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Themes from the Annual Underbanked Financial Services Forum

The 8th Annual Underbanked Financial Services Forum in Miami last week was a three-day collaboration involving financial service innovators—representatives from networks, like yours truly, to banks and credit unions, payment and technology firms, non-profit organizations, researchers and regulators.

In a series of seminars, keynote speeches, networking sessions and information luncheons, the industry united on a common goal: discovering a better way to understand, serve and support the financially underserved in the United States. I wanted to share with the Payments Perspectives followers what I found to be the biggest conference themes:

1. Primetime for prepaid. For the 34 million Americans currently considered “un-” or “underbanked” the proliferation of prepaid products were widely considered an “on ramp” to mainline banking services at the conference. Banks and networks called prepaid a “fantastic business model,” because it is the next incremental transaction at the ATM and has the potential to be a tool in the cash conversion space. MasterCard’s own Brett Adams spoke on a panel that highlighted prepaid’s benefit to underbanked consumers, because the instruments can protect consumers from overdraft fees, promote responsible budgeting techniques and are increasingly facilitating government sector payments.

2. Making big data, small. From the beginning of time to 2003, just five exabytes of data were created; in 2013, 5 exabytes of data are created every two days. True, this produces troves of data for brands and marketers of financial services to use to better understand the needs of consumers; but, without a targeted objective and defined business goals, Big Data can say ambiguous and contradictory things. Each speaker touching on the subject left attendees with a similar message when approaching big data: it’s more important to analyze the most relevant data, not find a way to study all of it.

3. Alternative credit scoring models. Not all underbanked consumers are ineligible for credit—in fact, nearly 40 percent of those denied traditional lines of credit would actually have prime credit scores if they had longer histories or stronger banking relationships. There is a clear need for alternative models of assessing credit worthiness, discussed in a variety of seminars during the conference, such as in the issue of secured credit products now being offered by banks or startups leveraging alternative data (like social and prepaid card data) to better determine a consumers risk during the underwriting process.

In her closing remarks, CFSI CEO Jennifer Teschler wanted attendees to walk away with one word: HEALTH. Because that’s what this conference and effort was really about – using the knowledge, thought leadership, tools and new technologies at the industry’s disposal, to promote the financial health of the consumers.  As Teschler said, “we, as an industry, have a responsibility to move beyond simply making financial services accessible and instead focus on fostering the successful uptake and healthy usage of high-quality products.”


Comments: (2)

A Finextra member
A Finextra member 14 June, 2013, 13:14Be the first to give this comment the thumbs up 0 likes

Good observations, but the author omitted one of the most significant themes -- that the terms "Un-banked" and "Under-banked" are misnomers because they are essentially meaningless to the population being described.  Lisa McFarland, Visa's head of prepaid products said, "We have to recognize that the terms unbanked and under-banked don't work. . .  hese consumers do not view themselves this way."   Jim Wells, prsident, Wellspring Consulting International, USA   

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 June, 2013, 12:08Be the first to give this comment the thumbs up 0 likes

SQUARE reportedly uses social networks to assess reputation and credit risk while signing up new merchants to its mobile payment service. However, securitization of credit card outstandings based on traditional credit scores (e.g. FICO) will present a major challenge for mainstream adoption of alternative credit scoring models. Imagine a bank trying to get a rating for its credit portfolio comprising 50% people with 500 FB Likes, 30% having 100+ Twitter Followers and 20% with 50+ LinkedIn Connections. Or, encouraged by their success of getting prime ratings for subprime mortgages during the GFC, have they become totally confident of getting anything past CRAs?

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