18 October 2017
Mike Fromant

End-to-end in prepaid

Mike Fromant - Contis Group Ltd

6Posts 16,021Views 4Comments

Underbanked: King is right but doesn't paint a full picture

14 February 2013  |  3852 views  |  0

US commentator Brett King is right in his claim that ‘the underbanked don’t need banks anymore’ (FinExtra blog, Dec’12) but, frankly speaking, his is only half the story.

King offers an overview of some alternative financial services that provide the utility of banking. First he cites low-value convenience purchase accounts from retailers like Starbucks and Apple as one example of how consumers are banking elsewhere. This facility, however, will only account for a tiny fraction of an unbanked individual’s day to day spending. Then he turns to P2P lending, which may well be expanding rapidly but, in my view, can’t (and shouldn’t) be cited as a service that supports the idea of not having a traditional current account.

For me, the key to King’s claim is that the underbanked do, in fact, need basic banking facilities; they just no longer need to get them from a bank.

Take a closer look at the breadth and sophistication of services that are available from European e-money providers and King’s claim strengthens considerably. Here, a traditional bank account is actually a rather poor choice for the underbanked consumer.

e-Money insititutions are tailoring financial solutions specifically to suit the underbanked market and are gaining real traction as bona fide alternatives to traditional bank accounts. The best of these are delivered with an online account facility complete with an account number and sort code. This enables users to check their balance and set up standing orders to manage benefit payments and other regular transfers, without requiring a visit to a bank branch or enduring a raft of unwelcome (and often pointless) credit checks. No bank in sight.

The reloadable prepaid card model (which traditional European banks have always struggled to deliver effectively) is exploding. In the UK, the model’s growth is, in large part, being driven by the government’s flagship Universal Credit state benefits initiative which, when it kicks off in April, will require all claimants, including those currently unbanked, to open an account in order to receive payments. Faced with this prospect, low income and underbanked individuals are fast realising they now have attractive alternative options. They need not live in fear of tipping over their limit and incurring extortionate bank charges because with a prepaid account, they can only ‘spend what they load’. Moreover, when obtained via a Credit Union, the best of these e-money solutions offer incentive reward and loyalty schemes linked to high street merchants, which help cardholders generate automatic rebates on everyday purchases.

2013 will be a year of change for the underbanked segment and it’s great to see King banging the drum for banking alternatives. Finally, this customer segment is starting to get the services support it both needs and deserves.


Comments: (0)

Comment on this story (membership required)

Latest posts from Mike

AmEx and the unbanked - look to the UK for best practice

13 March 2014  |  1912 views  |  0 comments | recomends Recommends 0 TagsPaymentsInnovation

T-Mobile's 'Mobile Money' - where's the added value?

29 January 2014  |  2130 views  |  1 comments | recomends Recommends 0 TagsMobile & onlinePayments

The Looming Crisis for UK Credit Unions

19 July 2013  |  2741 views  |  0 comments | recomends Recommends 0 TagsMobile & onlinePayments

Shoring Up a House of Cards

17 June 2013  |  2557 views  |  0 comments | recomends Recommends 0 TagsCardsRetail banking

Prepaid eAccounts: last and best resort for Universal Credit

19 March 2013  |  2830 views  |  0 comments | recomends Recommends 0 TagsCardsPayments

Mike's profile

job title Managing Director
location Skipton
member since 2013
Summary profile See full profile »
As Managing Director, Mike has operating responsibility for the strategic growth of international end-to-end prepaid and debit solutions provider, Contis Group.

Mike's expertise

Member since 2013
6 posts4 comments
What Mike reads
Mike's blog archive
2014 (2)2013 (4)

Who's commenting on Mike's posts