To bank or not to bank
Comprehensive policy needed to attract, educate "unbanked"
For Mike Allard, director of retail and marketing at Westborough Bank, solving the problems of serving an increasing "unbanked" immigrant population will require more than a piecemeal, branch-by-branch approach.
Allard said what is necessary is an industry-wide initiative to first understand, and then tailor services to, the unbanked portion of society.
"The issue is much bigger than Westborough Bank and what we'd do," Allard said. "At the least, we need to introduce (the unbanked population) to the banking services in this country on a bank-wide, not just a branch-wide, FDIC and Mass. Bankers level."
Size matters
"Until we understand the population, and understand the community, we don't know if the products we're offering are even attractive to them," Allard said. "We're still going through the process of trying to understand our own traditional customer base and what their habits are. We're a long way from understanding a customer base that doesn't typically bank within the confines of established, recognized institutions."
Allard said community banks like his may be at a disadvantage in trying to lure unbanked depositors. Because larger banks like Bank of America and Sovereign Bank have more branches, they can more easily penetrate a given community, breeding familiarity and creating community ties.
According to the FDIC, there are an estimated 28 million people in the U.S. who do not have or use bank accounts, nearly 10 percent of the total population. The number represents mostly immigrant populations that either don't understand, or worse, don't trust, the American banking system, according to the FDIC.
A lack of knowledge of basic banking services is one thing, Allard said, but the lack of trust is a killer for local and national banks alike.
"The main problem is there is a trust issue with immigrants, because A: they've never banked with a bank or never had a relationship like that; or B: the experience they had in the country they come from was not a pleasant one," said Allard. "So now it's a once bitten twice shy thing, where they say 'I'm not gonna put my money in a bank, I'm gonna keep it under my mattress.'"
These products range from low, or no-fee checking and savings accounts, to free wire transfers to relatives back home and small loans. But none are as polarizing as an initiative spearheaded by retail giant Wal-Mart.
Rich get richer
Wal-Mart recently announced it would begin offering a form of stored value debit card that could be loaded with cash and used to make purchases or visit ATMs, presumably at Wal-Mart locations and with a multitude of fees attached, of course.
Some locations see the debit cards as a logical solution to the problem, offering the security and convenience of a cash-less marketplace without the hassle of background and identity-check procedures, which can often scare off bank-shy immigrant populations.
"I think there is a need for those in certain populations, they have a place and a purpose," said Andrea White, senior vice president and chief retail officer for Commonwealth National Bank. "I could see us offering it at some point."
Others, however, think the high fees and lack of accountability associated with the cards might do more harm than good.
Bob Hicks, branch operations officer for Flagship Bank, admits his bank has explored the option, but said the cards risk being redundant to traditional banking products, saying loading up a stored value card is basically the same as having a checking account.
Indeed, conventional services would probably be a better value, said Paul Scully, president and CEO of Ware-based Country Bank for Savings, with branches in Charlton and Leicester.
"A lot of banks I suppose could offer that service and overcharge," Scully said. "But debit cards for our customers is a free service, and we wouldn't want to have to start charging a fee just to load up some card."
Community comfort
A key component, Allard said, of getting new customers in the door is fostering that sense of familiarity by hiring from within the community.
"So many people don't bank with a bank, they bank with a banker," Allard said. "If your more visible employees, the teller or manager or business development officer, lives and works in the community, that has a huge advantage. They become the face of the bank."
Kevin Kiley, executive vice president and chief operating officer of the Massachusetts Bankers Association, agreed.
"It's critical for a new immigrant or whomever to walk into a bank and see a familiar face, someone who speaks the language and has had similar experiences," Kiley said. "That creates a comfort level, and people are aware of that."
In addition to fostering a more open, comfortable environment, Kiley also stressed the importance of basic consumer education and financial literacy, so that unbanked citizens can begin to realize on their own the efficiencies and regimented cost structures of traditional banks.
WBJ Web Partners
Most Recent
Most Recent
0 Comments