risks are high, but banks are creating new accounts and more for customers
San Francisco, CA -- (SBWIRE) -- 09/28/2012 -- Banks are seeking new ways to build revenues in a still shaky economy. In an effort to attract new customers, banks and credit unions are getting creative. More products are being rolled out by banking institutions that are similar to those of the “payday” lenders to get customers through the door. The target group is those that don’t use a bank at all.
There are a variety of reasons why people are not using a bank so some local institutions are offering things like second-chance checking accounts or small loans similar to those made by the payday advance/payday loan companies. The idea is to encourage people into using the bank instead of other loan services or related services. The risk is high for lenders but the possible increases to revenue are even higher.
“Big banks have started to explore more and more opportunities for fee-generating businesses,” according to Maclovio Pina, a senior equity analyst for Chicago-based Morningstar inc. “It’s about growing their revenues, and this is definitely a way to do it.”
Since the onset of the recession, the number of unbanked or underbanked people has grown. So the potential for growth is high and banks want to cash in on the trend. According to a Federal Deposit Insurance Corp. survey, “more than one in four U.S. households are either unbanked or underbanked, slightly up from the findings of the FDIC’s 2009 inaugural national Survey of Unbanked and Underbanked Households.”
For a household to be “unbanked” this means no one in the household has a savings or checking account. An “underbanked” household means at least one person has an account within a banking establishment but use non-bank services such as payday loans, check-cashing services and pawn shops. When banks choose to offer other services, it is hoped that customers will see the benefits of having not only an account with them but then will also use services like check cashing that they already use through other sources.
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