In order to succeed in the 21st century, credit unions cannotafford to not serve the enormous and growing population offinancially underserved consumersin the U.S., according to Greg Rable, CEO of FactorTrust, anaggregator of data on those consumers.

“The stereotype of these consumers is that they are lowerincome, not good credit risks and not economically promising,”Rable said. “But the reality that we are finding in our data isthat these consumers have significant income, often have jobs andcould be very good credit risks.”

Sometimes these people are just young and starting out on theircareers, and they haven't been inclined to start a relationshipwith bank, Rable added. Sometimes they have been away from theworkforce for a while and are coming back. There are a lot ofreasons not to write them off, but that's what too many banks andcredit unions have been doing, and they need to stop if they wantto grow rapidly in the future, he said.

In addition to aggregating data on the financially underserved,FactorTrust also services an alternative credit risk scoringservice for many firms that work with financially underservedconsumers, such as payday advance firms.

“Sometimes, you just don't know how big something is until youlook at it from all sides,” Rable wrote in a Feb. 5 blog post.“This is especially true with a certain consumer population werefer to as the underbanked. These consumers have financial needsthat aren't or can't be met by traditional financial institutions.They often have subprime credit scores with thin or nonexistentcredit files. In the eyes of traditional credit reporting agencies,they basically all look the same and represent a perceived creditrisk, so they are denied access to mainstream financialproducts.”

“But what if you had a better view of the situation? Anopportunity to look at valuable alternative data that might show ahealthy portion of this population is not only getting overlooked,they actually deserve a chance to access mainstream financialproducts and would be great long-term customers if given thechance.”

Rable maintained that part of the problem is that too manycredit union executives rely on what they think they know aboutfinancially underserved people instead of seeking out facts.

Here, then, are five things that he said every credit unionexecutive needs to know about financially underserved U.S.consumers who could become credit union members.

Over $1 Trillion

Consumers without standard banking relationships represent over$1 trillion in annual income.

FactorTrust pointed to the Center for Financial ServicesInnovation as good source for information about the income offinancially underserved consumers. A November 2012 study from thecenter included consumers who have subprime credit scores, thin orno credit files or find their access to mainstream financialproducts challenged by low to moderate household incomes.

Rable said this would also include consumers who are precludedfrom obtaining more financial services from credit unions or banksbecause they have a bad mark on a record with one of the checkreporting services. The fact that a consumer might have once left abank owing $50 in checking fees over a decade ago does notnecessarily say anything about their current income or theirability to repay a loan, he noted. Rather, it might indicate thatthey are discouraged from opening checking accounts and prefer touse other financial tools that banks and credit unions do notoffer.

Monthly Income

The average monthly income for financially underserved borrowersis $3,061.

FactorTrust turns to its own database for this fact, noting thatusers of nontraditional banking services reports where they areemployed just as those who have banking relationships do and thatthese data also include income. Rable observed that the data behindthis figure had also been filtered to address consumers whosometimes misunderstood a question about income and would give ayearly income instead of a monthly one or make some othertypo.

Branded Credit Card

More than half, 54%, of consumers who take out payday advanceloans or similar products have at least one major branded creditcard.

This fact comes from a 2001 reportgenerated by the Credit Research Center at the McDonough School ofBusiness at Georgetown University. Rable said FactorTrust stillconsidered this data valid despite the length of time since thereport because none of the data FactorTrust had collected so farconflicted with it.

The CRC conducted extensive surveys of consumers who use paydayadvance loans and reported that 61% of bank card holders respondedthat they had refrained from using their cards at least once in thepast year because they feared going over their credit limits.

The survey also found that these consumers tended to revolvetheir credit balances more than did consumers who did not usepayday advance loans, making them profitable card consumers fromthe point of view of card issuers.

Home Ownership

About a third, 32%, of consumerswho take out payday advance loans or similar products own their ownhomes and have mortgages. Contrary to broadly held perceptions,nearly a third of consumers who use payday advance or similar loanproducts own their own homes and carry mortgage loans, according tothe CRC study.

Phone Connected

Most financially underserved Americans have mobile phones andmore than half have smartphones. Apps and other products aimed atthe underserved are growing quickly.

The CFSI reported that financially underserved consumers use ofmobile phone services significantly outpaces that of the overallpopulation. At the start of 2012 , the center reported that 91%have a mobile phone and 57% of these consumers have a smartphone,compared to only 87% and 44%, respectively, among allconsumers.