Written by Ron Mazursky and Madeline K. Aufseeser, PayGility Advisors based on data from consumer research by Phase 5.
Covid-19 has clearly taken its toll on Americans – both psychologically and financially. Historically, underbanked consumers tend to be underserved by financial institutions. The current pandemic has only accentuated the disparity in how the underbanked are underserved. Looking at research data parsed by banked vs. underbanked consumers, the underbanked have been harder hit.
Although a little more than half of underbanked and banked consumers have both equally felt that Covid-19 has impacted them in terms of household spending, underbanked consumers report more negative impact on household income (55%) than banked consumers (28%). As a result, underbanked consumers report that they are more “anxious” than banked consumers.
The underbanked consumer is significantly less comfortable in applying for certain types of financial services than banked consumers during the pandemic. The underbanked are NOT VERY COMFORTABLE in applying for a new mortgage online, and NOT VERY COMFORTABLE in applying for a new credit card online. The underbanked feel that their primary financial institution did not perform as well as they could using their digital tools to help with their banking needs (37%) when compared to banked consumers (22%). In part, this could be due to their own financial situation, and in part, because they are not adequately supported by their financial institution.
Ultimately, the underbanked are generally pessimistic about their finances looking ahead 12+ months (27%) vs. banked consumers (12%). Although some of that pessimism can’t be helped by the financial institution, there are other ways for the financial institution to better meet the needs of the underbanked.
What is a banker to do? First, identify the best approaches to better reach the underbanked. Only 31% of the underbanked felt their primary financial institution reached them in ways that were convenient to them (vs. 45% of the banked). Second, determine where the underbanked is being underserved – identify which day-to-day banking needs were not being met compared to the banked consumer. Ultimately, the underbanked consumer can be better served – and potentially more business from this segment can be generated.
Data provided by financial services research firm Phase 5 from their ‘Impact of the Pandemic on Consumer Financial Services’ July 2020 survey. Analysis provided by Ron Mazursky and Madeline K. Aufseeser of PayGility Advisors.