PHOENIX — Too many fees, too little trust. That’s how a large segment of consumers see traditional financial institutions, said Lewis Goodwin, CEO of Provo, Utah’s Green Dot Bank, a subsidiary of Green Dot, the prepaid card company.
And in that market is huge opportunity, Goodwin told an afternoon session last week on emerging growth strategies at the BAI Payments Connect conference.
“We don’t charge overdraft fees. We don’t have penalties. We help a vulnerable group. Sixty million Americans are our potential market,” he said.
But because many of these consumers have had unpleasant relationships with banks, they have no qualms about doing business with a nonbank, said Goodwin. “What you did in the past doesn’t matter to us.” Customers aren’t excluded for a history of bounced checks or similar failings.
Goodwin cited polling data that claimed Americans view banking as among the least-innovative industries. Another poll found 65% of us are “open” to a mobile-centric banking relationship that does not involve branches. “Mobile banking,” he added, “has to offer everything a branch offers except safe deposit boxes.”
On the same panel, Paul Tomasofky, who runs Two Sparrows Consulting in north Jersey, predicted: “Traditional branch banking will decline. Consolidation of financial institutions will continue.”
Bottom line: We have entered an era of new-style banking where what worked before no longer matters.
Another BAI panel examined financial institutions that aggressively pursue underbanked and unbanked populations, including groups that lack Social Security numbers because they are not U.S. citizens. The new fraud risks that that strategy can include 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.
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.