NEW YORK – Regional lender KeyBank recently held focus-group meetings with people who don’t have bank accounts to find out why they avoid the system.
“They bashed banks,” said Bruce Murphy, the Cleveland-based company’s president of community-development banking. “They’ve had bad experiences” with high fees often levied against lower-income consumers on minor transactions.
Soon after, KeyBank began offering paycheck and government check cashing services for a 1.9 percent fee – lower than most competitors – as well as a financial-education center offering tips on improving credit histories.
The effort will add to the bank’s account holders and mortgage business, Murphy said. “We will break even in a three-year time frame and make money in four years. We’re comfortable with the data we see so far.”
While dubious, high-cost check-cashing and overseas money transfers persist, a growing number of companies are vying to win business from an estimated 10 million unbanked U.S. households with new products, services and in some cases, lower prices.
The competitors include traditional banks, check-cashing stores, money-processing firms and even Wal-Mart, which now offers check cashing at some of its stores.
The Federal Reserve Board estimates 9.7 percent the U.S. population doesn’t have a bank account, with most of that group earning under $24,999 per year. It’s a market that banks rarely pursued until recently, as the rival check-cashing business ballooned into an estimated $60 billion to $80 billion a year industry.
For this complete story, please visit More Companies Target ‘Unbanked’ Consumers.
