Unbanked and financially underserved households in the U.S., which currently number more than 35-million (excluding about 9-million undocumented aliens), spend an estimated $10-billion annually in fees related to financial transactions, according to new research.
A study by Phoenix ESP Payments Research Group found both the unbanked population and its revenue potential are growing. The company said, by definition, unbanked and under-banked households are not being fully served by traditional banks. Therefore, banks are not benefiting from the fee income stream.
Projections of revenues generated by this segment are based on fees paid for use of check cashing services, money order purchases and international money transfers, in addition to fees paid to make bill payment transactions in-person and by telephone, the company said.
"We can only estimate total revenue value at this stage," said Ken Kerr, VP of retail payment strategies for Phoenix ESP Payments Research Group, "because hard measures of financial product and transactions services used by this segment of the population don't exist. But the revenue opportunity this market segment represents is a key driver for non-banks looking to enter the financial services arena."
Phoenix ESP found households with limited or no banking relationships are 17 times more likely than their counterparts to pay a utility bill with a money order and more than twice as likely to pay that bill in person. Further, 17% of those who pay a utility bill in person will pay a fee of $2 or more to make that transaction.
Leon Majors, President of Phoenix ESP, cautioned against drawing too many conclusions from the data. "It's really just an indicator," said Majors, "because the survey was not targeted to unbanked or underbanked consumers. But by looking at this segment in our balanced consumer research sample, we begin to get a glimpse of the growing and largely unmet financial needs of this customer segment, and its untapped revenue potential for banks."
For info: www.phoenixmi.com
