A new research tool from Bank On provides information on the unbanked and underbanked at the community level.

Unbanked Data Includes…

The Research Your Community tool returns data on the number and percentage of households by city and metro area.  It also includes state and national numbers so you can compare your community with state and national averages.

You also get detail on at-risk populations within the defined community.  The data provided includes breakdowns by household income, ethnicity, level of education, age and citizenship.  The app even generates an interactive map, and can export data to a pdf.

Check out this great resource to get a better understanding of the needs in your local community.

Related posts:
Bank On Initiatives for the Unbanked

The working poor are moving away from traditional banks, according to a survey released by the Pew Health Group, a division of the Pew Charitable Trusts.

This report, “Slipping Behind: Low-Income Los Angeles Households Drift Further From the Financial Mainstream,” interviewed predominately Hispanic, low-income residents in the Greater Los Angeles area.

The numbers of unbanked families increased during the period 2009-2010.  32% or roughly one third of respondents reported closing their account as a result of hidden or unexpected fees; other reasons included lack of funds and employment, among others.

Alternative Financial Services

The Pew report also found (not so surprisingly) that banked customers continue to use Alternative Financial Services (AFS). Almost one-third of the banked respondents (crossover customers) continue to use check cashers and other non-bank financial services due to perceived transparency and liquidity concerns; despite having an active account.  Reasons include…

Source: Pew Trust

• Remittance (49 %)
• Money orders or cashier’s checks (34%)
• Check cashing (10 %)
• Bill Payment (38%)
  • 43% use AFS bill pay services because of posting times and cash liquidity
  • 37% claim bill payment is faster at store front check casher than at a bank

Banks win on Location

One thing that did surprise me was that bank location had the advantage; with 59% of respondents preferring banks over check cashers, due to their proximity to work or home.

I’d always perceived that check cashers won out on location, hours of operations and service offerings (not necessarily customer service!).  While location may no longer be a factor (at least in LA), providing multiple services is! 38% of crossover customers continue using check cashers because they can purchase several services at one time.

Conclusions

1. Alternative Financial Services are not going away. Traditional barriers to banking remain for the unbanked; including not enough money to open account, lack of proper ID, high fees, and difficulty understanding the banking system.  As a result the unbanked continue to need a place to perform their financial services.  Even some banked individuals use AFS providers for varied reasons as shown above.

2. Multiple service offerings are important.  The ability to handle all financial transactions in one place is often more important than getting the best deal on just one service (and having to travel to different locations to do it).

3. Remittance is big! 96% of unbanked individuals wire money using a money transfer shop; and 40% of banked do the same.  And they remit frequently!

Need help or advice on expanding your service offering?  Contact an AllTrust representative today at 1-877-280-1679 or email us.

The recent CFSI show in New Orleans was wonderful; focusing on innovation and serving the global underbanked population.  For instance, SAFARICOM presented its achievements in Kenya where they have great success with their M-PESA mobile payments network.  This network allows formerly unbanked consumers, 15-million users, to store funds and pay individuals or retailers via their mobile phones.

Retail Financial Trends in the US

In the United States, there is a growing trend to provide a broad range of financial services (e.g. check cashing, remittance, bill payment, prepaid cards, etc.), in mainstream retail.  Walmart® has led this trend and has achieved great success with its “Money Centers”. This year, Walmart expects to cash somewhere in the area of $40 billion in checks.  Jane Thompson, Walmart’s outgoing President of Financial Services, was the keynote speaker at CFSI and urged the industry to continue innovating and serving this market as Walmart has clearly done.

Other mainstream retailers like Sears® and Safeway are also recognizing the value in tailoring programs for this same demographic base.  These retailers are making strides to update their store’s financial service offerings making them more visually appealing to the customers.  In addition, they are investing in systems to enhance the transactional experience.

At AllTrust Networks we’ve been preaching these same messages for several years and believe that there are two technology-driven keys to success for alternative financial service providers.

• The first is employing technology that enables offering services to as many consumers as possible.  For our users, to effectively manage risk, this means focusing on true consumer identities through biometric identification rather than asking for SSN’s.  Requiring an SSN is unattractive for many potential consumers, and using a biometric ID means faster repeat transactions which are critical in retail.

