise

Table 3-4: Comfort Trusting Money to a Bank: Unbanked vs. All, 2008-2015

Table 3-5: Comfort Trusting Money to a Bank: Banked, Unbanked and Institution Unbanked: All, 18-

34s, Hispanics, Spanish-Speaking Hispanics, and Foreign-Born Hispanics, 2015

Commercial banks gain share amid account usage declines

Percentage of banked consumers declines

But among banked, commercial banks fare better than savings banks and credit unions

Despite credit union competitiveness

Table 3-6: Banked Adults: Percentage Banked by Type of Financial Institution, 2008-2015

Percentage of Hispanic unbanked remains stable; commercial banks gain share

Table 3-7: Banked Hispanic Adults: Percentage Banked by Type of Financial Institution, 2008-2015

18-34s take similar path

Table 3-8: Banked 18-34s: Percentage Banked by Type of Financial Institution, 2008-2015

Why not go with a large, branch-based bank?

Fees are too high

What’s the point?

Convenience

Branch-based banking less relevant for 18-34s

Graph: 3-3: Reasons for Not Having a Checking Account at a Large Bank with Many Physical Branches, 2015

Table 3-9: Reasons for Not Having a Checking Account at a Large Bank with Many Physical Branches, by Age, 2015

Fee and expense trends

Overdrafts still big business

Consumer advocates argue for more regulation

Lower-income groups at risk of overdraft hangover

Post-regulation review raises concern

Maintenance fees not an issue

Opting in for trouble?

Frequent overdrafters on the ropes

Table 3-10: Distribution of Accounts and Gross Overdraft Fees By Overdraft Frequency: All, Opt-In and Opt-Out, 2014

Overdraft correlates to debit card use

And to youth and smaller purchases

Table 3-11: Distribution of Accounts and Gross Overdraft Fees, by Overdraft Frequency and Monthly Debit Card Intensity, 2014

Progress not fast enough!

CFPB shows its teeth

On the horizon

Bank innovation

FDIC Model Safe Accounts

Encouraging adoption of “checkless” checking

Low cost to implement and maintain

Table 3-12: FDIC Model Safe Accounts: Core Features/Fees & Auxiliary Services and Fees, 2013

Small-dollar credit

A tough nut to crack

Deposit advance loans bite the dust

But $70 billion on the table

Leadership: Key Basic Line of Credit

Overdraft

Enhancements

Tale of the tape

Table 3-13: Key Basic Line of Credit: Characteristics, 2012-2014

$200 generated per account

Table 3-14: Key Basic Line of Credit: Revenue Analysis, 2014

Bank accounts

Leadership: Citi Access Account

Key features

Account economics

Blending needs of traditionally underserved with Millennial-style features

Table 3-15: Citibank Access Account: Customer Demographics, 2014

Navigating the ChexSystems blacklist

Remittance option retired

Leadership: PaySound

Table 3-16: Town & Country Bank: Checking Account Options, 2015

Chapter 4: The Retailer Connection: Trends & Innovation Setting the stage: demographic reach and customer need

In-store retail bank branches fall by 13% in four years

Filling a money order void?

Retailers an AFS stronghold

Check cashing

Check cashing still very relevant

Table 4-1: Check Casher Household Usage: Unbanked vs. Underbanked, by Demographic, 2013

Retailers a more likely option than stand-alone non-bank financial services store

Table 4-2: Check Casher Household Usage: Unbanked vs. Underbanked, by Most Common Location, 2013

Money orders used by two-thirds of underbanked

Table 4-3: Money Order Household Usage: Unbanked vs. Underbanked, by Demographic, 2013

Post office to the rescue

Table 4-4: Money Order Household Usage: Unbanked vs. Underbanked, by Most Common Location, 2013

Foreign born skew to AFS locations

Table 4-5: Money Order Household Usage: Unbanked vs. Underbanked, by Most Common Location and U.S. Born/Foreign Born, 2013

Supermarket, discount and club stores

Tremendous demographic reach

Significant unbanked/underbanked sweet spots

Table 4-6: Adults Shopping at Major Supermarket/Discount/Club Store Brands: Banked, Unbanked and Institution Unbanked, by Brand, 2015

Table 4-7: Adults Shopping at Major Supermarket/Discount/Club Store Brands: Banked, Unbanked and Institution Unbanked Share, by Brand, 2015

Remittance users skew to retail players that don’t offer the service

Table 4-8: Unbanked Shoppers at Major Supermarket/Discount/Club Store Brands: Share of Those Who Use Remittances, by Brand, 2015

Prepaid cards should be a foregone conclusion . . . but are they?

Table 4-9: Unbanked Shoppers at Major Supermarket/Discount/Club Store Brands: Share of Those Who Have Reloadable Prepaid Cards, by Brand, 2015

Spanish speakers up to a quarter of shoppers

Table 4-10: Unbanked Shoppers at Major Supermarket/Discount/Club Store Brands: Share by Race/Ethnicity and Spanish-Speaking Hispanics, by Brand, 2015

Foreign-born customers

Table 4-11: Unbanked Shoppers at Major Supermarket/Discount/Club Store Brands: Share among Hispanic Foreign Born, by Brand, 2015

Leadership: Kroger

Nice card!

