Banks look to reach out to disadvantaged

Conference focuses on new types of servicesBy LESLIE A. PAPPAS, The News Journal
Posted Wednesday, October 17, 2007Read Comments-->10/17/2007 -->
They are 20-somethings and senior citizens, urban poor and suburban immigrants, dreamers struggling to build a future and wary risk-takers who have lost it all.
The industry calls them the un- or underbanked: 40 million households in the United States who don't, won't or (for a variety of reasons) can't take full advantage of the services offered at their local bank.
"There's a lot of work to be done in this space," Jennifer Tescher, director of the Chicago-based Center for Financial Services Innovation, told about 130 people assembled at the Federal Reserve Bank of Philadelphia on Tuesday morning for a conference on the issue.
The conference, sponsored jointly by the Philadelphia Fed and the Center for Financial Services Innovation, focused on innovative financial tools to reach the underbanked, from prepaid plastic cards to micro-loans to alternative types of credit scores. Somewhere between 35 million and 50 million people in the U.S. have no credit score, Tescher said, meaning they are unable to access many financial services and are paying more than they should for those they can access.
"PNC Bank is very, very interested in trying to reach out in creative ways to the underbanked to bring them into the fold," said Norma Zumsteg, vice president of community development at PNC Bank Delaware.
The underbanked population has become a focus for a number of groups, from banks and credit unions looking for untapped markets to government agencies and nonprofits seeking to protect vulnerable consumers from becoming victims of fraud and violence.
In one example, the Center for Community Change, a Washington, D.C.-based nonprofit, began looking for ways to bring prepaid cards to immigrant communities after a survey showed immigrants cited mugging as one of their biggest health care concerns.
"They're thought of as being walking ATMs," explained Tam Doan, a project manager for the Center's Low Wage Work Team. The reloadable card comes with a PIN and could be used like a debit card, eliminating the need to go to the check-cashing centers and reducing the amount of cash a person has to carry. "We realized there was a huge need for this product."
Several nonprofits trying to develop the prepaid cards now find themselves competing with banks, financial companies and even retailers like Wal-Mart, which offer the cards with high fees.
"This isn't just about getting a card out to individuals," Patricia Hasson, president and executive director of Consumer Credit Counseling Service of Delaware Valley, explained during a panel discussion on prepaid and payroll cards. "We wanted it to be a low-cost product."
There are still many kinks to be worked out of prepaid cards, conference-goers said.
"The question is 'What can be provided in a cost-effective way?' " said Michael D. Skipper, community development manager at WSFS Bank, who came to the conference to better understand the obstacles and needs of the underbanked.
Skipper said WSFS has been discussing ways to serve the underbanked population with prepaid cards, but so far had not found a cost-effective way to do it.