Working through employers could very well be why KeyBank has had few problems with fraud in its payroll card program. "We haven't seen huge losses associated with the unbanked or underbanked population," states KeyBank's Theodore Gerbick, product manager, card services, in the bank's global treasury management division. "If you strip out the people with credit problems, the demographics are no different from other customers. However, I think the industry is going to have to embrace alternative data to go after those with no credit history."
There is no denying that the underbanked consumer is a different animal from the banked consumer, in spite of any similarities. "The risk profile does change a bit," says MasterCard's Archer. "The method of income is not as stable or predictable so banks need a way to minimize that. Banks need to change their risk models and thresholds when extending any kind of products to the underbanked. They have to adjust the processes and protocols of their existing systems to deal with these people."
Unique Technology Requirements?
But BearingPoint's Ramsey points out that banks' existing systems may not be able to handle the unbanked/underbanked consumer. "A lot of the technology at traditional banks is not necessarily the technology required to serve this segment," he explains. "They can't leverage their existing infrastructure easily. There's a unique group of technology required to serve this market."
Although bank tech vendors are introducing new products that address the needs of the unbanked/underbanked, CFSI's Tescher adds, current banking technology does not facilitate the kinds of services the underbanked require, such as check cashing. "Everything the bank does revolves around the notion of the account," she says. "Banks need to remember that these people don't always want a checking account. They have to switch their internal cross-sell systems so that checking accounts aren't the only products that can be cross-sold to this segment." The last thing banks should do is force these people to become accountholders, Tescher asserts.
Still, banks' advanced technology capabilities -- as well as the breadth of services and products they offer and the reach of their distribution networks -- may give banks an edge in courting the unbanked and underbanked, says Accenture's Weisel. "They have the technological capabilities and products to offer more to this segment than other players," he asserts.
"The ability of a bank to aggregate, collect, house and analyze large amounts of data within data warehouses provides banks with a huge opportunity in this market from a technology standpoint," relates MasterCard's Archer. "Versus a low-tech organization, the one with the database wins in the long run." **