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Providing the most comprehensive and up-to-date information and analysis of the The Un- and Underbanked: Incl Impact of COVID-19 – US market, and the behaviours, preferences and habits of the consumer.

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What are the key challenges facing the industry? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Covered in this report

The un- and underbanked are more vulnerable to economic uncertainty, and the COVID-19 pandemic will have made it much more difficult for many of these folks to make ends meet. Further compounding matters, Hispanic and Black consumers are both more likely to be un- and underbanked and more likely to suffer worse health outcomes from COVID-19. Banks and financial brands that say “we’re all in this together” now have a golden opportunity to help make a real difference.

Expert analysis from a specialist in the field

Written by Chris Shadle, a leading analyst in the Financial Services sector, his extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

The un- and underbanked are more vulnerable to economic uncertainty, and the COVID-19 pandemic will have made it much more difficult for many of these folks to make ends meet. Further compounding matters, Hispanic and Black consumers are both more likely to be un- and underbanked and more likely to suffer worse health outcomes from COVID-19. Chris Shadle
Financial Services Analyst

Table of Contents

  1. Overview

    • What you need to know
    • Key issues covered in this Report
    • Definition
  2. Executive Summary

    • Market overview
    • Impact of COVID-19 on the un- and underbanked
      • Figure 1: Short, medium and longer term impact of COVID-19 on the Financial Services Industry, July 2020
    • Key takeaways
    • Almost 1 in 10 consumers are unbanked, with a quarter underbanked
      • Figure 2: Share of banked, unbanked, and underbanked population, March 2020
    • The unbanked need a convincing value proposition
      • Figure 3: Reasons for not having bank account, March 2020
    • Direct deposit is the best foot in the door for converting the unbanked
      • Figure 4: Underbanked financial attitudes, March 2020
    • What it means/what’s next
  3. Impact of COVID-19 on the Un- and Underbanked

      • Figure 5: Short, medium and longer term impact of COVID-19 on the Financial Services Industry, July 2020
    • Opportunities and Threats
    • Stimulus checks provided opportunity and incentive to become banked
    • The response from neobanks added to the pressure on established banks
      • Figure 6: Chime, tweet about stimulus payments, April 2020
      • Figure 7: Direct Deposit with PayPal, May 2020
    • The mere prospect of future payments (stimulus or otherwise) can spur new banking originations
      • Figure 8: PenFed Access America Checking, acquisition email May 2020
    • During lockdown, proper documentation was hard to acquire
    • Broader shifts in consumer behavior will emphasise the importance of financial inclusion
    • The shift to digital will reduce the barriers for some – but will alienate others
    • Mintel’s Global Consumer Trend Drivers provide lens into mind of the unbanked
    • Get rid of fees to attract unbanked consumers
      • Figure 9: Motivation for unbanked to become banked, May 2020
      • Figure 10: Credit Sesame, Sesame Cash acquisition email, May 2020
    • More people are acting with an awareness of Rights
    • How the COVID-19 crisis will affect the un- and underbanked
    • An overlap between the unbanked and the groups most exposed to COVID-19
    • Healthcare costs will put even greater strains on vulnerable consumer groups’ finances
    • Expiry of the CARES Act will further impact consumers’ financial position
      • Figure 11: Unemployment rate, by race and Hispanic origin, May 2007 – May 2020
    • How a COVID-19 recession will reshape the future of the financial services industry
    • Learnings from the Great Recession are still relevant
      • Figure 12: Financial opinions of the un- and underbanked, March 2020
    • COVID-19: US context
  4. The Market – What You Need to Know

    • FDIC’s unbanked numbers leave large question mark
    • Unemployment threatens to keep more folks unbanked
  5. Market Size and Factors

    • “Status unknown” clouds official data on the un- and underbanked
      • Figure 13: Banking status of US households, 2013-17
    • Sustained unemployment will inhibit new account growth, may threaten existing membership
      • Figure 14: Unemployment rate, May 2007 – June 2020
    • COVID-induced recession stands to hit the unbanked particularly hard
      • Figure 15: Employment status of the un- and underbanked, March 2020
  6. Key Trends – What You Need to Know

    • The history of race in America echoes in today’s financial world
    • Technology can redefine financial inclusion
    • Non-bank companies will continue to challenge traditional financial institutions
  7. What’s Struggling

    • A clear picture of who needs help
    • America must reckon with its past crimes
    • 1865-1874: Freedman’s Savings Bank sets a precedent of mistrust
    • 1934 (officially) – present: Redlining systemically denies Black and Hispanic consumers access to credit
    • 2020: Black and Hispanic consumers are twice as likely to be unbanked
      • Figure 16: Unbanked rate, by race and ethnicity, March 2020
      • Figure 17: Chase Instagram post regarding George Floyd, June 2020
  8. What’s Driving Consumer Behavior?

