Overview 1
Catalyst 1
Summary 1
Methodology 1
Table of Contents 2
Table of figures 3
Table of tables 4
Introduction 5
Understanding changing consumer attitudes towards traditional financial services is vital 5
A large percentage of consumers are not using traditional financial services for a variety of reasons 6
The recession is likely to have swelled the number of Underbanked consumers 7
Providers must focus on 'disengaged' Underbanked consumers, as they are at most risk of being poached 8
The post-recessionary FS space has changed considerably 9
The time is now for targeting the Underbanked 10
The Future Decoded 12
Trend: The Underbanked are disengaged 12
The Underbanked segment is small, but it is growing 13
The Underbanked are not necessarily sub-prime 13
The Underbanked have, however, been the worst affected by the recession 13
Insight: Underbanked consumers are more comfortable with the informal economy 14
The Underbanked should not be assumed to not have an interest in developing or expanding their relationships with traditional providers 16
Insight: The Underbanked are budget driven 16
Honesty, trust and transparency are still paramount 16
Trend: The Underbanked are struggling to manage their money effectively 18
The Underbanked are budgeting and trying to save just as much as the average consumer 19
Insight: The AFS industry is still capitalizing on Underbanked consumers' confusion by offering convenient credit and transaction products 19
Emerging prepaid solutions may help to integrate the Underbanked into the traditional product cycle 25
Trend: New entrants to the market are threatening banks' abilities to capture this market 28
The banking crisis has greatly diminished the public's trust in established banks 28
Trust levels in supermarkets and other retailers have already overtaken banks in Europe and the US 29
Tesco Bank and Co-operative Bank in the UK have seen an increase in new business in the wake of the crisis 31
Consumers rate products from non-traditional players more favorably than those from established banks 31
Insight: Retailers can use predictive power in their prior knowledge of consumer spending patterns to gain cross-selling advantages to the Underbanked 31
Tesco is an acknowledged leader in data mining and customer analytics 31
Marks and Spencer and Asda have also started analyzing customer behavior with an eye to increase their financial product sales 32
Loyalty scheme data provide retailers with detailed information for the effective targeting of products 32
Loyalty schemes can be leveraged to encourage take-up of financial products 33
Tesco's credit card shows how financial products can be effectively linked to loyalty schemes 34
Retailers can reach potential customers through a variety of channels 35
Tesco already possesses an extensive physical network 35
Advances in technology have reduced some of the costs of entry 36
Action Points 37
Action: Help the Underbanked manage their money more effectively 37
Action: Find a place in the 'new community' 39
Harness the power of social media 40
Lessons can be learnt from other industries in how to build a sense of community to restore trust 40
Virgin Money now rivals independent peer-to-peer lending facilitators with it's own 'social lending' community 43
Underbanked borrowers will benefit through cost and convenience 45
Appendix 46
Additional data 46
Methodology 53
Further reading 54
Ask the analyst 54
Datamonitor consulting 54
List of Tables
Table 1: Proportion of Underbanked consumers, by country 46
Table 2: Effects of the global economic downturn on financial circumstances among both global and Underbanked consumers 47
Table 3: Levels of trust in FS providers among Underbanked consumers 47
Table 4: Attitudes towards spending among Underbanked and global consumers 48
Table 5: Types of AFS used by Underbanked households 48
Table 6: Specific AFS products used by Underbanked households 49
Table 7: Reasons why Underbanked households use non-bank money orders 49
Table 8: Reasons why Underbanked households use non-bank check chasing services 50
Table 9: Reasons why Underbanked households use payday loans 50
Table 10: Reasons why Underbanked households use pawn shops 51
Table 11: Consumer trust levels in FS providers in Europe and the US 51
Table 12: Consumer trust levels in FS providers in APAC 52
Table 13: Consumer trust levels in FS providers in BRIC 52
List of Figures
Figure 1: Datamonitor's Recovery from Recession portal allows industry players to continually identify emerging opportunities and track what is happening in the global economy as it occurs 6
Figure 2: A large percentage of consumers are not using traditional financial services 7
Figure 3: 6% of global consumers are Underbanked through disengagement 9
Figure 4: Campaigns such as the UK's Better Banking Campaign highlight the current demand for 'inclusive' FS 10
Figure 5: The Underbanked are comparatively worse off as a result of the recession 14
Figure 6: Trust in more informal FS providers is comparatively higher than traditional services 15
Figure 7: The Underbanked are more price-driven average consumers, but still value honesty and trust above all 17
Figure 8: The Underbanked are struggling to manage their money effectively 18
Figure 9: Use of AFS transaction services among Underbanked households is more common than the use of credit products 20
Figure 10: Use of non-bank money orders and check cashing services is particularly prevalent among Underbanked consumers in the US 21
Figure 11: The majority of Underbanked consumers in the US use non-bank transactional services simply because they are more convenient 22
Figure 12: The majority of Underbanked consumers in the US seek credit through payday loans or pawn shops because it is easier and more convenient than applying for a bank loan 24
Figure 13: Bank Freedom has pioneered the targeting of the Underbanked 26
Figure 14: Zopa has been hugely successful in facilitating peer-to-peer lending 28
Figure 15: Trust in supermarkets and other retailers has overtaken that of banks in several European countries 29
Figure 16: Trust in banks in APAC and the BRIC economies is still paramount, but traditional providers here cannot afford to be complacent 30
Figure 17: Sainsbury's loyalty partnership with Nectar may attract Underbanked consumers 33
Figure 18: Tesco has effectively integrated its credit card into its wider loyalty program 35
Figure 19: SmartyPig has created an innovative savings platform 38
Figure 20: High value tools on Wells Fargo's online platform are attractive for budget-driven consumers 39
Figure 21: It is clear that Coca-Cola 'gets' social media 41
Figure 22: Being a Mobank customer is very much like being part of the 'in group' 42
Figure 23: First Direct has pioneered in terms of feedback gathering 43
Figure 24: Virgin Money has successfully stepped into the peer-to-peer lending space 44
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