The article below from the American Banker warrants reviewing. Those groups or institutions that are serving the low income and unbanked commuities must recognize that there are very good alternatives and better mousetraps to serve this expanding market.
Viewpoint: Don't Overlook the Role that Nonbanks Play
By Joseph Coleman, American Banker Friday, March 6, 2009
Why is the Federal Deposit Insurance Corp. determined to recreate the wheel when it comes to serving the financial needs of low- and moderate-income consumers?
The FDIC's Advisory Committee on Economic Inclusion's most recent meeting highlights many of the challenges and shortcomings associated with the ongoing efforts to convince millions of Americans that they are better served by using banks and other mainstream financial institutions than alternative providers.
The financial service center industry, with 13,000 locations nationwide, conducts more than 350 million transactions each year. These companies are regulated by a variety of federal and state laws. The transaction-based model for accessing day-to-day financial services is well established and functioning efficiently on a cost-effective basis.
Perhaps more importantly, millions of people use these alternative providers, not because they have to, but because they chose to. Stores are located in neighborhoods, keep convenient hours (up to 24 hours a day, seven days a week), have friendly employees who speak the customer's language and offer a wide array of services.
Through new technologies, many stores that belong to my organization, the Financial Service Centers of America, have expanded those opportunities to include "virtual bank accounts" that offer FDIC-insured savings options with a 5% interest rate tied to a prepaid debit card.
A national customer satisfaction survey confirmed the popularity of financial service center. It found that 92% of respondents rated the overall value of products and services received at centers from "excellent" to "good" for the money. In addition, 95% of respondents rated the overall quality of services from "excellent" to "good."
Two recently published reports by Aite Group ("Debunking the Myths About the Unbanked and Underbanked") and the FDIC ("Banks' Efforts to Serve the Unbanked and Underbanked") highlight common misconceptions about this market segment and the shortcomings of banks to adequately serve it. For example, Aite Group said its study "reveals that people are unbanked for very practical reasons, including credit, pricing, cash flow and service issues." The FDIC study found that more than 70% of respondents "have not identified" expanding services to the underbanked as a priority.
The Advisory Committee on Economic Inclusion is exploring the value of expanding government incentives to help banks serve the underbanked.
What is most perplexing is that even with the financial service center industry's solid record of service to this market segment and the inadequate performance of banks, the FDIC has repeatedly rebuffed my group's efforts to participate in the committee.
One area where we could be of particular assistance is with small-dollar loans. Financial service centers handle about $13.2 billion of these loans each year. The FDIC itself has acknowledged the need for such a product by implementing its Small Dollar Loan Pilot Project.
It is important for policymakers and those who advise them to have solid answers to the following questions:
-What are the standards for judging the success of the FDIC's pilot program?
-Can the bank model for small-dollar loans be economically translated to the current volume nationwide?
-What levels of loan losses are being reported by participating banks?
-Are banks' pilot programs profitable, sustainable and scalable?
-Is the FDIC granting banks relief from existing loan-loss reserves for this product? (Subprime loans require a 25% capital reserve.)
-A core question to consider: Is it better for consumers to have access to banking services or access to banks?
The FDIC should work to create a collaborative, inclusive environment where banks and financial service centers can work together to provide the services customers want and expect.
Coleman is the chairman of the Financial Service Centers of America.
© 2009 American Banker and SourceMedia, Inc.
Directo provides an alternative to this market at the worksite. Payroll Cards. www.directocard.com
Showing posts with label unbanked. Show all posts
Showing posts with label unbanked. Show all posts
Monday, March 9, 2009
Wednesday, March 4, 2009
Direct Deposit/Banking Service for Spanish Speakers
By Ferney Colorado & Melissa Burkhart
Many employers and HR managers have long noted with great frustration that their Spanish-speaking employees tend to be very reluctant to sign up for direct deposit of their paychecks. The advantages to an employer of having at least the majority of their staff on a direct-deposit system are considerable---greatly reduced costs for paper products, improved efficiency in payroll departments, greatly reduced chaos on payday, etc.
While these are very significant issues to many companies, the growing risk of check fraud makes it yet much more urgent for companies to find a direct deposit program that will meet the needs of all employees. Unfortunately, check fraud is relatively easy to commit, especially when employees cash their checks at smaller venues, like check-cashing operations or liquor stores. A common practice is for several people to present forged payroll checks at a local bank and attempt to get them cashed. It is easy enough to make forged copies of a legitimate paycheck and them and then modify only so that they will correspond with false identification.
Because of the volume of transactions that banks and check-cashing outlets process daily, as well the limited resources available for training bank personnel to recognize the latest fraud techniques, preventing this crime can be extremely difficult. Therefore, a growing number of banks make the effort to protect themselves from payroll check fraud by making it difficult or expensive for the individual to cash checks. This practice obliges ‘unbanked’ workers to cash checks at ‘fringe’ financial services outlets, liquor stores and the like---which can expose employers to increased risk that the fraud will occur in the first place.
