Did you know that there are many, many Americans that do not or will not use banks? They're known in the financial industry as the "Underbanked" and their numbers might surprise you. Best estimates place the number in the 40 million range. More specifically, there are roughly 40 million households in the United States that either use a bank in a very limited way or do not use one at all.
The prepaid debit card industry is very aware of this community because that's its initial core customer base. These are the people who can really use the prepaid debit card products and services each company has to offer. For instance, the online bill payment capabilities, the ATM access, the direct deposit option are all very attractive to people who do not have these types of options through a bank. In fact they're so popular they're what has fueled the skyrocketing growth of the industry.
And while the prepaid debit card companies are trying to expand their offerings so they can attract more of the traditional "banked" customers, the banks are looking closely at trying to expand their own line of products into the underbanked.
At one time banks thought the underbanked (sometimes known as the unbanked) were just poor risks and were not very good candidates for customers. But now they're having second thoughts. You see, that 40 million number represents over 10 billion in potential revenue because that's the amount of money the underbanked spend each year on what's known as alternative financial transactions. Things like check cashing, remittance processing, etc. So banks and credit unions have sat up and taken notice.
They figure if they can coax these consumers into using one or more products, then they can hook them into others and keep them as long-term customers. It's a good strategy but it's going to take some big changes in banking policy and infrastructure to first identify these particular customers, create the kinds of products they would most likely use, and then retain them as customer after that.
Right now it's a race that the prepaid debit card companies are winning but the banks have the deep pockets so they could catch up and pass all but the most successful debit card companies. And those they can not pass, they just might gobble up. It will be interesting to see where all of this is one year from now but the end result will probably be that the consumer will be the true winner. Would not that be a novelty?