Tuesday, February 14, 2012

Who Loses when Consumers Debank?

As I started catching up on my reading, I came across Ron Shevlin's recent post on Snarketing 2.0 last week. Titled The Debanked: The $1.7 Billion Threat to Banks, Ron defines the these customers as " Mainstream consumers who willingly opt out of the traditional banking system." These could be consumers who have chosen to manage their daily financial needs by using prepaid cards. Debanked consumers can be distinguished from the UnderBanked as they are typically young, highly educated, and employed or employable. I think of many of the young people who've participated in the recent Occupy Wall Street demonstrations.
The $1.7 Billion represents the fees lost by banks as these customers leave. So who in the financial services industry gets hurt the most? In my opinion, it is the community banks and credit unions. The Mega-Banks have been willing to give up these customers and the related fees (Bank of America's decision to decline any Reg E overdrafts on debit card transactions, for example). Community banks and CU's don't have that luxury.
So if you are a community bank or credit union, don't miss the boat (although some would argue they already have). Look at a prepaid card program as an add-on to regular checking options. It's what a whole new generation of consumers are looking for, and WalMart and other retailers are more than happy to provide it.


  1. Thanks for citing the blog post, Kevin.

    But personally, I don't see the Occupy protesters as representative of the Debanked.

    A high percentage of the Debanked are employed people, and of those who aren't employed, a high percentage are full-time students.

    The Occupy protesters don't strike me as employed or highly educated.

    The Occupiers are certainly leaving the traditional banking system, but I'm not sure they represent a huge loss to banks.

  2. Ron, Thanks for your comment. I certainly see your point. I was using it more as an example of the groups who are rebelling against the traditonal financial system. I'd also suggest that many of the orignal organizers do fall into the category of highly educated and employable or under employed. Just my two cents.