• The second key is having a platform capable of combining all of the financial service offerings to allow for faster transactions, better compliance programs and more efficient operations within the retail setting.

For the underbanked consumer, this trend in retail financial services should deliver them better choices, new products and low prices.  Many national retailers have already followed Walmart’s lead; and we’re seeing a great rush to deliver the whole set of financial services in an attractive setting that drives repeat visits, and leads to a consumer relationship that extends beyond just financial services.  In many cases, the alternate financial services may be offered as a loss leader or breakeven proposition to bring more customers into the stores and drive more retail sales.  Mainstream retailers are smart to focus on these areas as this part of the population is expected to continue to grow, through immigration as well as continued increases in consumer banking fees.

Tell us what you think about this trend in retail financial services, in the comments.  For more on AllTrust’s new all-in-one platform, Retail Connect, contact us at 1-866-324-6729 or pcssales (at) alltrustnetworks.com.

FinCEN released the latest SAR Activity Review – By the Numbers, with details on SAR filings for January 1, 2010 – December 31, 2010.  The key findings compare reporting in 2010 to previous 12 months of 2009:

• Overall SAR filings increased 3.5%
• Non-depository institutions comprised roughly half of the reports filed (an increase of 12%)
  

  SAR filings by money service businesses on the whole increased 10% in 2010

Finding specific to Money Service Businesses (MSBs):

• SAR filings by MSBs on the whole increased 10% in 2010
  • “Individual using multiple or false identification documents” was the only activity that saw a decrease; dropping 16%

• MSBs reported that money transfer and money orders were the leading type of serviced related to SAR reporting.  Accounting for 96% of services reported.

• Reports on money transfers increased 23% in 2010, compared with 2009.
  • Other financial services declined
    • Money orders reports dropped 3%
    • Traveler’s checks, down 71%

Looks like you should watch out specifically for money transfer transactions, where an individual returns frequently and / or to multiple locations!

For free information on SARs and government compliance contact AllTrust Networks at 1-866-280-1679, or visit us online to learn more.

Check cashing can be a risky proposition without proper tools in place to minimize fraud. Here are a couple layers of protection that really help and can easily be implemented with the right check cashing system….

1. Access to data from other check cashing retailers
2. Automatic flags for potential fraud with velocity settings
3. Positive ID of customers – using FBI-certified biometric technology

1. Data from Other Retailers

Real feedback and data from other retailer cashing checks is invaluable. Participating in a network that shares negative data across all stores is a great asset when dealing with fraud rings.

AllTrust’s network includes 2000 retail check cashing locations (including grocery, liquor, and convenience stores, mom & pop shops, as well as traditional check cashing locations). In addition we have more than 6 million consumers enrolled in our network, and data on more than 3 million companies issuing payroll checks. This data is accessed during the check cashing transaction to reduce your exposure to fraud.

2. Velocity Settings

Velocity settings alert you to differences in your normal check cashing activity; from either an individual customer or a check issuer. A velocity warning is not always an indication of fraud; but it is a warning that your risk has increased; as your average check cashing transaction amounts are (or will be) exceeded.

Look for check cashing software that can enforce your store policies (e.g. velocity settings) automatically. For more on velocity and how to use it effectively, read our post “Velocity: What is it and how it can help protect your business from fraud”.

3. Proof of Customer Identity

How do you know a person you’ve never seen before, holding a check to cash is who they say they are? There’s a government issued ID (driver’s license), and their word. But that’s not always enough. IDs are still relatively easy to fake. So, how else can you know your customer?

Biometrics can help; when you use a quality biometric device (e.g. FBI-certified) to compare your customer against a network.

1. They discourage potential fraudsters. Once an individual is in the AllTrust system, and if they are marked BAD; any time they try to cash a check within the AllTrust network, they’ll be declined.
2. Good customers like the convenience of biometrics. They simply place their finger on the scanner and their record appears on screen (no more fumbling for IDs). Plus once they have a history in the network; even if you don’t know them individually; you can quickly view their check cashing activity at your store, or elsewhere.

For more about check cashing tools, contact AllTrust Networks at 1-866-280-1679 or visit our product site at www.alltrustnetworks.com.

