The Underbanked and the Unbanked

NEW YORK (MainStreet)—Rob Levy inhabits a part of the U.S. financial industry far removed from Wall Street, that famous (and sometimes infamous) stretch of the U.S. financial market. He is Director of Research for the Center for Financial Services Innovation (CFSI), an organization focused on meeting the needs of the underbanked customer–a term used to categorize customers whose financial needs are not met by traditional financial institutions.

It's a huge market: a recent CFSI study estimated that there were 68 million customers across 22 different financial product types, adding up to $78 billion in revenue per year.

Also see: 2013 Financial Literacy Forum Series Dispatch

At the sidelines of the 8th Annual Underbanked Financial Services Forum (CFSI is a co-sponsor), being held from June 5 to 7 at the Intercontinental, Miami, Levy is driving a key message. "There is shift that the underbanked market is making from the margins to the mainstream," he said. "We see Chase and AmEx, two mainstays in financial services, making major plays in the underbanked space through release of market-leading prepaid cards."

So far, though, it has been CFSI that has shown the way to others on how social inclusiveness and financial services can mix to make for a great business case. It's come a long way from its 2002 origins as a joint project by alternative financing specialist Shorebank and the Ford Foundation to examine the gap between supply and demand of financial services for low-income people.

Levy says the project discovered that a huge number of people in the U.S. did not have adequate access to well-designed, affordable financial products and services to meet their short-term financial needs and also provide a platform for longer-term wealth creation. "Many folks were either already saving or had the potential to save," he said. "Most were transacting financial business through some mechanism, mostly informal and unorganized. At the same time, this segment was growing, and had tremendous market potential."