Banco Popular of Puerto Rico recently launched two electronic services designed for the unbanked.
The flagship unit of Popular Inc. has begun offering an all-electronic savings account and a money transfer service that use debit cards and automated teller machines. These services may be forerunners of what U.S. institutions could extend to people without bank accounts.
Because an estimated 44% of Puerto Rico's population is unbanked, Banco Popular sees significant revenue opportunity in extending services to noncustomers.
"We are trying to look at the services that the unbanked use and provide them at a much lower cost," said Richard L. Carrion, chairman and chief executive officer of $20 billion-asset Popular Inc., which in July changed its name from Banponce Corp. "That means moving to electronic services."
The first new service, called Envia ATH (which stands for "a toda hora" or "at all hours"), lets people without bank accounts transmit money electronically. It is used, for example, by immigrants wanting to remit cash to family members in the home country.
Consumers may register for the service in a Banco Popular office, where they are given two transaction cards that can be used at ATMs to gain access to a prepaid account. One card is used for sending; the other, by the payment recipient.
Bank executives said the service's main appeal is its price. In contrast to many money transfer services whose fees escalate with the amount of money sent, Envia ATH charges a flat fee of $3.
Although currently focused on giving immigrants in Puerto Rico a way to send money to relatives and friends in the Dominican Republic, the service could be expanded to include New York City. About 2,000 people have used it since it was launched in August.
"The goal was to provide this segment with a low-cost product," said Jose H. Colon, vice president of marketing at Banco Popular. He added that the bank eventually would like to convert users into conventional banking customers.
The second of Banco Popular's services directed at the unbanked is an all-electronic savings account. It accepts direct deposits and gives users access to their money through ATMs and point of sale terminals. It could become important as more government disbursements, such as welfare and Social Security payments, are made electronically.
At the suggestion of Swarthmore College economist John P. Caskey, who has studied the unbanked market and who has advised Banco Popular informally, the bank lets customers write money orders against their electronic accounts for a fee of $1.
Because many "lifeline" banking services work like checking accounts, "many low-income households get in trouble with bounced-check fees," said Mr. Caskey. "What I propose instead is a low-cost savings account with the ability to use money orders to pay bills."
One drawback of these accounts is that banks are required to issue monthly paper statements for them.
But the Treasury Department is considering creating a new account category, Direct Deposit Two, that would free banks from that requirement.
"Low-income customers may be unprofitable if you think of them in conventional terms," said John D. Hawke, Treasury under secretary for domestic finance.
But he said he did not accept the notion that banks had rejected this market.