An Underbanked Opportunity

CUs’ mission aligns well with the needs of 68 million consumers.

February 06, 2013
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Located in a small strip mall on a commercial street in Decatur, Ala., Right Choice Money Services looks like any other check-cashing outlet. Once you step inside, however, you immediately notice differences.

Large, prominently displayed signs inform customers of all fees. “Part of what sets us apart from competitors is that we’re not trying to hide anything,” says Peter Alvarez, general manager. “We show all our fees up front.”

But the most notable feature that sets Right Choice apart from local “fringe bankers” is how it treats its customers. “Our employees really want to do what’s right for the consumer,” Alvarez says. “They’ll strike up conversations to figure out how to help. We hire people who have a personal mission for service.”

Right Choice has an advantage in its search for service-focused staff because its employees already work for a credit union. Right Choice leases its employees from $3.3 billion asset Redstone Federal Credit Union, Huntsville, Ala. Redstone Federal created Right Choice as a credit union service organization  to serve unbanked and underbanked consumers.


The decision to look like a typical retail financial services storefront was deliberate. “Many folks who are unbanked or underbanked are intimidated at the thought of going into a traditional financial institution like a bank or credit union,” Alvarez explains.

Redstone Federal’s strategy for serving the unbanked and underbanked is only one of many possible approaches, says Karen Biddle Andres, senior manager and consultant for advisory services at the Center for Financial Services Innovation (CFSI).

“We’re just beginning to scratch the surface in terms of the models that are emerging,” she says.

Final frontier?

Financial services revenues from serving unbanked and underbanked consumers totaled $78 billion in 2011, according to a study released by CFSI and Core Innovation Capital in September 2012. The report predicts revenues will hit $85 billion in 2012.

“This is the last remaining ‘white space’ in financial services,” Biddle Andres says. “What makes it so exciting and compelling is that there’s a lot of uncharted territory here. There’s a lot of opportunity for credit unions to reinvent themselves to serve this market.”

CFSI’s mission is to help financial institutions figure out how to do just that. Twice a year, CFSI hosts an Underbanked Solutions Exchange where participants share ideas and best practices. Since forming in 2008, the group has grown from five participants to 18, including seven credit unions.

Biddle Andres has witnessed an evolution in thinking among Exchange members over the years. Early on, she says, the focus was on transforming unbanked and underbanked consumers into more traditional members or customers. Consumers could start with cashing checks or buying prepaid cards, for instance, and then move “up the ladder” into other financial products.

But what Exchange participants have learned is that it’s crucial to serve consumers in their current circumstances. “Some people are just fine with check cashing, prepaid cards, money transfers, and money orders,” Biddle Andres says. “They don’t need to move up the ladder at all. Staying on the rung where they are could be the best place for them.”

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