Table of Contents
Executive Summary
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- Market overview
- Impact of COVID-19 on the un- and underbanked
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- Figure 1: Short, medium and longer term impact of COVID-19 on the Financial Services Industry, July 2020
- Key takeaways
- Almost 1 in 10 consumers are unbanked, with a quarter underbanked
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- Figure 2: Share of banked, unbanked, and underbanked population, March 2020
- The unbanked need a convincing value proposition
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- Figure 3: Reasons for not having bank account, March 2020
- Direct deposit is the best foot in the door for converting the unbanked
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- Figure 4: Underbanked financial attitudes, March 2020
- What it means/what’s next
Impact of COVID-19 on the Un- and Underbanked
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- Figure 5: Short, medium and longer term impact of COVID-19 on the Financial Services Industry, July 2020
- Opportunities and Threats
- Stimulus checks provided opportunity and incentive to become banked
- The response from neobanks added to the pressure on established banks
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- Figure 6: Chime, tweet about stimulus payments, April 2020
- Figure 7: Direct Deposit with PayPal, May 2020
- The mere prospect of future payments (stimulus or otherwise) can spur new banking originations
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- Figure 8: PenFed Access America Checking, acquisition email May 2020
- During lockdown, proper documentation was hard to acquire
- Broader shifts in consumer behavior will emphasise the importance of financial inclusion
- The shift to digital will reduce the barriers for some – but will alienate others
- Mintel’s Global Consumer Trend Drivers provide lens into mind of the unbanked
- Get rid of fees to attract unbanked consumers
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- Figure 9: Motivation for unbanked to become banked, May 2020
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- Figure 10: Credit Sesame, Sesame Cash acquisition email, May 2020
- More people are acting with an awareness of Rights
- How the COVID-19 crisis will affect the un- and underbanked
- An overlap between the unbanked and the groups most exposed to COVID-19
- Healthcare costs will put even greater strains on vulnerable consumer groups’ finances
- Expiry of the CARES Act will further impact consumers’ financial position
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- Figure 11: Unemployment rate, by race and Hispanic origin, May 2007 – May 2020
- How a COVID-19 recession will reshape the future of the financial services industry
- Learnings from the Great Recession are still relevant
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- Figure 12: Financial opinions of the un- and underbanked, March 2020
- COVID-19: US context
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The Market – What You Need to Know
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- FDIC’s unbanked numbers leave large question mark
- Unemployment threatens to keep more folks unbanked
Market Size and Factors
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- “Status unknown” clouds official data on the un- and underbanked
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- Figure 13: Banking status of US households, 2013-17
- Sustained unemployment will inhibit new account growth, may threaten existing membership
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- Figure 14: Unemployment rate, May 2007 – June 2020
- COVID-induced recession stands to hit the unbanked particularly hard
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- Figure 15: Employment status of the un- and underbanked, March 2020
Key Trends – What You Need to Know
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- The history of race in America echoes in today’s financial world
- Technology can redefine financial inclusion
- Non-bank companies will continue to challenge traditional financial institutions
What’s Struggling
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- A clear picture of who needs help
- America must reckon with its past crimes
- 1865-1874: Freedman’s Savings Bank sets a precedent of mistrust
- 1934 (officially) – present: Redlining systemically denies Black and Hispanic consumers access to credit
- 2020: Black and Hispanic consumers are twice as likely to be unbanked
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- Figure 16: Unbanked rate, by race and ethnicity, March 2020
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- Figure 17: Chase Instagram post regarding George Floyd, June 2020
What’s Driving Consumer Behavior?
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- Technology is changing the nature of community, experiences, and surroundings
- Sweepstakes pull at basic human urges
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- Figure 18: Credit Karma, $20,000 sweepstakes, July 2020
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- Figure 19: Chime, July 2020
- “Path to Apple Card” program plants seeds for financial success
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- Figure 20: Apple Card path to approval, June 2020
What to Watch
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- Walmart MoneyCenter is a one stop shop for financial services
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- Figure 21: Un- and underbanked attitudes toward banking, March 2020
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- Figure 22: Walmart money center, July 2020
- Changing attitudes toward cash further threaten the unbanked
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- Figure 23: Attitudes toward cash, July 2019
- Fintech can bring greater access to credit to the un- and underbanked
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- Figure 24: Attitudes toward personal loan attributes, by age, September 2019
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- Figure 25: Zest AI, July 2020
The Consumer – What You Need to Know
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- Who are the un- and underbanked consumers?
- Why unbanked? No need, no money
- Many of the un- and underbanked say they plan to open accounts
- Direct deposit is a strong incentive to become banked
The Un- and Underbanked Consumer
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- The un- and underbanked population skews young and multicultural
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- Figure 26: Generational composition of the un- and underbanked, March 2020
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- Figure 27: Banking status, by race and ethnicity, March 2020
- The underbanked utilize a wide variety of non-bank products
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- Figure 28: Non-bank financial products, March 2020
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- Figure 29: Earnin Youtube video, july 2020
Unbanked Rationale
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- Lack of need, lack of money maintain the unbanked status quo
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- Figure 30: Reasons for not having bank account, March 2020
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- Figure 31: USAA stimulus check email, May 2020
- Reasons for remaining unbanked, TURF Analysis
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- Figure 32: TURF Analysis – Reasons for not having bank account, March 2020
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- Figure 33: Table - TURF Analysis – Reasons for not having bank account, March 2020
- TURF Methodology
- Lack of fees is the greatest incentive
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- Figure 34: Incentives for opening a bank account, March 2020
Financial Challenges and Plans
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- The underbanked are more aspirational, while the unbanked focus on the day-to-day
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- Figure 35: current financial challenges, by banking status, March 2020
- Significant amounts of the un- and underbanked plan to open an account
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- Figure 36: Plans to open bank account, by current banking status, March 2020
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- Figure 37: Dave homepage, July 2020
Financial Attitudes and Behaviors
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- One third of the unbanked use cash exclusively
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- Figure 38: Financial habits, by current banking status, March 2020
- Bank satisfaction is high, direct deposit is a strong incentive
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- Figure 39: Underbanked financial attitudes, March 2020
- The un- and underbanked are optimistic, but wish things were easier
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- Figure 40: Un- and underbanked attitudes toward banking, March 2020
Appendix – Data Sources and Abbreviations
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- Data sources
- Consumer survey data
- Direct marketing creative
- Abbreviations and terms
- Abbreviations
Appendix – The Market
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- Household type
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- Figure 41: Percent of households that are unbanked and underbanked, by household type, 2013-17
- Race and Hispanic Origin
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- Figure 42: Percent of households that are unbanked and underbanked, by race and Hispanic origin, 2013-17
- Age of Householder
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- Figure 43: Percent of households that are unbanked and underbanked, by age of householder, 2013-17
- Employment status
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- Figure 44: Percent of households that are unbanked and underbanked, by employment status, 2013-17
- Household income
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- Figure 45: Percent of households that are unbanked and underbanked, by family income, 2013-1
- Region
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- Figure 46: Percent of households that are unbanked and underbanked, by geographic region, 2013-17
Appendix – Trend Drivers
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- Figure 47: Mintel Trend Drivers and Pillars
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