Onsite Coverage: The Underbanked, Unbanked and Fraud
PHOENIX — Financial institutions that aggressively pursue underbanked and unbanked populations – including groups that lack Social Security numbers because they are not U.S. citizens – encounter new fraud risks. But the risks are thoroughly manageable and the customers can and will become loyal and profitable.
Those were the takeaways from a panel at BAI Payments Connect where JoAnne Dickson, an executive with First National Bank Texas, and Cassaundra Franklin, a Regions Bank executive, presented their experiences pursuing and servicing these customer groups.
Also from BAI Payments Connect:
- 5 Facts You Don’t Know
- The Rise of the Non-Bank
- Old Fraud Targets Still New Favorites
- Now Up: Cross-Channel Fraud
- Digital Wallet Update: Try Something, Anything
- On Mobile: Go Big or Go Home
The underlying question: when there is no credit history, how does a financial institution mitigate risk?
And note: First National Bank Texas does no credit scoring in new account opening, said Dickson. Because it accepts Mexican and Guatemalan IDs, and many of its customers lack proper U.S. paperwork, probably credit checks would be pointless anyway.
But that bank does clever verification – using social media, Google, Google Earth (does the claimed home address exist?) – to attempt to dig deeply into who its customers are. “It’s amazing what you can find out,” said Dickson.
Her bank also takes a photograph of every new account applicant and uses sophisticated tools to match the face with identity.
A continuing focus at both institutions is money laundering – it is not always easy to verify sources of funds – and that is a reason why Franklin stressed, several times, “talk early and often with your regulator.”
Her experience is that regulators can be made comfortable about serving these populations but a key is regular conversation and listening to their concerns.
Both institutions attempt to provide continuing financial education to these groups, the panelists told the Tuesday session at the Phoenix conference.
As for the risks in serving them, Dickson said: “Risk? What risk? To us, this is normal business and we follow normal safety and soundness steps.”
She added, “Don’t be afraid to enter this market. Everybody deserves a banking relationship and these are good customers.”