Today, the Center for Financial Services Innovation (CFSI) and Core Innovation Capital (Core) released their fourth annual Financially Underserved Market Size Study. The report, which benefited from the financial support and strategic input of Morgan Stanley and financial support from the Ford Foundation, reveals that American consumers spent $103 billion in fees and interest revenue in 2013, generated from a volume of $1.3 trillion in financial activity.
“The undeserved comprise a diverse and growing market”
Findings indicate a continually growing marketplace that expanded 7.1% during 2013, demonstrating significant market opportunities for financial institutions and investors that aim to develop high-quality, affordable solutions to address the financial health of underserved consumers. The market is projected to grow by 4.6% from 2013 to 2014 reaching total revenue of $107 billion.
The report is not intended as a commentary on the appropriateness, safety, or quality of any specific product.
“The underserved comprise a diverse and growing market,” said Jennifer Tescher, President and CEO of CFSI. “Our goal with this study is to help financial services providers better understand and identify the complex financial needs of this marketplace as they launch safe, affordable, high-quality financial products and services to improve consumer financial health.”
At a minimum, the US market includes 68 million adults who lack a bank account and use alternative financial services, such as check cashing or payday loans, according to the FDIC’s estimate from the National Survey of Unbanked and Underbanked. The underserved market also encompasses people with poor credit, thin or no credit files, and those challenged by low-to-moderate incomes and income volatility.
The Market Size Study identified five key trends driving the growth of 26 different products used by underserved Americans to borrow, spend, save and plan in 2013, including GPR prepaid cards, installment loans and checking accounts.
This year’s Market Size Study included new products increasingly utilized by the underserved, including auto leases, student loans, government benefit prepaid cards, and borrowing from retirement savings. Previous years’ results were adjusted to maintain the integrity of year-over-year growth statistics.
“The growth of this market makes a strong case for the financial services industry and entrepreneurs to take note of the wide and diverse set of opportunities to provide high quality products relevant to the financially underserved,” said Audrey Choi, Head of Global Sustainable Finance at Morgan Stanley.
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