Many banks are finding that growing their market share is becoming more and more challenging. The the share of “bankable” seems to be saturated with services. Many of these banks are now looking at unbanked, meaning they have no bank account, and the underbanked, or those that have a bank account but also use alternative financial services such as check cashing, as a vain of potential new customers. Making inroads into this market can be a challenge because of the many regulatory constraints placed on these institutions.
Enter mobile banking. These unbanked and underbanked households are adopting mobile banking at a higher rate than those that are fully banked. The FDIC will release a report showing that 33% of unbanked and 65% of the underbanked households have smartphones. 42% of these underbanked households have used mobile financial services in the past year. Only about 22% of fully banked households have done so.
Senior consumer researcher for the FDIC’s division of depositor and consumer protection (man that’s a mouthfull) Susan Burhouse had this to say about these mobile finical apps:
“People who are doing this don’t get the same consumer protections that you get in the banking system and don’t always have the same opportunities to build assets and credit histories as you would in a banking relationship. In addition, having people outside of the system can undermine confidence in the banking system itself.”
OK. But Burhouse and the FDIC have an an interest in propping up traditional banking institutions. These apps may not offer the same consumer protections…blah blah blah… but these people are not interested in building assets. They are just trying to get by day by day. Mobile apps, check cashing stores and pawn shops offer this growing segment of the US population access to needed finical services and have for decades (or centuries as in the case of pawn shops) . Banks have traditionally avoided this segment in the past because they were viewed as risky. Only now that the fully banked market is saturated are they looking at this group of people as a viable customer base. Maybe the will be able to gain inroads into this segment by using technology. But they will never be willing to offer the full range of services these households need.