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Underserved Markets: How to reach the unbanked

Alabama bank serves untapped market by partnering with a nonprofit and creatively using technology and ABA’s prepaid debit card 

Underserved Markets: How to reach the unbanked

As the nation moved into the financial crisis and its aftermath, Bob Jones began to see that much of what happened might have been avoided, or at least softened, if more Americans truly understood the financial commitments they take on. This made Jones, president and CEO of United Bank, Atmore, Ala., a believer in financial literacy. Along the way, Jones began to realize that meeting the needs of the unbanked was an intertwined challenge. What has troubled him is the industry finding ways to get these jobs done.

But Jones’ ongoing search has been paying off. He and his team have come up with a combination of products—including ABA’s prepaid debit card—and approaches—a “bankerless” branch—that have started to bridge the gap between the bank and the unbanked.

Getting over habits and customs

United Bank has been identified by FDIC as a leader in outreach. In 2011, United received the Chairman’s Award for Excellence, specifically for a “second-chance checking” program that has enabled many credit-challenged people to qualify again for bank accounts. Since its 2007 inception, more than 40% of account holders have been upgraded to other types of accounts.

But that program is merely a sample of what United is about. In 2010, under Jones’ leadership, the bank became a “community development financial institution.” At the time, this made United a rarity. As Jones explains, much of the territory that the $446.4 million-assets bank serves in southwest Alabama and northwest Florida is rural. Historically, rural areas haven’t been targeted for CDFIs, financial literacy education, or other similar programs. It’s simply been a numbers game, Jones says. Program developers tend to look for larger, denser populations.

“We happened to be the odd animal that fit,” says Jones of his CDFI designation. Among the benefits  is eligibility to apply for Treasury Department funding. In 2011, United received a Bank Enterprise Award of $209,060 for loans, investments, and programs.

Jones also finds that banks—including his—don’t always have the creativity it takes to serve atypical and nontraditional customers. “You have to get past ‘banker think,’” he says. “These markets are often a different world and a different culture.” Bankers, through industry habits and customs, and regulatory strictures, have been programmed to work in certain ways.

As an industry, “we tend to find reasons why we can’t do something,” says Jones, and the reaction of regulators to new thinking doesn’t help. In fact, he says bluntly about such reactions, they “just kind of suck the creativity out of you.” Recently, Jones has seen some thawing. And he credits joining the Community Development Bankers Association, where he serves on the board, for broadening his perspectives.

“It’s a different way of viewing the communities you serve,” says Jones. About 20% of United’s markets are unbanked, according to Greg Walker, vice-president, marketing and business development.

Breaking out of traditional mindsets takes effort, and Jones says that sometimes the best way to channel that effort and meet these challenges is through partnerships. “Nonbank partners are not encumbered by all that,” he says. “They can find ways to solve issues.”

Understanding the unbanked

A key point that Jones has learned is that the unbanked aren’t a homogenous group. At least three segments exist, and gauging the mix in a bank’s market will help identify how much can be accomplished.

Some people want to be “off the grid” and can’t be reached. Others don’t trust banks; they see banks as an extension of the government, which they want to avoid. But there are many for whom education and awareness can bring improvement.

But overall, “many of these people will not come to a bank,” says Jones, “though they will go to nonbank financial providers. They don’t understand the banking industry, so they avoid it. But they do go to nonprofit organizations.” Acceptance of this stands behind the latest wrinkle in United Bank’s outreach: a special branch sited within the walls of a community organization.

Successful search for a HERO

Among the partnerships United has formed is one with a group called HERO, which stands for Hale (County) Empowerment & Revitalization Organization. HERO works on affordable housing, employment, and financial and other education in a three-county area in Alabama’s “Black Belt.” The region’s name derives from its rich black soil, not its demographics, although it is heavily African-American in population.

In early April, the bank opened an official new branch in HERO’s headquarters in Greensboro. What sets it apart is that there are no bankers-—by design. The branch’s key elements are a computer with a high-speed Google Chat connection, allowing two-way video, headsets for privacy, a secure scanner for transmission of documents, and HERO staffers to help newcomers get started. Bankers at a United office more than three hours away work with prospective customers.

“We have a close connection with our community, and many of our families are unbanked,” says Pam Dorr, HERO’s executive director. Why people are unbanked varies, she says: “People have hiccups in their lives for different reasons.” A widespread desire is to build, or rebuild, credit scores. A major goal for HERO is helping clients to eventually qualify for mortgages, and, thus, home ownership.

Merely putting a brick and mortar branch in this market wouldn’t have helped things as much as putting the “bankerless” branch under HERO’s roof, Jones believes. The approach taken piggybacks on the trust in Dorr’s organization. “We do what we do well, and HERO does what they do well,” says Jones. “Two plus two can equal five.”

United’s team walked its application through state and federal regulatory processes carefully. It was a new idea—a bankerless branch. The state’s banking commissioner, John Harrison, grew so interested in the concept for helping the unbanked that he waived the application fee and expedited processing.

“It’s a step-by-step process,” says Jones of the program, and Dorr reflects similar thinking at the client level. “This is a chance for [unbanked people] to come back a little,” she explains, beginning the road to building banking history with an eye on borrowing, down the road.

Stocking the “shelf”

The branch has launched with two types of accounts. One is a secured United credit card, with a $300 limit. Clients who complete HERO’s financial literacy program are eligible to apply. It is secured by HERO funds. The second is the United Advantage Card—the bank’s version of ABA’s Community Bank Prepaid Debit Card Program, which is offered to banks through a partnership of ABA’s Business Solutions subsidiary and TransCard. The bank’s program involvement began with a hallway conversation between Jones and Craig Fuller, TransCard’s CEO. The bank has been offering the prepaid program to customers since the beginning of this year—issuing hundreds—and saw it as a good fit for the new branch’s prospective clients, according to Jones.

For some of the people buying prepaid cards, which are reloadable and have online features, “it’s an emotional opportunity to be able to carry a branded MasterCard debit card,” says Jones. Being a bank customer, possibly for the first time, is a major step. He also points out that the prepaid cards’ balances are FDIC insured, providing peace of mind for banking newcomers.

While the branch has only just begun efforts, Jones says the program is already paying dividends internally. United bankers have trekked to see the operation. “And they are coming back energized to help their communities,” Jones says. Plans are under way to help HERO expand efforts to other parts of Alabama.

Steve Cocheo

Steve Cocheo’s career in business journalism has taken him to all 50 states and nearly every corner of banking in institutions of all sizes. He is executive editor of ABA Banking Journal, digital content manager of, and editor of ABA Bank Directors Briefing. He coordinates the popular Pass the Aspirin and First Person features and wrote the booklet series Focus On The Bank Director. He is the only journalist to have sat in on three federal banking exams, was a finalist for the Jesse H. Neal national business journalism awards, and a winner of multiple awards from the American Society of Business Publication Editors.

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