Alternative Finances

The $103B Bank Revenue Stream

Financially underserved consumers now spend more than $100 billion a year on financial fee and interest charges, according to a report released Thursday (Dec. 11) by the Center for Financial Service Innovation.

The CFSI estimated that underbanked U.S. consumers used $1.3 trillion in financial products and services in 2013 and spent $103 billion on the nonbank charges, up 7.1 percent from 2012's $96 billion in charges. In 2014, that spending is projected to grow 4.6 percent to $107 billion, Credit Union Times reported.

Much of the growth came from expansion in subprime auto lending and auto leasing, which has been crowding out more expensive "buy here, pay here" auto-sales outlets.

Another growing niche: credit cards. "The increasing availability of subprime credit through credit cards has brought renewed strength to consumer solicitations and approvals in the Subprime Credit Card segment, a trend projected to continue in 2014," the CFSI wrote. Secured credit cards also saw a sharp jump in revenue, driven by a 30 percent jump in average fees from 2012 to 2013. But those fees are expected to plateau in 2014.

And just as with more mainstream financial services, products aimed at lower-income and financially underserved consumers are shifting online, the CFSI said.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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