This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Unbanked Customers Embrace Alternatives

NEW YORK ( TheStreet) -- In the aftermath of the financial crisis, some low-end customers are being pushed out of the traditional banking landscape and into the world of alternative financial services.

Alternative financial services -- or AFS as some industry insiders call it -- has been around for years signified by check cashing stores that charge customers exorbitant fees, payday lenders and even retail layaway programs. Those who are considered underbanked, or even unbanked, include immigrants, low income, teenagers and, of course, those consumers that have been deemed risks by banks.

Retailers including Wal-Mart Stores (WMT - Get Report) and Sears (SHLD - Get Report) have long had offerings for the underbanked market.

But there is a new crop of companies looking to take advantage of this growing market and they're doing so with reloadable prepaid cards.

According to the Federal Deposit Insurance Corp.'s study of the unbanked and underbanked, which was published in early 2009, roughly 60 million consumers are not receiving financial services through a bank or credit union.

"More people are leaving banks. People are not being underwritten for credit cards, especially at the bottom end. And so the use of alternative financial services has increased significantly in the last few years," says Arjan Schutte, senior advisor at the Center for Financial Services Innovation, a think tank for expanding access of financial services products to underbanked consumers.

"Even though remittances and check cashing volumes are stable as opposed to growing, there has been tremendous growth in payday loans and there's been tremendous growth in more payroll agnostic, general purpose reloadable cards which can be used as a payroll card," Schutte says.

The organization estimates that underbanked consumers in the U.S. are paying $29 billion a year in fees and interest.

"There is multi-billion opportunity to serve this customer by providing more efficient products and services that we believe can also, if structured well, can actually be lower cost," Schutte says.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
GDOT $16.46 1.54%
MA $87.25 -0.77%
SHLD $42.40 1.51%
WMT $81.35 -0.66%
V $65.54 -0.08%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs