Targeting Underbanked Consumers With Mobile Banking Solutions

Underbanked consumers — those without a checking account — rely on their mobile phones more so than other segments, making them a prime target for mobile banking services, mobile prepaid, and mobile P2P money transfer solutions.

Mobile services and the underbanked are two of the hottest topics in the financial industry today, but few people weave the two issues together. But a new study from Javelin Strategy & Research suggests financial marketers might be missing a huge opportunity by tackling mobile and the underbanked separately.

Javelin’s research report, “Reaching Underbanked & Unbanked Consumers In 2012: Strategies for Connecting With Mobile Financial Services,” outlines the business case for developing mobile solutions specifically for those who typically fall outside mainstream banking channels.

Who Are The Mobile Underbanked?

While the underbanked don’t have checking accounts, they can — and often do — have prepaid cards, savings accounts or other financial accounts, none of which would typically qualify as “a primary financial relationship.” The unbanked, however, consist of those without any banking products whatsoever.

Javelin estimates the underbanked in the U.S. to total around 35 million adults, about 15% of the population. Included in that number are 10 million who are completely unbanked, 4.3% of all adult consumers. These folks are disproportionately younger. Three out of five of are under the age of 35. Men and women are equally represented in both under- and unbanked segments.

Their annual income is lower ($52K vs. $73K average), but not as low as one might expect. It would be a mistake to think these consumers don’t need banking services simply because it is assumed that “they have no money.”

The underbanked in the U.S. are less likely to own computers (60% vs. 72% for all consumers) or pay for broadband services (34% vs. 59%), but more likely to own a mobile phone (74% vs. 68%).

The Underbanked Are More Receptive to Mobile Banking

While the underbanked are much less likely than all consumers to have used online banking (56% vs. 72%) in the past 90 days, they use mobile banking at significantly higher rates (36% vs. 28%).

The underbanked are much more willing to use mobile banking services than the rest of the population. Only 59% of the underbanked have never used any mobile banking service vs. 68% among all other consumers.

Key Findings

Javelin’s report, “Reaching Underbanked & Unbanked Consumers In 2012: Strategies for Connecting With Mobile Financial Services,” uses consumer data and qualitative analysis to isolate the best practices for marketing mobile products to the underbanked. The report is based primarily on data collected online from 3,180 consumers with mobile phones or smartphones. Among the many strategies outlined in the Javelin report:

Build a foundation for the underbanked on two primary services: mobile money transfers and prepaid accounts. Simple, straightforward, entry-level services can provide a conduit to a deeper banking relationship. These two mobile services provide the basic building blocks for essential financial services that meet the central needs of the underbanked.

Financial institutions need to provide greater means of access, in less formal settings, and communicate in the client’s own language when possible. Many underbanked consumers find it difficult to access branches during traditional banking hours. Reach this population by offering alternative settings and hours, in places where they shop, work, and go about their daily lives (e.g., shopping mall kiosks).

Smaller financial institutions may have checking accounts that cost less, but they are also less likely to offer robust mobile tools. This can be a key sales point for those financial institutions who have their mobile act together.

The full report is 50 pages and includes dozens of charts, tables and graphs. The report breaks down in detail the different types of mobile banking behaviors, and frequency of use, including mobile alerts, payments, P2P transfers and other services/transactions. In-depth demographic and psychographic profiles are provided. You can get your copy of the Javelin report here.

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