CNP Expo: Underbanked and Underappreciated

May 21, 2015

CNP Expo: Underbanked and Underappreciated Shopping online without a credit card or bank account is possible, but difficult. And, a growing number of consumers either don’t qualify or don’t want these financial products, but online merchants still want to reach them. In the U.S., experts estimated in 2013 that 30 percent of consumers, or 66 million (many of them millennials), didn’t have a relationship with a bank.

“These are people who prefer to pay with cash,” said Sergio Fogel, CEO of Astropay. “They are afraid to put their credit card numbers online.”

Adopting the unbanked as customers, however, can be difficult because their identities are hard to confirm, making online transactions risky.

“Trying to validate their identity can be a real challenge,” said Curt Haid, director for digital risk fraud & payments at Ria Financial. “Sometimes, they just make up birthdays. They don’t understand why we need that birthday date. But getting their name as it appears on a utility bill gives a much better match rate.”

Gift cards are a major way to get the underbanked shopping online. But, there are several reasons transactions fail with gift cards.

“When these consumers are using their prepaid cards online, sometimes there’s not enough funds to cover what they’re trying to purchase,” said Priya Dozier, vice president of product development at FIS. “We do have a couple of merchants that totally block prepaid cards.”

She advises businesses to let customers know in advance that gift cards are not accepted, so they aren’t embarrassed when their card is refused.

The transition to mobile can help reach underbanked customers, especially in emerging markets. Fogel said he met a man in an underdeveloped country who was very popular because he had a television and, more importantly, a solar panel that could charge his neighbor’s smartphones, which they used constantly to make purchases.

“It’s a huge market that’s waiting to be served,” Fogel said.