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Growing through unconventional consumer segments: the unbanked and under-banked Print E-mail
Tuesday, 26 May 2015

A new report from Timetric’s Retail Banking Intelligence Center finds that the unbanked and under-banked consumers – people with no, or minimal access to formal financial services – have emerged as a potentially profitable segment for banks.

According to Timetric’s Analyst, Amit Verma: “About two billion people across the world lack a bank account and more than one billion in the developing countries still use cash to pay their bills. Poverty, illiteracy, irregular income and complexities involved in opening a bank account compel them to depend upon alternative financial service providers. The exorbitant charges of these services add to the woes of underprivileged consumers. However, several governments are now emphasising on financial inclusion by enacting favourable regulations. In addition, developments on technological fronts have enabled banks to minimise the cost to serve the low-income clients. This has led the unbanked and under-banked consumers to emerge as a promising segment for banks.”
Pressurised with stringent regulatory compliance and considerable drop in profits, banks are targeting unconventional consumer segments for revenue growth. To serve the segment effectively, banks are designing innovative offerings and efficient delivery channels. The mobile point of sale (m-POS) device named Chhota ATM (small ATM) from State Bank of India also doubles up as an ATM and is one such example of innovation by banks.
Even banks in developed markets have launched their low-cost accounts, such as Opportunity Checking Account from Wells Fargo and Access Account from Citibank, to tap into this market. To reduce costs, banks are going branchless with agent banking. Moreover, rising adoption of mobile as a financial service platform has provided a cost-effective medium for banks to connect with the unconnected consumers.
“The global surge of mobile as an alternative to bank accounts and debit cards is creating convenience to connect with financial services for unbanked customers. A significant number of countries now have more mobile money accounts than bank accounts, clearly suggesting the impact of the channel. Proliferation of mobile banking apps, SMS and USSD-based mobile money platforms, m-POS and mobile wallets are expected to bring a positive change in inclusive banking,” Verma asserts.
“The influx of non-bank companies in financial services has increased in the last few years. Moreover, regulators around the world have issued banking license to new entrants. In such a competitive environment, banks need to devise consumer-centric products and services strategies to capture a larger share of underserved consumers and stay ahead in competition,” Verma adds.

(Source - Timetric Press Release)


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