For company management, it is very easy to see that a direct deposit program that serves and meets the needs of immigrant or transient workers is the ideal solution. Fortunately, Directo, an Atlanta-based company, has introduced a low-risk direct deposit program that is customized specifically for unbankable workers. Furthermore, Directo has gone to great lengths to bring foreign workers on board with this concept. Directo is aware that workers from Latin America in particular have a great mistrust of financial institutions and a strong preference for saving and spending money in cash. This is a result in part of economic instability in many Latin American countries. Spanish speakers will be very reluctant to trust a paper statement telling them their account balance and would far prefer to determine their own balance by counting bills in their hand. Often this mistrust is so strong that even those Spanish speakers who are eligible for a bank account will choose not to have one.
To assuage these doubts, Directo starts by providing literature, training, and customer service in Spanish. They also consult with Futuro Sólido USA http://www.futurosolidousa.com/ as to the best communication strategies for laying to rest Spanish speakers’ typical fears and misconceptions. With such a clear, concrete, multi-step, roll-out process, both companies and their employees are very happy to find that they can achieve significant savings and greatly enhanced security with Directo’s program.
The advantages of Directo---for both business owners and employees speak for themselves. Some of them are:
For Business Owners
Eliminates the risk of exposing the company corporate account number in environments where it might be vulnerable, such as check cashing outlets, which gain access to the bank account number.
Eliminates the risk of overdrafts because the company controls when the payments will be distributed
Eliminates the all-too-frequent chaos on payday, when employees often attempt to end a work day early, crowd into the office to receive their checks, and rush to the check-cashing establishment before it closes
Increases the company’s efficiency by eliminating lost checks or paper check production and administration.
For Employees
Greatly reduces the risk of loss from theft since many unbanked workers carry large amounts of cash on their person and accumulate their savings in cash at home
Eliminates the cost, as well as the time, associated with cashing checks
Increases access to the privileges, safety, security, convenience and other benefits enjoyed by banked workers
Greatly reduces the cost of sending money to family members in their country of origin, as Directo cards are used internationally at ATM's and this transaction is offered for a very modest flat fee---rather than a percentage of the amount being transferred
Furthermore, by sending money to their home countries by traditional means, immigrant workers also face potential fraud themselves that their employers are entirely unaware of. Many express concern that the personnel at the establishment where their wives or mothers are to pick up their cash will not be able to resist the temptation to pocket a bit of it. Once enrolled in this service, these workers enjoy the automated system that guarantees that the family they are supporting in their home country will receive exactly the right amount of money, according to the most current exchange rate.
Programs like Directo enhance a company’s benefit package at no cost whatsoever to the employer. Furthermore, when a company provides a system that so clearly has been customized to meet the specific needs of immigrant workers, those workers sit up and take notice. Their impression (although usually incorrect) of benefits in general is that these packages are not designed to meet their needs---but rather the needs only of the company and of those employees who were born and raised in this country. A service like this will go a long way towards demonstrating to them that this is not at all the case.
Ferney Colorado and Melissa Burkhart are dedicated to provide understanding and value of benefits programs for Spanish speaking workers. For more see http://www.futurosolidousa.com/.
Directo is a leading provider of payroll cards for the unbanked worker. Founded on the notion that there is a better way for Spanish speakers to receive and keep their hard earned pay, Directo celebrated its 10 year annivesary in November of 2008. http://www.directocard.com/
Many employers and HR managers have long noted with great frustration that their Spanish-speaking employees tend to be very reluctant to sign up for direct deposit of their paychecks. The advantages to an employer of having at least the majority of their staff on a direct-deposit system are considerable---greatly reduced costs for paper products, improved efficiency in payroll departments, greatly reduced chaos on payday, etc.
While these are very significant issues to many companies, the growing risk of check fraud makes it yet much more urgent for companies to find a direct deposit program that will meet the needs of all employees. Unfortunately, check fraud is relatively easy to commit, especially when employees cash their checks at smaller venues, like check-cashing operations or liquor stores. A common practice is for several people to present forged payroll checks at a local bank and attempt to get them cashed. It is easy enough to make forged copies of a legitimate paycheck and them and then modify only so that they will correspond with false identification.
Because of the volume of transactions that banks and check-cashing outlets process daily, as well the limited resources available for training bank personnel to recognize the latest fraud techniques, preventing this crime can be extremely difficult. Therefore, a growing number of banks make the effort to protect themselves from payroll check fraud by making it difficult or expensive for the individual to cash checks. This practice obliges ‘unbanked’ workers to cash checks at ‘fringe’ financial services outlets, liquor stores and the like---which can expose employers to increased risk that the fraud will occur in the first place.
