The Unbanked Are Better Paid than You May Think

Surprising Facts Emerge

My recent article “Report: Consumers Want to Switch Banks But Won’t” highlighted the phenomenon of the unbanked and underbanked.

A new report on the U.S. unbanked population, released last week by consultancy firm Javelin Strategy and Research, recently highlighted by UniBul Credit Card Blog adds to our general understanding of this segment.

According to UniBul, a Federal Reserve survey from earlier this year already indicated  that being unbanked is more often a matter of personal choice than one of forced necessity.  And the average income statistic in the Javelin survey, highlighted in American Banker interview with Javelin executive Mary Monahan, confirms this.

Defining Unbanked vs. Underbanked Consumers

Javelin defines the underbanked as “those without a checking account and often without a primary financial institution relationship,” but they may have a prepaid card. One limitation of this definition is that it doesn’t make the important distinction between prepaid and traditional credit cards.

The Federal Reserve’s definition is that:

  • Unbanked are consumers without a “checking, savings, or money market account.”
  • Underbanked are consumers who have one of these accounts, but who also use an “alternative financial service” including prepaid cards.

So Javelin’s underbanked are, in fact, the Federal Reserve’s unbanked. Even so, the statistics are surprising.

Results: Underbanked Not Hiding Under A Rock

Javelin surveyed consumers with mobile phones. Since 88% of Americans are cell phone users and the remaining 12% are predominantly older people, the surveyed as a group should be a fairly representative of the working-age population as a whole.

The Javelin Survey findings:

  • 15% of the adult American population are not using any form of a traditional banking service.
  • $52,000 is the income of the average American underbanked consumer, as of June 2011.
  • $73,000 is the average for all of the surveyed consumers.

Federal Reserve survey findings:

  • Only 10% of underbanked and unbanked consumers found themselves in this situation because no bank would give them an account.
  • The top personal reason (24%) was “I don’t like dealing with banks.”

Other Javelin stats:

  • 12% of the underbanked are unemployed, vs. 8% percent for the entire population.
  • Immigrants are much more likely to be underbanked than residents.
  • Underbanked consumers are twice as likely to send wire transfers as all consumers.
  • Underbanked consumers are three times as likely use remittances.
  • 60% of underbanked consumers have access to computers, and 34% use broadband vs. 72% percent and 59% for the general population.


To put these numbers in perspective, the high income of the unbanked is an unexpectedly high number – especially since 36% are 18 to 24 years old, which means that they are either still in college or at the very beginning of their professional careers with either no income or lower income than older work colleagues. income.

For the underbanked, now is a better time than ever to be using prepaid cards and other alternative payment services as new technologies and regulatory realities are making them both more easily accessible and cheaper than ever before.

Case Study: Serving the Unbanked Consumer

Being “unbanked” has its perils. Homes that have no way to hide their assets securely are targets for theft or con men and day laborers are prey for gangs. They make their money on the job site and have to carry it around. Now mobile banking solutions can allow them to deposit and transfer the cash to their loved ones regularly with more security.

One such initiative is the partnership of GSMA and The Bill & Melinda Gates Foundation to expand availability of financial services through mobile phones:

The GSMA, which represents the interests of the worldwide mobile communications industry, and the Bill & Melinda Gates Foundation today announced an innovative programme that will expand the availability of financial services to millions of people in the developing world through mobile phones. The Mobile Money for the Unbanked (MMU) programme, supported by a US$12.5 million grant from the foundation, will work with mobile operators, banks, microfinance institutions, government and development organizations to encourage the expansion of reliable, affordable mobile financial services to the unbanked.

Snap! principle of unbanked/underbanked consumers:

While traditional banking services are likely to remain popular, the unbanked/underbanked population remains an important prospective market.