The Future of International Calling | Pinless Prepaid Minutes

Phone cards as we know them today

Phone cards have been around for what may seem forever.  They’re a great way to make long distance and international calling without having a long distance calling plan.  Most people are familiar with them and have used them.  They’ve certainly evolved over the years, with an endless supply of different programs, providing the “best rate” to your home country! While this sounds great, there are some disadvantages for the average customer with traditional phone cards.  There are hidden fees (ones to connect and disconnect); and rates change frequently, to the extent that customers don’t know how many minutes they’ll actually get for that $5 card.

Retailers that service the immigrant population (those who probably use the cards the most frequently) have the hassle of maintaining card inventory and dealing with prepaid reps on an on-going basis.

The Future | Pinless, Cardless Prepaid

So what if you could have a virtual prepaid phone card – with no pins to remember?  Sounds pretty good doesn’t it.  Krush Communications, who has been marketing prepaid phone cards for over 10 years, is now offering what they call Pinless Prepaid, or Homies No Mas Pin.

Customers simply visit their local retailer where they provide:

The best part of the program – no hidden fees – you actually get to use the minutes you buy for actual conversations.   In addition, customers can benefit from adding additional phone numbers for free to the program (so you can call from home, multiple cell phones or work all using the same minutes), and take advantage of the speed dial feature – dial just 2 digits per call, rather than 10-20 for international numbers.

Homies retailers are currently offering a $1 free promo – so customers can try out the program for free.  And great news for retailers – they don’t have to pre-fund an account; rather they get ACH’d weekly.

While there are a few other pinless prepaid programs out there, this one looks the best bet for consumers.  And for full disclosure, AllTrust is now offering this service.  For more on the Homies No Mas Pin program visit www.alltrustnetworks.com/pinless.

CBC News ran an article on a new study which posits that using a credit card for purchases feels less like real money, so people who use them are more impulsive.

So cash is apparently healthy?

Well if not healthy at least less impulsive when presented with all those yummy things on display at the grocery or the candy bars at check out!  The study analyzed shopping patterns of 1000 people and discovered two things:

1. “There is the correlation between unhealthiness and impulsiveness of food items: unhealthy food items tend to elicit impulsive responses.”

2. “Cash payments are psychologically more painful than card payments, and this pain of payment can curb the impulsive responses to buy unhealthy food.”

The study, published in the Journal of Consumer Research, notes that the purchase of unhealthy food products is influenced by many factors such as faulty beliefs and lack of knowledge.

But researchers suggest impulsivity may be the single most influential factor in an individual’s decision to buy unhealthy foods.

So maybe using check cashing establishments to cash your paychek isn’t so bad after all.  Read more about this study at http://www.cbc.ca/health/story/2010/10/20/con-cash-purchase.html#ixzz12zbsIJ5B

I read an interesting story in USA Today about a new study conducted by The Investor Education Foundation of the Financial Industry Regulatory Authority (FINRA).  FINRA asked 28,000 people questions on five key issues and used the results to produce a state-by-state look at financial capability.  The results: people in New York, New Jersey and New Hampshire are the most fiscally responsible in the US.

So if NY, NJ and NH did well, how did other states fare?  According to FINRA, Oklahoma and South Dakota were on the bottom.  Looking at the national averages it’s kind of shocking.  Of those surveyed, one quarter use payday loans or auto-title loans; and 60% don’t have a rainy day fund (at least 3 months savings to cover illness, job loss, etc)!  I did a quick comparison of best and worst states against the states with large numbers of underbanked consumers.

Summary of US state's fiscal responsibility - best & worst in comparison to states with large numbers of underbanked

I can see why there have been so many reports recently indicating that people are more concerned about their personal finances.  Hopefully knowing about the problem will be the first step to fixing it.

For more on the FINRA study, go to http://usfinancialcapability.org/.

Once you’re interested in offering walk-in bill payment services to your customers , you need to go through the process of choosing a provider.   (See Bill Payment: Getting Started if you want to know more.)  There’s no universal right and wrong here, but remember to think about the following when you select a vendor.

