For most of us, to use or not use a bank is never a consideration. As we come of age, we open checking accounts, maybe get a loan for a new car or to fund higher education, or use other banking services. Even many high school students have their own checking accounts and ATM cards. But a segment of the population, for a variety of reasons, does not use banks.
The unbanked sector has traditionally been served by a variety of alternative financial services providers, including check cashing stores, money transfer services such as Western Union and alternative credit sources such as pawn shops. These services grew rapidly through the 1990s. Over the past few years, banks have begun to evaluate and reach out to this overlooked unbanked sector in an effort to convert them to customers and reduce their dependence on more expensive alternative services providers.
In Biloxi, Chevis Swetman, president of The Peoples Bank, hired a Vietnamese employee 25 years ago because he thought this would help this largely unbanked group gravitate to his bank. He found there was a distrust of authority but says it has changed gradually and will continue to change. He countered the language barrier by having communications translated and by using bilingual signs in lobbies. Through the Gulf Coast Community Action Agency he tried to help these new Mississippians become homeowners.
“We got a good portion, but some were distrustful because they didn’t want others knowing their business,” he said. “That is changing, too.”
As banking becomes more international, he sees the industry trying to reach unbanked customers with entry-level, debit card-based accounts and consumer-friendly rates. “A lot of consumers probably are going that route,” he said. “A lot of issues are not big problems like they used to be.”
He feels that reaching out to unbanked groups of people will become more important as banking becomes more international and noted that since Biloxi has always been a melting pot of nations, he’s ready.
Huey Townsend of Belzoni says there are a number of residents in his Delta area who do not use banks. “They use ATMs with no charge, and we have tailored accounts that are very inexpensive,” he said. “We also cash payroll checks at no charge for people who live here. We reach out to them in these ways and do convert some to customers.”
The chairman and CEO of the Guaranty Bank & Trust Co. and vice president of the Mississippi Bankers Association, Townsend thinks there are some consumers who would just rather deal with cash no matter what banks do.
Gene Walker, CEO of the Bank of Forest, said he has no specifics but is aware that banks such as his offer budget accounts with a minimal balance required. “We offer services through the Community Reinvestment Act and are seeing Hispanic workers who come into our area use banks,” he said.
BancorpSouth offers checkless checking for businesses to use for direct deposit of employee payroll checks, according to Derek Caswell, product manager in the marketing department. For a small fee, the employee gets an ATM card to retrieve funds from the account but receives no monthly statement.
“This reduces our risks,” he said, “and it saves the customer money that would be spent on expensive check cashing places.”
Banking officials say the long-term goal is to guide the unbanked into traditional banking relationships, including savings accounts and consumer loans that would afford the consumers an opportunity to accumulate assets and create a new customer base for banks. Banks are taking advantage of new technology such as ATMs to deliver some services. The high prices charged by check-cashing stores and payday loan providers give banks room for price competition.
Contact MBJ contributing Lynn Lofton at firstname.lastname@example.org.
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