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Marketing to the Underbanked

Posted by Wendell Brock on Thu, Aug 20, 2009

Underserved and underbanked communities are well documented in the banking industry: the FDIC and others have published numerous reports, surveys and case studies on the topic. And, the FFIEC produces an annual list of underbanked communities, segmented by county and state.

As capital flows into the banking industry via bank acquisitions, many new business plans are incorporating programs to attract and retain underserved/underbanked consumers. Some bank acquirers are even selecting target banks based on their locations relative to known underserved communities.

Creating a plan

A bank purchase, like a bank start-up, has a rigorous regulatory approval process. Part of that process involves documenting and defending a viable business and marketing plan for the target institution. This is no small undertaking, particularly when an underserved community is being addressed. Studies have repeatedly shown that underserved consumers do not respond consistently to traditional bank marketing programs.

Earlier this year, the FDIC completed a survey to identify initiatives and programs that had successfully attracted underserved consumers. Effective outreach efforts incorporated the following actions:

•    Early identification of suitable underserved populations
•    Early commitment to serve the targeted underserved population
•    Launch of educational programs, teaching consumers about managing their finances
•    Partnership with established community organizations
•    Off-site outreach visits and programs (at high schools and/or community organizations)
•    Providing educational pamphlets and brochures
•    Marketing specifically to certain demographics (such as Hispanic Americans)
•    Empowering bank employees to welcome underbanked customers  

The FDIC study concludes that educational programs, community partnership and off-site visits are among the most effective strategies. Subjects most commonly addressed in educational sessions are basic banking and savings programs. While the development of financial pamphlets and brochures is a popular strategy among banks, it is not considered one of the most effective methods.   

Widening the service set

An effective underserved outreach program must also include the establishment of services for noncustomers, such as:

•    Check cashing
•    Money orders
•    Bill-pay
•    Reloadable, prepaid cash cards

A challenge in offering these services to noncustomers is setting effective identification policies. Underserved customers are less likely to have traditional forms of I.D., such as a driver’s license or state-issued I.D. card. Also, the goal in developing relationships with noncustomers is to transition them into accountholder status over time. Banks must therefore establish identification policies for account openings as well. Lack of identification is a common reason new account applications are denied. Other reasons include negative results on a check screen and a low credit score.

Assuming noncustomers can be converted to accountholders, these entry-level customers will also have specialized service needs. Banking services to consider for this customer segment include:

•    Checking and savings accounts with no balance requirements
•    Accounts with less severe overdraft penalties
•    Short-term, unsecured loan facilities with specialized eligibility requirements

For further insights on working with underserved customers, read the full FDIC survey, available here:

Topics: underserved communities, underserved areas, Unbanked customers, Bank Marketing

BarCampBank - Chicago

Posted by Wendell Brock on Mon, Jul 21, 2008

On July 16, 2008, DCI, De Novo Strategy and CREED hosted a BarCampBank in Chicago at the Drake Hotel - it was a great success! All who attended enjoyed a lively discussion on the current affairs of several banking topics, such as de novo banking, enterprise zone marketing, Islamic finance, bank loyalty, and market trends. Read on for an overview of the information shared at the meeting.

De novo banking is always a topic of interest. Industry folks want to know how many new banks are being started and what the consensus is on whether it's wise, in the current environment, to start a new bank. In the first quarter of this year, 38 new banks received permission to open. Annualizing that number indicates a run-rate of 152 for 2008. However, as the financial crisis has deepened, I suspect that the latter half of the year will slow down, such that 2008 will possibly close out with about 100 new bank openings nationwide.

Attendees also discussed the wisdom of starting a new bank in these difficult times. As the question was turned over and thoughtfully discussed, the general opinion was that while capital would be difficult to obtain, starting a bank now would be a good thing. After all, the bottom of a market is normally the right time to enter. And, since it takes 14-24 months to actually open the doors, the economic environment is likely to be much different by the time a bank started today is ready to begin doing business. These factors may be contributing to the encouraging market trends for DCI thus far this year; trends have been up and DCI has seen an increase in its activity.

Islamic Finance was perhaps the most interesting topic discussed. While there are approximately 7 million people in the United States of Muslim heritage, there are very few sources of Sharia compliant banking. A few banks have started offering Sharia compliant residential mortgage loans, but this is a small subset of a larger market. Most Muslims are small business owners and need other sources of small business loans and commercial real estate loans. If a bank is interested in labeling its loans and deposits as Sharia compliant, it must employ an Islamic Scholar to research all the terms of the transactions and compare them with Islamic law to make sure they are valid. Once this is done, the bank can offer its banking products to the Muslim public as "Sharia Compliant." The average Muslim in the U.S. is educated with a bachelor's degree and earns an average income of $67,500. This places this demographic in the highest income bracket of the immigrant population, along with other Southeast Asians. Within this group, the default rate is relatively low, so the opportunity for a bank to place good, profitable financial transactions on the books is strong.

Another topic discussed was how to increase bank loyalty. There were several ideas put forth and one was to offer better financial education, specifically with the goal of matching bank products to customer needs. This ultimately means providing customers with easy-to-understand information about how specific products will help their businesses and what options are available to enhance those products to the customer's advantage. The philosophy of ‘helping someone else get what he truly needs and he will help you' comes to mind here. Banks might consider adding more customized products to the portfolio of customer solutions. Then, give customers the information and ability to pick and choose product features that will contribute to their own success. Ultimately, this is where the community bank will flourish - by building success through its customers. This is easy to talk about and more difficult to implement, but the banks and core providers will have to figure it out.

This leads to the Enterprise Zone marketing ideas. Forty-three states have enterprise zones, each with different tax credits for businesses that operate within these zones. Approximately 95 percent of the tax credits every year go unclaimed, mostly because businesses are unaware that the benefits are available or unaware of how to do the accounting so the credits can be claimed. Often it is a matter of education, on the part of the business owner and its accountant. The bottom line is that there are billions of dollars available and bankers - if they learn how to help their customers - can capitalize on this great opportunity.

There are many workshops, seminars, and conferences that people attend, but the discussions at a BarCampBank are amazingly insightful for all who attend. We want to thank our attendees and wish them the best of success in their endeavors. A sincere thanks also to our sponsors as we greatly appreciate their support; we at De Novo Strategy will certainly plan to sponsor more of these events in the future.

By Wendell Brock, MBA, ChFC

Topics: BarCampBank, Bank Marketing, De Novo Banking, Islamic Banking, Enterprise Zone


Posted by Wendell Brock on Sat, Jun 28, 2008


A BarCamp is a unique and engaging
conference, where the attendees actually
drive the agenda topics and lead discussions.
Visit to get up to speed.
We at De Novo Strategy recently attended a
BarCampBank in Dallas. It was engaging and
enlightening. A great experience.
Because we believe in building smarter
banks we thought it would be smart to hold
a BarCampBank during the Interagency
Minority Depository Institution National
Conference on July 16 - 18. It only made
sense with all the bankers in town.
Topics can include new banking products,
customer retention, web 2.0 your bank,
enterprise zone banking, ROI marketing,
etc.... and other topics you may want to add.

July 16, 2008, 9:00 am - 4:00 pm

The Drake Hotel
140 East Walton Place
Chicago, IL 60611


- Includes a light lunch.

Participate. Present. Sponsor. Visit.


Wendell Brock
De Novo Strategy

Topics: Building Smarter Banks, BarCampBank, Bank Marketing

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