Core Innovation Capital, a venture capital group focused on financial technology serving the underbanked community, released a report this month that investigates the large and diverse revenue opportunities for financial services in the underbanked marketplace. The study was conducted in conjunction with the Center for Financial Services Innovation (CFSI), a leading authority in the U.S. on financial services for underserved consumers. The report shows several key findings depicting various demographic, economic and financial sector data, as well as an intent to track trends over time.
According to the report, credit, payment and deposits are the three main categories of services provided by the financial sector to underbanked consumers in the U.S through 2010. The payments and credit segments realized strong growth from 2009 to 2010 within the underbanked marketplace with technology-centric solutions enjoying a particularly high rate of growth. The FDIC distinguishes between the underbanked and the unbanked as those who have a checking or savings account, but also rely on alternative financial services. The unbanked are considered those who do not possess a traditional checking or savings account. The published Knowledge Brief includes both underbanked and unbanked consumers in the totals.
Here are some Key Findings of the study:
- There are an estimated 60 million underbanked and unbanked consumers in the U.S. (This number is actually derived from a December 2009 FDIC publication – view this and other valuable research here.)
- Underbanked consumers in the U.S. generated approximately $45 billion in fee and interest revenue for financial services providers in 2010.
- The market has shown strong growth in certain segments: payment services grew by 6% from 2009 to 2010; credit services grew by 2% in the same period.
- Several individual products witnessed very high revenue growth rates between 2009 and 2010: internet-based payday lending (35%), general purpose reloadable (GPR) prepaid cards (33%), and payroll cards (25%).
Also included in the study are product and segment breakdowns of all sectors servicing the underbanked market accompanied by growth rate statistics and methodology. Most notable to us in this report is the astonishing 33% growth rate of the General Purpose Reloadable (GPR) or prepaid debit card market. The report states that technological advances in this area (among others) have replaced traditional methods of transacting.
To view the Core Innovation Capital/CFSI Knowledge Brief click here.