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Despite an ailing U.S. economy brought on, in part, by rising unemployment and tightened credit, lenders should not eschew the unbanked and underbanked markets, an industry analyst contends. "As a whole, the unbanked and underbanked represent a large segment of the U.S. population. That segment is not going away," Gwen Bézard, research director at Boston-based research and advisory firm Aite Group LLC, tells CardLine sister publication Collections & Credit Risk. "Is there a market? Yes, absolutely. You just don't have to be foolish about how you lend." If anything, the credit crisis has shown that the basic ability to repay is not tied to a borrower's credit score as much as it is to lending practices, Bézard says. "A lot of the problems we are facing right now do not have much to do with the level of [credit] score people have," he says. "There are a lot of people with good scores who are not able to pay." Creditors can succeed marketing to the unbanked and underbanked populations as long as their lending policies are sound, Bézard says. Many institutions have been hurt by the credit crisis "not because they picked the wrong FICO scores, they had horrible lending practices, lax lending practices, sometimes fraudulent practices where people were overstating income," Bézard says.