For company management, it is very easy to see that a direct deposit program that serves and meets the needs of immigrant or transient workers is the ideal solution. Fortunately, Directo, an Atlanta-based company, has introduced a low-risk direct deposit program that is customized specifically for unbankable workers. Furthermore, Directo has gone to great lengths to bring foreign workers on board with this concept. Directo is aware that workers from Latin America in particular have a great mistrust of financial institutions and a strong preference for saving and spending money in cash. This is a result in part of economic instability in many Latin American countries. Spanish speakers will be very reluctant to trust a paper statement telling them their account balance and would far prefer to determine their own balance by counting bills in their hand. Often this mistrust is so strong that even those Spanish speakers who are eligible for a bank account will choose not to have one.
To assuage these doubts, Directo starts by providing literature, training, and customer service in Spanish. They also consult with Futuro Sólido USA http://www.futurosolidousa.com/ as to the best communication strategies for laying to rest Spanish speakers’ typical fears and misconceptions. With such a clear, concrete, multi-step, roll-out process, both companies and their employees are very happy to find that they can achieve significant savings and greatly enhanced security with Directo’s program.
The advantages of Directo---for both business owners and employees speak for themselves. Some of them are:
For Business Owners
Eliminates the risk of exposing the company corporate account number in environments where it might be vulnerable, such as check cashing outlets, which gain access to the bank account number.
Eliminates the risk of overdrafts because the company controls when the payments will be distributed
Eliminates the all-too-frequent chaos on payday, when employees often attempt to end a work day early, crowd into the office to receive their checks, and rush to the check-cashing establishment before it closes
Increases the company’s efficiency by eliminating lost checks or paper check production and administration.
For Employees
Greatly reduces the risk of loss from theft since many unbanked workers carry large amounts of cash on their person and accumulate their savings in cash at home
Eliminates the cost, as well as the time, associated with cashing checks
Increases access to the privileges, safety, security, convenience and other benefits enjoyed by banked workers
Greatly reduces the cost of sending money to family members in their country of origin, as Directo cards are used internationally at ATM's and this transaction is offered for a very modest flat fee---rather than a percentage of the amount being transferred
Furthermore, by sending money to their home countries by traditional means, immigrant workers also face potential fraud themselves that their employers are entirely unaware of. Many express concern that the personnel at the establishment where their wives or mothers are to pick up their cash will not be able to resist the temptation to pocket a bit of it. Once enrolled in this service, these workers enjoy the automated system that guarantees that the family they are supporting in their home country will receive exactly the right amount of money, according to the most current exchange rate.
Programs like Directo enhance a company’s benefit package at no cost whatsoever to the employer. Furthermore, when a company provides a system that so clearly has been customized to meet the specific needs of immigrant workers, those workers sit up and take notice. Their impression (although usually incorrect) of benefits in general is that these packages are not designed to meet their needs---but rather the needs only of the company and of those employees who were born and raised in this country. A service like this will go a long way towards demonstrating to them that this is not at all the case.
Ferney Colorado and Melissa Burkhart are dedicated to provide understanding and value of benefits programs for Spanish speaking workers. For more see http://www.futurosolidousa.com/.
Directo is a leading provider of payroll cards for the unbanked worker. Founded on the notion that there is a better way for Spanish speakers to receive and keep their hard earned pay, Directo celebrated its 10 year annivesary in November of 2008. http://www.directocard.com/
Friday, February 20, 2009
Unemployment Debit Cards. Good intentions with pitfalls?
The Associated Press today released an article about some of the pitfalls of state governments's wonderful idea to implement debit card programs for recipients of state unemployment benefits. (see below):
____________________________________
AP IMPACT: Jobless hit with bank fees on benefits
Associated Press - February 20, 2009 12:43 AM ET
A new analysis shows many unemployed Americans are having to pay just to collect their own unemployment benefits -- or pay to call customer service to complain about it.
A review finds that 30 states have struck debit-card benefit deals with banks that include Citigroup, Bank of America, JP Morgan Chase and US Bancorp. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20.
A Democratic state lawmaker in Missouri has received a wave of complaints about the fees from autoworkers laid off from a suburban St. Louis Chrysler plant. She's urging a statewide review an eye toward reducing the fees.
With the national unemployment rate now at 7.6%, the market for bank-issued unemployment cards is booming.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
___________________________________
Here is another example of the banking industry's attempt to bring a solution to states in order to lower costs of distributing payments. Did they accomplish this objective? Probably yes. But do they really care about the unemployed recipient? Aren't they really after the millions of unemployment cash deposits to stash in their banks for the state? You bet!
Along with the ability to earn intesest on the deposits - at low interest rates these days, how do banks make money? Afterall, one can only assume that the low bidder with the most influence won the business. The simple answer is fees, fees and more fees as illustrated in this article.
