NEW YORK (11/8/11)--Roughly 60 million underbanked consumers in the U.S. generated about $45 billion in fee and interest revenue for financial services providers in 2010, according to new research.
That means credit unions aiming to serve the underbanked will see competition from sectors looking to profit from this market while themselves having the opportunity to provide low-cost alternatives.
The total dollar volume of the underbanked marketplace in 2010 was roughly $455 billion in principal borrowed, dollars transacted and deposits held, said the Center for Financial Services Innovation (CFSI) and Core Innovation Capita, which released the data last week.
The results indicate a substantial need for financial products and services to serve the unbanked population, said the organizations. The underbanked market showed strong growth in certain segments of services. For example, payment services grew 6% and credit services grew 2% from 2009 to 2010, said the groups.
They also noted "a significant revenue opportunity in providing products and services" aimed at the underbanked. Several products experienced high revenue growth rates during the period, the organizations said. Internet-based payday lending rose 35%; general purpose reloadable prepaid cards, 33%; and payroll cards, 25%.
The new data "confirm that there is a large opportunity for the financial services industry to create products and services that are both profitable for them and provide much needed solutions for this consumer segment," said Arjan Schutte, managing partner, Core Innovation Capital. "Our vision is to transform this market in a way that is significantly more profitable to the industry, will save consumers billions of dollars and help create upward mobility for tens of millions."
The groups said there are major market sectors that suggest an opportunity for more competition and that warrant greater attention.