    • Technology is changing the nature of community, experiences, and surroundings
    • Sweepstakes pull at basic human urges
      • Figure 18: Credit Karma, $20,000 sweepstakes, July 2020
      • Figure 19: Chime, July 2020
    • “Path to Apple Card” program plants seeds for financial success
      • Figure 20: Apple Card path to approval, June 2020
  9. What to Watch

    • Walmart MoneyCenter is a one stop shop for financial services
      • Figure 21: Un- and underbanked attitudes toward banking, March 2020
      • Figure 22: Walmart money center, July 2020
    • Changing attitudes toward cash further threaten the unbanked
      • Figure 23: Attitudes toward cash, July 2019
    • Fintech can bring greater access to credit to the un- and underbanked
      • Figure 24: Attitudes toward personal loan attributes, by age, September 2019
      • Figure 25: Zest AI, July 2020
  10. The Consumer – What You Need to Know

    • Who are the un- and underbanked consumers?
    • Why unbanked? No need, no money
    • Many of the un- and underbanked say they plan to open accounts
    • Direct deposit is a strong incentive to become banked
  11. The Un- and Underbanked Consumer

    • The un- and underbanked population skews young and multicultural
      • Figure 26: Generational composition of the un- and underbanked, March 2020
      • Figure 27: Banking status, by race and ethnicity, March 2020
    • The underbanked utilize a wide variety of non-bank products
      • Figure 28: Non-bank financial products, March 2020
      • Figure 29: Earnin Youtube video, july 2020
  12. Unbanked Rationale

    • Lack of need, lack of money maintain the unbanked status quo
      • Figure 30: Reasons for not having bank account, March 2020
      • Figure 31: USAA stimulus check email, May 2020
    • Reasons for remaining unbanked, TURF Analysis
      • Figure 32: TURF Analysis – Reasons for not having bank account, March 2020
      • Figure 33: Table – TURF Analysis – Reasons for not having bank account, March 2020
    • TURF Methodology
    • Lack of fees is the greatest incentive
      • Figure 34: Incentives for opening a bank account, March 2020
  13. Financial Challenges and Plans

    • The underbanked are more aspirational, while the unbanked focus on the day-to-day
      • Figure 35: current financial challenges, by banking status, March 2020
    • Significant amounts of the un- and underbanked plan to open an account
      • Figure 36: Plans to open bank account, by current banking status, March 2020
      • Figure 37: Dave homepage, July 2020
  14. Financial Attitudes and Behaviors

    • One third of the unbanked use cash exclusively
      • Figure 38: Financial habits, by current banking status, March 2020
    • Bank satisfaction is high, direct deposit is a strong incentive
      • Figure 39: Underbanked financial attitudes, March 2020
    • The un- and underbanked are optimistic, but wish things were easier
      • Figure 40: Un- and underbanked attitudes toward banking, March 2020
  15. Appendix – Data Sources and Abbreviations

    • Data sources
    • Consumer survey data
    • Direct marketing creative
    • Abbreviations and terms
    • Abbreviations
  16. Appendix – The Market

    • Household type
      • Figure 41: Percent of households that are unbanked and underbanked, by household type, 2013-17
    • Race and Hispanic Origin
      • Figure 42: Percent of households that are unbanked and underbanked, by race and Hispanic origin, 2013-17
    • Age of Householder
      • Figure 43: Percent of households that are unbanked and underbanked, by age of householder, 2013-17
    • Employment status
      • Figure 44: Percent of households that are unbanked and underbanked, by employment status, 2013-17
    • Household income
      • Figure 45: Percent of households that are unbanked and underbanked, by family income, 2013-1
    • Region
      • Figure 46: Percent of households that are unbanked and underbanked, by geographic region, 2013-17
  17. Appendix – Trend Drivers

      • Figure 47: Mintel Trend Drivers and Pillars

About the report

This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

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Data

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