Taking Everyone Into Account

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Crain's Cleveland Business
By: Arielle Kass
March 22, 2010

Institutions aim to wake up 'unbanked' to value of saving money, dealing in financial mainstream

Not everyone has a bank account. There are some people - many people, in fact - who deal on the outskirts of the financial system. They go to check cashers or payday lenders; they keep their money on their person or under their mattress.
They are, in the words of mainstream financial institutions, the unbanked, and efforts increasingly are being made to bring these people into the fold.

From financial literacy courses to special products, banks in this area have been reaching out to the unbanked both to better their own bottom lines and as a service to people who may have never before set foot in a bank.

For KeyBank, one of the banks doing the most outreach, it's a way to make mission and margin work together.

In 2009, the bank hosted about 900 people for classes at its KeyBank Financial Education Center on Buckeye Road in Cleveland, where photos of people who managed to save enough money to buy a house or pay off a car are displayed in a sort of hall of fame on the wall.

Another 2,000 in Greater Cleveland received financial literacy training through Key's outreach to schools, churches and other organizations.

It's not just about cashing that check, said Poppie Parish, senior vice president of community development banking. It's about building a relationship that's able to support whatever your financial goals are.

KeyBank vice president of community development banking Emmanuel Glover said his bank also started the KeyBank Plus program, a low-fee check-cashing service that charges between 1% and 1.5% to cash a check. Mr. Glover said nationally, check cashers charge on average between 3% and 10% for the service. Every fifth time a customer comes in, Key's fee is waived, and each time a check is cashed, customers receive five free money orders, Mr. Glover said.

The check-cashing service is available to people who previously had been flagged for mishandling checking and savings accounts, those who have just one form of identification - a normal checking or savings account would require two - and people who would be rejected for a loan, among others. It also appeals to people who prefer to work exclusively with cash.

Other banks have created services for people who had no banking relationship in the past or who did have one and had trouble managing it. At U.S. Bank, for example, a second-chance checking program is geared toward people who had problems with overdrafts on a previous account.

U.S. Bank also offers a pre-loaded ReliaCard that can be loaded with unemployment benefits or other government money.

The bank rewards people who are able to save, giving them a $50 Visa card when they reach a $1,000 balance in their accounts, through the Savings Today and Rewards Tomorrow, or START, program. And a network of in-store branches is designed to make going to the bank for the first time less intimidating.

A lot of times, people are uncomfortable with traditional bank settings, said Pat Ramsey, community development manager in Northeast and Central Ohio for U.S. Bank. It helps break down barriers.

Tom Zirbs, U.S. Bank's regional manager in this region, said the programs provide a great opportunity for the bank to create a relationship that can be built on over the years, while also doing good.

Opening doors

Andrew Kaplan, executive vice president of the financial solutions group at AmTrust Bank purchaser New York Community Bancorp, said the challenge his bank and others face is convincing people who see the marble and columns of many bank buildings as impenetrable that they can, in fact, relate to the bankers inside.

In addition to teaching people that a check can bounce or that money deposited one day may not be available immediately, he said bankers have to work past preconceived notions of traditional banking and bankers.

For that reason, he said, NYCB bankers are encouraged to volunteer and be involved in charitable events where they can be seen outside of the bank.

It's the best way to touch people, he said. Now we've put a face to that.

Maria Thompson, vice president of community development banking at PNC, said diversity at the bank is also imperative.

When people come into our doors, they see people who look just like themselves, she said. She said, too, that those first efforts can help encourage people to reach minor savings goals that can give them peace of mind in an emergency.

As these individuals grow and grow their financial needs, maybe one day they'll need help with home ownership or college, she said. We view this as an opportunity to grow our customer base.

When PNC formally enters the market next month by switching over National City branches, it will bring a new tool for the unbanked, she said. The Foundation savings and checking accounts are designed for those who have never used a bank before or who have had minor problems managing an account in the past. The accounts include no minimum balance and limits on debit card transactions and ATM withdrawals.

Some legacy National City products will remain, including an auto-save partnership with Welcome House and a scholarship match with the Cleveland Scholarship Program.

Reaching out

Louise Gissendaner, director of community development and a senior vice president at Fifth Third Bank in the Northeastern Ohio region, said it is critical that a bank provide as much support as possible to as many people as it can.

According to the 2000 Census, she said, nearly a quarter of all houses are unbanked or underbanked - a term meaning they lack access to credit.

A disproportionate number of those people are low-income or minorities, she said, but Key's Ms. Parish also said there are doctors, lawyers and other professionals who live paycheck to paycheck and fall into those categories.

Ms. Gissendaner said Fifth Third's strategy - like that of many banks - is to participate in classroom training about financial matters, where they hope to reach children when they are young. The bank also sends a bus into many neighborhoods so financial lessons can be taught outside the bank.

Fifth Third has a Goal Setter savings account with no minimum balance that promises a bonus once that goal is reached. Customers cannot make online banking transfers or ATM withdrawals, but can access their money by visiting the bank. It has a Basic53 Checking account that allows unlimited checking, check-writing and withdrawal with a debit card, but has no deposit access to an ATM for one year and will not allow access to funds if they are not there. And the DreamGuard program pairs financial calculators with budgeting tips and advice.

There's a lot of explaining involved with this, Ms. Gissendaner said. Most of the time, one session is not enough. Some people just haven't grown up with a bank. ? I do think they need more handholding.

Copyright 2010 Crain Communications Inc. All Rights Reserved.

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This page contains a single entry by Ernest Roberts published on March 29, 2010 4:55 PM.

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