Remarks by
Donald E. Powell
Chairman
Federal Deposit Insurance Corporation
for Delivery to
"Tapping the Unbanked Market: Helping People Enter the Financial Mainstream"
National Press Club
Washington, D.C.
November 5, 2003
Photo Essay: "Tapping the Unbanked Market"
Good morning. I am glad you are here with us today explore ways to help the unbanked
enter the financial mainstream.
There has been considerable discussion in the industry -- and significant media
attention -- about those who have not yet made it into the financial mainstream. I'm
talking about the rapidly growing segments of ethnically and racially diverse consumers
who are either unbanked or underbanked. These groups represent significant emerging
markets for new and expanded bank products and services.
Interest in multi-cultural markets has skyrocketed since the release of the 2000 Census
figures. The statistics that have stimulated such keen interest are well known. Asians
make up 4% of the U.S. population, and that percentage is expected to grow to 6.5% by
2025. The Hispanic population, currently around 13%, is expected to reach 18% during
that same period. In addition, homeownership among African-Americans rose by 89%
between 1993 and 2000, making them an even more attractive market segment for
bank products and services. For banks that successfully reach these groups, they
represent a significant business opportunity.
But like most other "great opportunities," there are inherent challenges as well.
We know a lot about the market we're trying to reach. Adults without transaction
accounts - such as savings, checking, mutual funds and money markets - are more
likely to have lower incomes, are younger than 35, non-white or Hispanic, and
underemployed. Many of them do not own their homes, have limited English-speaking
ability, and often live from paycheck to paycheck.
They remain unbanked for reasons ranging from problem credit histories and debt
burdens to general distrust of financial institutions, all associated with a lack of basic
financial education.
Donald E. Powell
Chairman
Federal Deposit Insurance Corporation
for Delivery to
"Tapping the Unbanked Market: Helping People Enter the Financial Mainstream"
National Press Club
Washington, D.C.
November 5, 2003
Photo Essay: "Tapping the Unbanked Market"
Good morning. I am glad you are here with us today explore ways to help the unbanked
enter the financial mainstream.
There has been considerable discussion in the industry -- and significant media
attention -- about those who have not yet made it into the financial mainstream. I'm
talking about the rapidly growing segments of ethnically and racially diverse consumers
who are either unbanked or underbanked. These groups represent significant emerging
markets for new and expanded bank products and services.
Interest in multi-cultural markets has skyrocketed since the release of the 2000 Census
figures. The statistics that have stimulated such keen interest are well known. Asians
make up 4% of the U.S. population, and that percentage is expected to grow to 6.5% by
2025. The Hispanic population, currently around 13%, is expected to reach 18% during
that same period. In addition, homeownership among African-Americans rose by 89%
between 1993 and 2000, making them an even more attractive market segment for
bank products and services. For banks that successfully reach these groups, they
represent a significant business opportunity.
But like most other "great opportunities," there are inherent challenges as well.
We know a lot about the market we're trying to reach. Adults without transaction
accounts - such as savings, checking, mutual funds and money markets - are more
likely to have lower incomes, are younger than 35, non-white or Hispanic, and
underemployed. Many of them do not own their homes, have limited English-speaking
ability, and often live from paycheck to paycheck.
They remain unbanked for reasons ranging from problem credit histories and debt
burdens to general distrust of financial institutions, all associated with a lack of basic
financial education.
Not surprisingly, when cut off from mainstream banking services, many turn to
traditionally higher-cost lenders such as pawnshops, car-title lenders, payday lenders,
check-cashers and wire-transfer companies.
Today you are going to hear a variety of perspectives on how and why it is a good idea
to identify, support and initiate efforts to reach unbanked customers.
Banking relationships enable consumers to avoid carrying large amounts of cash,
reduce overall costs for financial services and establish solid relationships with financial
institutions that can help improve their economic circumstances.
For financial institutions, unbanked households represent a valuable source for new
customers that can produce revenue and help banks better meet the compliance
requirements of the Community Reinvestment Act.
And finally, both the public sector - through federal payments - and the private sector -
through payrolls - benefit from the cost savings that electronic delivery of payments
provide when unbanked individuals become account holders.
The rationale is clear, but most of us have yet to see an abundance of products,
services or outreach efforts to motivate these potential customers to enter the
mainstream market. But they are out there. And that's why we're here today - to discuss
the issues and share some answers.
Several of you are taking the lead in expanding your bank or organization's presence,
activities, and customer base in underserved emerging markets; and you can serve as
the beacon for the rest of us. At the end of the day we will discuss a forum to capture
and share best practices to help one another achieve this important goal.
The FDIC is committed to promoting your efforts through our financial education
curriculum, Money Smart, which we developed to help build awareness among the
unbanked about the benefits of banking relationships.
Since the rollout of Money Smart a little over two years ago, we've learned that financial
education is more effective when offered in conjunction with other asset building
strategies, such as opening Individual Development Accounts (IDAs), offering free tax
preparation for Earned Income Tax Credit (EITC) refunds, and other types of job
training.
The FDIC has taken the lead in establishing partnerships with communities and bankers
to link services such as applying for EITC funds, offering free tax preparation services
and other incentives to promote and provide financial education. And we have seen
nearly 14,000 previously unbanked consumers establish new bank accounts as a result
of these efforts.
traditionally higher-cost lenders such as pawnshops, car-title lenders, payday lenders,
check-cashers and wire-transfer companies.
Today you are going to hear a variety of perspectives on how and why it is a good idea
to identify, support and initiate efforts to reach unbanked customers.
Banking relationships enable consumers to avoid carrying large amounts of cash,
reduce overall costs for financial services and establish solid relationships with financial
institutions that can help improve their economic circumstances.
For financial institutions, unbanked households represent a valuable source for new
customers that can produce revenue and help banks better meet the compliance
requirements of the Community Reinvestment Act.
And finally, both the public sector - through federal payments - and the private sector -
through payrolls - benefit from the cost savings that electronic delivery of payments
provide when unbanked individuals become account holders.
The rationale is clear, but most of us have yet to see an abundance of products,
services or outreach efforts to motivate these potential customers to enter the
mainstream market. But they are out there. And that's why we're here today - to discuss
the issues and share some answers.
Several of you are taking the lead in expanding your bank or organization's presence,
activities, and customer base in underserved emerging markets; and you can serve as
the beacon for the rest of us. At the end of the day we will discuss a forum to capture
and share best practices to help one another achieve this important goal.
The FDIC is committed to promoting your efforts through our financial education
curriculum, Money Smart, which we developed to help build awareness among the
unbanked about the benefits of banking relationships.
Since the rollout of Money Smart a little over two years ago, we've learned that financial
education is more effective when offered in conjunction with other asset building
strategies, such as opening Individual Development Accounts (IDAs), offering free tax
preparation for Earned Income Tax Credit (EITC) refunds, and other types of job
training.
The FDIC has taken the lead in establishing partnerships with communities and bankers
to link services such as applying for EITC funds, offering free tax preparation services
and other incentives to promote and provide financial education. And we have seen
nearly 14,000 previously unbanked consumers establish new bank accounts as a result
of these efforts.