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Study IDs eight underbanked consumer segments
CHICAGO (6/10/08)--A new study defines eight underbanked consumer segments and reports on their preferences and attitudes about financial services. The Chicago-based Center for Financial Services Innovation (CFSI) released its initial findings at the third Annual Underbanked Financial Services Forum, which continues through today in Miami. The eight underbanked consumer segments include:
* Cash is King: This group includes consumers who are most likely to rely on cash and least likely to have or have had checking or savings accounts. They earn lower household incomes and are more likely struggling to make ends meet. They are highly unlikely to make financial transactions in a bank or credit union. * The Next Wave: This group tries to cover its needs and hopes to reach financial goals like owning a home. It's more likely to make financial transactions at non-banks, less likely to have checking or savings accounts, and cash still plays a key role. They are motivated to save money and are interested in earning interest. * The Strivers: Members of this financially aggressive group take an active role in money management, use checking/savings accounts actively and make many financial transactions. They like checking accounts so they can keep track of their spending and it makes it easier to pay bills while savings accounts are seen as keeping their money secure. More than half have checking accounts. However, some do not; among the reason they cite are concerns about personal information. * Middle of the Road: They also actively manage money, with nearly 70% having a checking account and 60% a savings account. They hold these accounts to facilitate paying bills and make purchases easier. They are less likely to come from families who have banked. The majority do bank and those that do most likely make their financial transactions in a stand along bank or credit unions. They prefer this to do what they need to quickly and the employees are most friendly and helpful. * My Way: This group's members are more likely than other groups to hold a checking and saving account. They enjoy the ease of paying bills and making purchases with checks, and indicate that earning interest is a key reason for their savings account. They make frequent bank and non-bank transactions at various places, including convenience stores. They want transactions completed quickly, conveniently and safely. They don’t want hidden fees or high minimum balances. * The Savers: Saving money is their key reason to have banking accounts. About half hold a checking and/or savings account. Keeping money secure is another key reason for these accounts. Savers who do not have an account cite the security of their personal information as their No. 1 concern. They make more frequent transactions at non-bank locations such as supermarkets, convenience stores, and discount/dollar stores. They look for access to information on products and services--either through classes or brochures. They are less likely to borrow money. Keeping themselves and their spending in check is key. * Almost There: This group's members are more likely to use traditional financial institutions, through a checking account. More than 60% of the group has checking accounts to make bill paying easier and to track their spending. A smaller portion has savings accounts. They are more comfortable making transactions in a bank or credit union than non-banks. They rate their banking experience more positively than the average adult and are likely to keep returning. They prefer banks or credit unions that are contained within a store rather than stand alone buildings. * Borrowers: This group borrows money frequently and for a variety of reasons. They have student loans, personal loans, lines of credit, home equity loans, payday loans, auto loans--all with higher rates than the average adult. This group is more than twice as likely to have borrowed money in the past year. The amounts are lower--under $1,000--but they are more likely to borrow from their bank than family or a friend. Borrowers make above-average transactions at a variety or places--banks/credit unions, supermarkets, convenience stores, drug stores and super centers. Seventy percent have a checking account; nearly 60% have a savings account.
The study linked survey respondents to their credit scores to better understand the credit profiles of the underbanked. Twenty-six percent have a prime credit score, 32% are considered subprime, and 42% had thin or no credit file. Consumers' perceptions of their credit profile largely mirrored their actual profile, the study revealed. The study was co-sponsored by CFSI, Citi, Fidelity National Information Services, H&R Block and MasterCard, and was conducted by Experian Consumer Research. It collected information nationwide from nearly 3,000 unbanked and underbanked consumers with a median household income of $26,390. For more information on the market segments, use the resource link.
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