Prepaid, Big Data and Credit Worthiness: Themes from the 8th Annual Underbanked Financial Services ForumSabrina Tharani |
The 8th Annual Underbanked Financial Services Forum in Miami last week was a three-day collaboration involving financial service innovators—representatives from networks, like yours truly, to banks and credit unions, payment and technology firms, non-profit organizations, researchers and regulators.
In a series of seminars, keynote speeches, networking sessions and information luncheons, the industry united on a common goal: discovering a better way to understand, serve and support the financially underserved in the United States. I wanted to share with the Payments Perspectives followers what I found to be the biggest conference themes:
1. Primetime for prepaid. For the 34 million Americans currently considered “un-” or “underbanked” the proliferation of prepaid products were widely considered an “on ramp” to mainline banking services at the conference. Banks and networks called prepaid a “fantastic business model,” because it is the next incremental transaction at the ATM and has the potential to be a tool in the cash conversion space. MasterCard’s own Brett Adams spoke on a panel that highlighted prepaid’s benefit to underbanked consumers, because the instruments can protect consumers from overdraft fees, promote responsible budgeting techniques and are increasingly facilitating government sector payments.
2. Making big data, small. From the beginning of time to 2003, just five exabytes of data were created; in 2013, 5 exabytes of data are created every twodays. True, this produces troves of data for brands and marketers of financial services to use to better understand the needs of consumers; but, without a targeted objective and defined business goals, Big Data can say ambiguous and contradictory things. Each speaker touching on the subject left attendees with a similar message when approaching big data: it’s more important to analyze the most relevant data, not find a way to study all of it.
3. Alternative credit scoring models. Not all underbanked consumers are ineligible for credit—in fact, nearly 40 percent of those denied traditional lines of credit would actually have prime credit scores if they had longer histories or stronger banking relationships. There is a clear need for alternative models of assessing credit worthiness, discussed in a variety of seminars during the conference, such as in the issue of secured credit products now being offered by banks or startups leveraging alternative data (like social and prepaid card data) to better determine a consumers risk during the underwriting process.
In her closing remarks, CFSI CEO Jennifer Teschler wanted attendees to walk away with one word: HEALTH. Because that’s what this conference and effort was really about – using the knowledge, thought leadership, tools and new technologies at the industry’s disposal, to promote the financial health of consumers. As Teschler said, “we, as an industry, have a responsibility to move beyond simply making financial services accessible and instead focus on fostering the successful uptake and healthy usage of high-quality products.”
Topics: Payments Strategy