Getting to Know Underbanked Consumers: A Financial Services Analysis

Analysis of activities, attitudes and behaviors of low-income consumers
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This paper describes a survey conducted by ShoreBank Advisory Services in Washington, D.C., Los Angeles and Chicago that provides a basis for financial services segmentation of the low- and moderate-income population in these cities.

The paper presents the following details of the survey:

  • It utilized a multi-stage stratified random sampling design in which census tracts were stratified by city, race/ethnicity and income;
  • It examined approximately 500 households in each city;
  • The median income was US $18,522.

The paper argues that:

  • Most discussions about the financial services practices of low- and moderate-income customers neatly fit them into two categories, the banked and the unbanked;
  • The banked are assumed to be fully integrated into the formal financial sector, while the unbanked are excluded from formal financial networks;
  • Most low- and moderate- income households rely on a patchwork of financial services provided by both bank and non-bank institutions;
  • There is remarkable diversity in terms of demography, attitudes and experiences in this market.

The paper concludes that:

  • Banks need to understand the distinct and related segments of this sector in order to increase their service to, and profitability from, this sector;
  • Banks face severe competition in this market from the alternative finance services providers;
  • Both banks and non-banks that wish to serve the sector will have to be demand-led;
  • Leadership that believes in the viability of the opportunity offered by this market can build relationships with a population that has the potential for growth and profitability.

About this Publication

By Seidman, E., Hababou, M. , Kramer, J.