And that’s not all

Convenience stores and drug stores

Table 4-12: Adults Shopping at Major Convenience Store/Drug Store Brands: Banked, Unbanked and

Institution Unbanked Share, by Brand, 2015

Prepaid card usage and remittances

Table 4-13: Unbanked Shoppers at Major Convenience Store/Drug Store Brands: Share of Those Who

Have Prepaid Cards and Use Remittances, by Brand, 2015

Crafting multi-ethnic marketing messages

Table 4-14: Unbanked Shoppers at Major Convenience Store/Drug Store Brands: Share by

Race/Ethnicity and Spanish-Speaking Hispanics, by Brand, 2015

Foreign-born customers

Table 4-15: Unbanked Shoppers at Major Convenience Store/Drug Store Brands: Share among Foreign

Born, by Brand, 2015

Leadership: 7-Eleven

Trending forward with cash conversion options

Self-service check cashing

Money transfer and prepaid

Chapter 5: Remittances & Payday Lending: Trends & Innovation The market

Table 5-1: U.S. International Remittances: Top 10 Recipient Countries, 2014

Unbanked and underbanked remitters

Table 5-2: Remittance Household Usage: Unbanked vs. Underbanked, by Demographic, 2013

Domestic and international money transfer trending

Table 5-4: U.S. Adult Money Transferors: Domestic and International, 2008-2015

Remittance retail channels

Table 5-3: Remittance Household Usage: Unbanked vs. Underbanked, by Most Common Location, 2013

Western Union and MoneyGram most prevalently used, but other methods gaining ground

Table 5-5: U.S. Adult International Money Transferors: Methods Used in Past 12 Months, 2010-2015

Leadership: Xoom

Mobile leadership

Overcoming security concerns

Major future potential

Payday and pawn loans

Usage among unbanked and underbanked

Payday loans

Table 5-6: Payday Loan Household Usage: Unbanked vs. Underbanked, by Demographic, 2013

Pawn loans

Table 5-7: Pawn Loan Household Usage: Unbanked vs. Underbanked, by Demographic, 2013

A dimmer future ahead

Pew makes its case

CFPB reviews the data

Debt trap, begone?

The solution: prevention and protection

But where and how will these borrowers access the money they need?

Banking small-dollar loans

Chapter 6: Reloadable Prepaid Accounts: Trends and Innovation

Setting the stage: changing the game

The market

U.S. prepaid card market growth

Market opportunity

Unbanked and underbanked fueling growth

Table 6-1: Prepaid Card Usage Penetration: Banked, Unbanked and Institution Unbanked, 2012-2015

Table 6-2: Reloadable and Non-Reloadable Prepaid Card Usage Penetration: Banked, Unbanked and Institution Unbanked, 2015

Table 6-3: Prepaid Card Use in Past 12 Months: Fully Banked, Underbanked and Unbanked, 2014

Demographic analysis

Table 6-4: Reloadable Prepaid Card Usage Penetration: Banked, Unbanked and Institution Unbanked, by Demographic, 2015

Table 6-5: Reloadable Prepaid Card Household Usage: Unbanked vs. Underbanked, by Demographic, 2013

Usage and reasons for use

Using like a checking account

Meeting financial transaction needs

Table 6-6: Prepaid Card Use & Main Reason Why Household Used: Unbanked vs. Underbanked, 2013

Overdraft management

Top cards

Bank-issued cards lag

Graph 6-1: Reloadable Prepaid Card Usage, by Brand, 2015

Serve skews to banked; NetSpend and Green Dot skew to unbanked

Table 6-7: Reloadable Prepaid Card Usage: Banked vs. Unbanked, by Brand, 2015

Regulatory checkup

CFPB analysis and impact

States of affairs

Table 6-8: Prepaid Account Agreements: Overdraft Service, Negative Fee Balance, Insurance, Fee Disclosure and Limited Liability Analysis, 2014

Further education on benefits and protection needed

Leadership: Bluebird

Graph 6-2: “Say hello to Bluebird” Marketing Graphic, 2013

Strength: fees

Graph 6-2: Bluebird Benefits: Marketing Graphic, 2015

Strength: features and funding options

Money management draws

Graph 6-3: Bluebird SetAside Account and Family Account: Marketing Graphic, 2015

Graph 6-4: Bluebird Financial Management: Marketing Graphic, 2015

Table 6-9: American Express Bluebird: Fees and Characteristics, 2013-2015

Strength: mobile connectivity

Graph 6-5: Bluebird Financial Management: Marketing Graphic, 2015

The economics

Reception

Chapter 7: The Mobile Connection: Trends and Innovation

Introduction

Setting the stage: unbanked but connected

Who’s got a smartphone?

Table 7-1: Cell Phone and Smartphone Usage: Unbanked and Institution Unbanked, 2012-2015

HH income remains unbanked smartphone stumbling block

Older unbanked left out of smartphone frenzy

Table 7-2: Smartphone Usage: Banked, Unbanked and Institution Unbanked, by Demographic, 2015

Mobile phones more important internet conduit than home computers

Table 7-3: Internet Usage at Home: Any, Mobile Phone, Desktop Computer: All vs. Unbanked, 2012- 2015

Mobile banking engagement

Underbanked engaged with mobile banking—and more so than fully banked

Table 7-4: Mobile Banking Methods Used in Past 12 Months: Fully Banked and Underbanked, 2014

Banking app usage: demographics

Table 7-5: Banked, Unbanked and Institution Unbanked Who Have Used Banking/Finance App in Past

30 Days: All, 18-34s and Hispanics, 2015

Appendix

Methodology

Consumer survey methodology

Report table interpretation

Color coding

Indexing

Terms and definitions

Unbanked and underbanked

Other terms and definitions

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