What is an Underbanked Consumer?

Javelin Strategy & Research released in mid June, their report called – “Reaching the Underbanked and Unbanked Consumers in 2012: Strategies for Connecting with Mobile Financial Services”.   Javelin defined the underbanked as U.S. adults without a checking account, while unbanked consumers do not have a bank account. Mobile banking is the key feature to attract the young underbanked.

The typical underbanked consumer is young, ethnically diverse, and more likely to bank using their mobile phone.  The underbanked are estimated to be 15 percent of the U.S. population or 35 million US adults.  This group consists of Gen X (ages 32 to 47) and Gen Y (ages 9 to 31), whose income is expected to grow.  In less than five years, adult Gen Y and Gen X incomes will outpace those of all other generations. By 2025 Gen Y will be responsible 46 percent of total personal income.

Information about the underbanked

Twice as many of the underbanked send wire transfers than the average consumer.

Twice as many of the underbanked send person-to-person transfers than the average mobile consumer.

One in three of the underbanked are likely to conduct international mobile money person to person transfer than the average mobile consumer.

The underbanked first payment method is cash followed by prepaid cards.

60 percent of the underbanked own computers compared to 72 percent of all mobile consumers.

32 percent of underbanked used mobile banking in the past 30 days compared to 25 percent of all mobile consumers.

The younger adults (Gen X and Gen Y) won’t conduct banking and transactions the same way they have been done in the past two decades.  They use their mobile phone for everything and don’t go anywhere without it.  They aren’t interested in “brick and mortar”; they want convenience that is right at their finger tips. The financial industry will have to change to keep up with the market demands and many financial institutions have.  Financial institutions that offer free checking are usually the smaller banks and credit unions; most of these haven’t had the resources to offer mobile banking.  In order to reach this market, they will have to make changes.  The big banks have made the changes, but younger adults don’t trust them and charge huge fees.

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Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.