Hat Tip: Bank Technology News
About 73 million people in the U.S. are unbanked or underbanked, a marketplace that is as diverse as it is unknown-often new to the U.S., frequently entrepreneurial and all lacking credit histories. Banks will find a bevy of new risk tools to help reach out to this market of emerging creditors
By Michael Sisk
The subprime mortgage troubles have grabbed a lot of headlines this year as delinquencies and foreclosures mount and lenders scramble to tighten underwriting standards and head off onerous new rules from a populist-minded Washington. But this story has masked another lending phenomenon gathering momentum: lending to unbanked or lightly banked consumers, whom some are calling "emerging credit."
Make no mistake, there is a significant difference between subprime and unbanked. The former have established and blemished credit histories that can be viewed through the three major credit repositories, while unbanked can't be easily tracked because they have never had a credit card, car loan, mortgage or other financial product that would leave a credit trail. However, these two groups do have two major commonalities: risk profiles that fall outside the norm and must be carefully studied before extending credit; each group also represents a deep pool of potential customers.
Reaching the unbanked is one of those perennial dilemmas for banks, but several new technology tools recently have been unveiled that show great promise in helping to bridge this gap. And it is a gap worth bridging. The Center for Financial Services Innovation estimates 73 million people in the U.S. are either unbanked or underbanked. When one considers that that figure is 56 percent of the total banked population of 130 million, it becomes pretty clear how much business is up for grabs.
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