Common misperceptions about underbanked consumers have hindered banks' efforts to attract business from them, according to the Boston market research company Aite Group LLC.
In a report published Wednesday, Aite identified and tried to debunk 10 "myths commonly held by bank executives, regulators, and consumer advocates about unbanked and underbanked consumers." Bankers need to understand these myths in order to "refocus their efforts" and develop better products for the segment, the report said.
The report was based on interviews with 400 customers at Virginia check-cashing stores in November and December.
The "myths" identified by Aite included the beliefs that the underbanked are underserved, that they would be better off relying on a regular checking account, that they are ripped off by alternative financial services providers, and that they are unbanked for "cultural and attitudinal reasons."
Many consumers have more practical reasons — including concerns about their own creditworthiness and cash flow, pricing, and service — for not using traditional banking services, according to the report.
For example, 43% of the respondents said they were unable to open a mainstream checking account because of poor credit or problems with their previous checking accounts.
And more respondents complained about bank fees than about fees from alternative financial services providers: 87% of all respondents said "the fee charged by banks for a bounced check or overdrawing a debit card is high or much too high, while 82% say credit card interest rates and fees are high or much too high," the report said. "Only thereafter, 76% of all respondents say interest rates and fees for payday loans are high to much too high."
Gwenn Bezard, a research director at Aite Group and a co-author of the report, said in a press release, "Greater education and marketing wizardry is unlikely to succeed in attracting this group to checking account relationships. The only way for banks to seriously compete is to deliver a better product and value proposition."