Banks Seek Profits, and a Better Reputation, from Low-Income Customers

By EmmaZahn on Sun, 08/05/2012 - 8:16am |

Poverty is the next big business in banking — but there are plenty of pitfalls before it becomes the next big success in banking.

Selling financial services to low-income customers has long appeared unprofitable at best, and a reputational risk at worst. From subprime mortgages to hidden credit card fees, banks have gotten a bad reputation for preying on poor people. Some banks always avoided those products, and the financial crisis and new regulations have restricted the industry's ability to sell many of them but the public image of the predatory banker has only grown stronger in the post-Occupy Wall Street era.

At the same time, high unemployment and the ongoing housing crisis have moved many Americans down the income ladder, out of the traditional bank branch and into the storefront check casher or the Wal-Mart (WMT). Now banks, starved for profits and nursing tattered reputations, are increasingly trying to serve those customers in new ways — as long as they can figure out how to do so profitably.

"There's tremendous enthusiasm about this market, both as people come to understand this market, and as it's gotten bigger in the wake of the financial crisis," said Jennifer Tescher, head of the nonprofit Center for Financial Services Innovation.

URL:

http://www.americanbanker.com/issues/177_140/banks-seek-profits-from-low-income-customers-1051111-1.html?zkPrintable=1&nopagination=1

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Banks Seek Profits, and a Better Reputation, from Low-Income Customers

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