How do they maximize fees? Oops, someone forgort to look into the notion that banks are very territorial about who uses their ATM's for free? Not my customer? Thank you for that $1.50 - $3.00 per transaction. The other way to collect fees is the oldest banking trick in the book. Give 'em free checking and the case of unemployment cards, whammo hit 'em hard with NSF and Overdraft fees.
Is there another solution? Frankly the notion of issuing payments to debit cards like the unemployment dispersement and entitlement programs described above is a good one. Moving to electronic payment methods is more efficient, cost effective and less risky for states and the recipient. But for this Blog, states must negotiate the best deal AND read the fine print to so that the people who need the money most at these challenging times, their previously employed TAXPAYERS can maximize their cash benefits.
Directo offers a bank debit card program for recipients of unemployment and entitlement benefits. It's philosophy has been to fully discloses fees which are typically a fraction of the "free or low cost" bank programs. Directo also offers low cost banking solutions (pay card, or payroll card) for workers who cannot or chose to not use a traditional bank account to receive direct deposit of pay.
BH
____________________________________
AP IMPACT: Jobless hit with bank fees on benefits
Associated Press - February 20, 2009 12:43 AM ET
A new analysis shows many unemployed Americans are having to pay just to collect their own unemployment benefits -- or pay to call customer service to complain about it.
A review finds that 30 states have struck debit-card benefit deals with banks that include Citigroup, Bank of America, JP Morgan Chase and US Bancorp. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20.
A Democratic state lawmaker in Missouri has received a wave of complaints about the fees from autoworkers laid off from a suburban St. Louis Chrysler plant. She's urging a statewide review an eye toward reducing the fees.
With the national unemployment rate now at 7.6%, the market for bank-issued unemployment cards is booming.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
___________________________________
Here is another example of the banking industry's attempt to bring a solution to states in order to lower costs of distributing payments. Did they accomplish this objective? Probably yes. But do they really care about the unemployed recipient? Aren't they really after the millions of unemployment cash deposits to stash in their banks for the state? You bet!
Along with the ability to earn intesest on the deposits - at low interest rates these days, how do banks make money? Afterall, one can only assume that the low bidder with the most influence won the business. The simple answer is fees, fees and more fees as illustrated in this article.
How do they maximize fees? Oops, someone forgort to look into the notion that banks are very territorial about who uses their ATM's for free? Not my customer? Thank you for that $1.50 - $3.00 per transaction. The other way to collect fees is the oldest banking trick in the book. Give 'em free checking and the case of unemployment cards, whammo hit 'em hard with NSF and Overdraft fees.
Is there another solution? Frankly the notion of issuing payments to debit cards like the unemployment dispersement and entitlement programs described above is a good one. Moving to electronic payment methods is more efficient, cost effective and less risky for states and the recipient. But for this Blog, states must negotiate the best deal AND read the fine print to so that the people who need the money most at these challenging times, their previously employed TAXPAYERS can maximize their cash benefits.
Directo offers a bank debit card program for recipients of unemployment and entitlement benefits. It's philosophy has been to fully discloses fees which are typically a fraction of the "free or low cost" bank programs. Directo also offers low cost banking solutions (pay card, or payroll card) for workers who cannot or chose to not use a traditional bank account to receive direct deposit of pay.
BH
Tuesday, February 10, 2009
Unbanked? Need an account? Your local bank may not be able to help, according to the FDIC.
According to the American Banker, the FDIC released a study last Thursday that says 73% of banking institutions polled knew about “unreached populations” in their regions, but 70% did not think that extending services to them was a priority.
The study goes on to say that most banks offer basic financial education, but that’s it. Interestingly, only 14% of the 700 institutions surveyed said that they offered payroll cards through their business partners. Payroll cards offer benefits to both employers and their unbanked workers, cutting payroll costs while offering financial security for employees.
Directo’s paycard offers all of this and more, allowing unbanked workers freedom from check cashers as well as the safety of a bank account with funds held in an FDIC member bank. For banks that wish to expand their product offering to commercial clients, the Directo paycard program is an easy win which costs them nothing, is supported entirely by Directo, yet earns them goodwill from the community and CRA credit. - ed
FDIC Vice Chairman Martin Gruenberg is quoted in the article, saying “Many banks don’t actually have strategies in place to target and reach out to those populations effectively…a market opportunity that…in many cases isn’t being fully taken advantage of…” and that although accounts are available for the unbanked, they’re limited and don’t meet the needs of unbanked people, such as low fees, and being able to accept direct deposit of payroll.
It’s tough being unbanked in today’s harsh economic climate. With Directo, relief is just a paycard away. For banks and employers, the free program is just a phone call or email away. Contact Jim McCarthy at 770.810.6502 or email jmccarthy@directo.net
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