1. Buy-rate / commissions

You will want to know how much the provider is going to charge for the service; also referred to as your buy-rate.  The buy-rate determines what commissions you receive each month.  If your buy-rate is 70 cents on a $1.50 payment, you make 80 cents

2. Biller List

Make sure the program you select includes some of the key utility billers in your area.   In addition, having lots of different billers in your program offering will encourage loyal customers and ultimately grow your walk-in bill payment business.  The more bills they can pay, the more likely they will return.

3. Consumer fees

Consumers don’t have to pay bills at your store.  They choose to do it there because it’s convenient and/or you have good pricing.  Look for programs that offer competitive consumer pricing — if you offer bill payment for $2 and store down the street has the same service for $1.50; guess where those people are going to pay their bills.

4. Timing

• Post-times – if you are an authorized bill pay location (see description below), the payment will post immediately to the biller. Most other non-authorized payments post in 1-2 days; but could take longer depending on the biller.

• Cut-off times – this is the time when the bill pay provider stops accepting payments for that particular day. For example if the cut-off time was 5pm EST; and a customer came to your store at 5:10pm on Wednesday to pay a bill that had a post time of 1-day; the payment will not post until Friday, as the cut-off time already passed for the day.

5. POS Materials and Customer Service

Most bill pay providers offer free point-of-sale signage to promote your bill pay services; just ask for it.   Also, make sure you have some ability to escalate problems directly to the bill pay provider via a Customer Service contact or number.

6. Additional Services that Differentiate Your Store

• Prepaid wireless reloads – most bill pay services include prepaid wireless minutes.  Commissions vary greatly among these reload programs, so be sure to check out the rates and participating programs.
• Cross-border bill payment – allow your customers to pay bills for family still in their home country.  Some international billers are available for payment from the US; so immigrants can pay international bills directly at your retail store.  Predominantly available for Latin American countries; international billers in other regions are being added regularly.
• Authorized bill payment – while commissions for merchants that participate in authorized bill pay programs are minimal; there are two advantages: (1) Utility company lists your store as authorized bill pay location (driving traffic to your location), and (2) Customers are likely to pay more than one bill when they come to your store, ensuring you get some revenue.

For more about offering bill payment services or to learn about the AllTrust Bill Pay program, visit us online or speak to sales representative today by calling 1-866-280-1679.

Kind of interesting that the Census Bureau did a study on money transmittal!  Here’s link to the paper http://www.census.gov/population/www/documentation/twps0087/twps0087.html; and I posted a few of the key findings below.

• Of the 5.9 million households that reported sending monetary transfers abroad, 84 percent were foreign born.
• On average, households sent monetary transfers 6 to 7 times during the previous 12 months. Considerable differences exist between the remitting patterns of native and foreign-born households.
• 53 percent sent less than $1,000, including 34 percent that sent less than $500
• Foreign-born households are more likely than native households to remit annual amounts greater than $500 – while 43 percent of native households reported sending more than $500, 71 percent of foreign-born households did so.
• Data from the CPS Migration Supplement suggest that households sent an estimated $11.7 billion to relatives and friends outside the United States during the 12 months before the survey.

The paper also includes some data from other surveys on money transmittal (and numbers vary greatly)…

– U.S. Bureau of Economic Analysis (BEA) is the government agency responsible for publishing the Annual Revision of the U.S. International Accounts (Bai and Hoang, 2010) which includes an estimate of personal transfers of the foreign-born population resident in the United States to households abroad. The BEA defines “personal transfers” as all transfers in cash or in-kind made or received by resident households to or from nonresident households. Using a model-based approach and data from the American Community Survey, the BEA estimated personal transfers by the foreign-born population resident in the United States to households abroad to be $36.9 billion in 2007, $38.5 billion in 2008, and $37.6 billion in 2009

– A second study by the Inter-American Development Bank’s (IDB) Multilateral Investment Fund (MIF) focused on remittances sent by immigrants in the United States to Latin America and the Caribbean. The MIF commissioned Bendixen and Associates, a polling and research firm based in Miami, Florida, to interview 2,511 adult immigrants from Latin America by telephone in Spanish from May 3-25, 2006 (IDB, 2006). Based on these data, IDB estimated that Latin American migrants working in the United States sent $45 billion to their home countries, up from approximately $30 billion estimated by a similar study done in 2004.