CFSI, Core: Underserved Opportunity Grows to $138 Billion (Dec. 8, 2015)
Financially underserved Americans spent $138 billion in fees and interest in 2014, up 7.6 percent from the previous year, according to a new study from the Center for Financial Services Innovation (CFSI) and Core Innovation Capital. Overdraft fees comprised the largest chunk of that total—$23.4 billion, the fifth annual Underserved Market Size Study found. Short-term credit, marketplace lending and subprime auto and student loans were among the fastest-growing of 26 different products and services typically used by underbanked Americans to spend, borrow and save, according to the report, which was released today. GPR prepaid card revenue grew by 6.6 percent, to $2.7 billion, placing GPR seventh among the 26 categories in revenue growth. Spending volume on GPR cards jumped 17 percent in 2014 over the previous year, to $98.6 billion. Among other prepaid card types, payroll cards and government benefits cards both saw declines in revenue between 2013 and 2014.
The survey highlights the opportunity presented by the underserved segment for financial services providers that can provide innovative solutions to help those consumers improve their financial security, the report authors said. “While advancements in technology and new entrants are driving increased efficiency in certain product verticals, massive opportunity remains to reduce costs and enhance access, efficiency and experience across financial services by innovating at the level of infrastructure, risk, product design and distribution,” noted Colleen Poynton, vice president, Core Innovation Capital. The underserved market opportunity has been growing by an average of 6 percent annually since 2010, the study’s first year, and is projected to expand an additional 6.8 percent in 2015, to $147 billion.