US Comptroller of the Currency John Hawke is urging financial institutions to adapt technology and branching strategies to give low-income Americans greater access to banking services.
Speaking at a community development conference cosponsored by the OCC and the American Bankers Association, Hawkes says low-income Americans constitute a large and potentially important market for financial services providers. He believes that technology provides banks with a means by which to cost-effectively target this sector.
"In the Electronic Transfer Accounts now being offered by hundreds of financial institutions around the country, we have the prototype of a technology-intensive, utilitarian, low cost account that has already drawn thousands of previously unbanked Americans into the banking system," says Hawkes.
The ETA allows recipients of many kinds of Federal payments to access their funds automatically through electronic funds transfers. Some institutions have already begun to develop ETA-like accounts that combine direct deposit with bill payment options.
"For banks, the key is to keep expenses down and paper to a minimum, and technology holds tremendous promise in that regard," urges Hawkes.
If banks are to compete effectively against the storefront lenders and cheque cashers, they will also need to rethink their branching strategies and focus on refining their delivery systems and making them user-friendly, says Hawke. "Some customers continue to report being deterred by what they view as an intimidating atmosphere in the typical branch, an objection that banks used to brush off when they could afford to be indifferent to the underbanked market."
These days, banks seem to be taking such objections more seriously, he notes. At the same sime, some institutions have acquired cheque cashing and payday lending outlets, where customers can select from the menu of financial products and services in the atmosphere they're accustomed to, while being gradually exposed to the potential benefits of mainstream banking.