The Unbanking of America: CUNA Mutual Group-Sponsored Keynote Speaker Lisa Servon Provides a Look at her Undercover Research on Alternative Financial Services and the Consumers that Rely on Them

ATLANTIC CITY, N.J. – CUNA Mutual Group-sponsored Keynote Speaker Lisa Servon took the stage Monday morning, giving attendees an extensive look into alternative financial services and the continuous debate about financial inclusion that she researched first-hand by working behind the counter of a check casher.

In her book, The Unbanking of America, which each attendee received a copy of at registration, she provides insights on the topic of “banking the unbanked,” focusing on consumers that rely on, and trust, payday loans, check cashing, buy here/pay here auto sales, prepaid debit cards, pawn loans, rent-to-own, etc.

She brought that topic to the floor during her presentation, providing statistics from the 2013 FDIC National Survey of Unbanked and Underbanked Households, which found that out of the households within the United States, only 67% are fully banked, 20% are underbanked, 7.7% are unbanked, and 5.3% whose banking status is unknown.

Using her first-hand experience of working with those that fall under the “unbanked” category, she gave undercover look into why so many consumers take advantage of alternative financial services over any other financial service while leaving traditional banks behind.

Check cashing transactions have grown from $45 billion in 1990 to $58 billion in 2010, and payday lending transactions have increased from $10 billion in 2000 to $30 billion in 2010. She found that payday loans are greater in commodity than Starbucks and McDonalds put together.

The consumer financial services industry is not prospering as greatly as they should and consumers are often being misunderstood, especially consumers of the lower- and middle-class. The mainstream, consumer finance institutions are banks and credit unions. With business not prospering as much as they should, what could be done to turn business around?

Servon found three things that alternative financial service customer’s value. They value lower costs/greater liquidity, greater transparency and better service. Bank fees continue to increase, and bank policy and practices continue to change, making it hard for consumers to stay.

Key takeaways from Servon’s discussion were to continue to reframe the debate. It is important for consumers to go from being “underbanked” to prospering with financial justice and health. It is important to know customers situations and make sure their needs are met. In addition, a key takeaway was to consider unlikely partnerships and make what credit unions stand for known through powerful marketing.