Emerging payments technologies like mobile banking and new prepaid tools present an opportunity to better serve the millions of unbanked and underbanked consumers in the United States, according to the president of global payments options at American Express.
For many of those consumers, smartphones are the primary mode of accessing the Internet because they can't afford desktop computers and broadband services in their homes, said Alpesh Chokshi during a keynote presentation Tuesday at the PaymentsSource Card Forum & Expo, ongoing this week in Boca Raton, Fla. As a result, the unbanked and underbanked are 30% more likely to use mobile banking services.
"For the first time in history, I think we can make every day financial services simple, affordable and accessible to the unbanked, underbanked and the expensively banked," he said.
Citing figures from the Federal Deposit Insurance Corp., Chokshi said there are 10 million unbanked households and an additional 24 million underbanked households in the United States.
"The bottom line is the current financial system that we're all a part of is failing to meet the needs of more than 34 million households...I'm sure you'd agree that's just not acceptable," he said.
To understand the extent of how difficult it is for underbanked consumers to manage day-to-day transactions, Chokshi described a day he spent without his bank account or credit cards. As he detailed the challenges he encountered conducting simple transactions like making a wire transfer and cashing a check, he challenged the conference audience to attempt the experience themselves.
He said it took 20 minutes to conduct a wire transfer and another 30 minutes to cash a check. As Chokshi held up his receipt for the transactions, he said it cost $11.50 to wire $80 from Manhattan to Brooklyn, $2 to cash a $100 check and another $4 to load those funds onto a prepaid card.
"This is the reality for a lot of people who aren't at this conference and not in Boca," he said. "That's three gallons of milk or a week's worth of subway fare. There has to be a better way."
Pairing mobile wallet and banking technologies with prepaid card products eliminates the overhead costs of managing an extensive network of branch locations at traditional prepaid venues. Through its Bluebird prepaid product, American Express has leveraged Wal-Mart’s retail locations and paired that with mobile tools.
"What if you could do all of your everyday financial transactions with the branch bank that's sitting in the palm of your hand," he said. "The pipe's been laid, the phones are there. This is an asset that we can leverage."
Since Bluebird first launched, more than 575,000 accounts have been created, with $275 million in funds loaded. Chokshi added that 45% of the customers are under the age of 35 and 85% are first-time Amex customers. While the service emphasizes digital tools, Amex has expanded Bluebird to include pre-authorized check writing after hearing feedback from consumers that they needed a way to use the account to pay for rent. In addition, Amex obtained FDIC insurance so it could enable military consumers to load their paychecks onto their accounts.
"You'll continue to see that mindset of evolving the product, listening to customers and bridging the reality of today and the digital potential for tomorrow," Chokshi said.