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New Growth Opportunities for Banks: The Under-Banked Segment


Timing is important.  It has been said:  if you’re too early, no one will understand; and if you’re too late, everyone will have already forgotten.  Leveraging today’s technologies can help your bank penetrate the under-banked segment and drive new revenue growth.  This post looks at some new financial services whose time may have come.

This recent article from The Financial Brand, entitled “Revenue Growth is a Critical Priority for Banking Industry” describes how banking strategy has shifted from the post-2008 recession period which focused on containing costs and mitigating risks to a new era focused on using technology to improve the customer experience and drive new revenue growth.

Regarding which customer segments offered the greatest revenue opportunity over the next three years, a survey of 100 banks showed that the "Under-banked" segment increased the most from one year ago to become the #2 opportunity (second only to the "Mass Affluent" segment which contains the top 10% of income earners).

In addition, this banking report from SWIFT and McKinsey, entitled “Putting Growth Back on the Banking Agenda” describes how global banks can realize significant revenue growth by targeting geographies with sizable under-banked populations (e.g., the Middle East and sub-Saharan Africa).

This report goes on to say:  Transaction-focused banks can tap into growth by helping develop international payments instruments and collection and payments infrastructures, and by taking advantage of new technologies to serve the unbanked….”

Beyond a bank’s core retail financial services, such as debit/credit card payments at in-store POS systems, cash withdrawals from ATMs, and card payments for online purchases, there are new revenue growth opportunities which can be realized by leveraging today’s modern technologies.

Mobile phone technology and cloud-based software platforms—when skillfully combined—enable new financial services which are well-suited for the under-banked segment, such as in-store or online payments with a new payment type (i.e., not using debit/credit cards and not using cash) and paying bills by sending a simple SMS message.

Both of these new transaction type examples are well-suited for the under-banked segment who does NOT have debit/credit cards… but who DOES have a mobile phone.  In addition, P2P Send Money in-country remittances is another new service which your bank could enter by leveraging appropriate modern-day technology solutions.  P2P remittance services have traditionally been the domain of non-bank specialized providers; however, technology now enables it to be a new market expansion opportunity for your bank.


A mindset shift is required for banks

While retail banks have traditionally focused on high-income individuals, today’s technologies enable banks to view the under-banked differently—as opportunities for new revenue growth.

By partnering or investing to develop new digital payment solutions, such as mobile payments, Bill Pay via SMS, Person-to-Merchant (P2M), Online purchases (eCommerce) and/or P2P in-country remittances, your bank can acquire new customers… and cross-sell them other bank services as their financial services needs evolve.

Good luck penetrating the under-banked segment, and let us know what you think.



New Opportunities for Banks:  Digital Payments for Unbanked

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