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While the Federal Deposit Insurance Corp.'s reporting of growing use of prepaid products among the underserved stokes concerns about high costs, some note they can be a bridge to more traditional accounts.
November 11 -
Small banks and credit unions can get a leg up on their large competitors by using low-cost, low-maintenance checking accounts to win over financially underserved customers.
September 15 -
As banks flee the deposit advance business, startups are offering services that let consumers name their payday and collect what they have earned up to that point, regardless of the day of the week.
August 14
The market for the serving underbanked customers expanded last year, mostly due to a rising demand for subprime auto loans, the Center for Financial Services Innovation said Thursday.
The Chicago-based group said in a report that revenue generated by products directed at low-income consumers grew 7.1% in 2013, to $103 billion, compared to a year earlier. In total, the underserved sector accounted for 7.9% of the larger consumer finance market.
A surge in subprime auto loans drove the expansion, as long-term credit this market's largest source of income, defined as loans with terms of more than two years increased 10.7%, to $39.7 billion.
"Falling subprime rates and pent-up consumer demand in the wake of the recession continue to drive strong growth in subprime auto loans and subprime auto leases," CSFI said in its report.
Revenue from short-term credit also increased, rising 11.2%, to $22.1 billion. That market which includes loans for less than two years, structured on an installment or revolving basis is poised for growth in the coming year due to an uptick in auto title loans and subprime credit cards, the report said.
Additionally, CFSI found that heightened regulatory scrutiny of payday lenders has contributed to a downward trend in single-payment loans, or loan products due in one lump sum. Revenue from this category grew 1.5% from the previous year, to $21.9 billion, and was outpaced for the first time by short-term, installment loans.
CSFI predicts the single-payment sector will shrink in 2014, due to fallout from the Justice Department's investigation into banks' ties with payday lenders, known as
A cutback in bank
