Banking & Finance

Fifth Third offers affordable solution to the underbanked

Plan is designed for those who pay fees at payday centers or retailers to cash their checks.

February 19, 2016
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A traditional financial institution has developed a rather nontraditional banking program to engage those with little or no bank relationship.

Since Fifth Third Bank launched its Express Banking program late last fall, more than 4,800 accounts have been opened in an approximately 40-county market region in Michigan.

Considered both a product and a service, Express Banking is designed for the underbanked and unbanked consumer population that doesn’t typically use a bank account but may use alternatives such as check-cashing centers. The program allows consumers to manage their finances without the worry of monthly fees, minimum balance requirements, credit score requirements and overdraft fees.

Patrick Lonergan, vice president of community and economic development for Fifth Third, said Express Banking is a bank account designed to provide a secure and easy-to-use solution for underbanked consumers and help them enter the traditional financial services business.

“Fifth Third Bank is certainly a traditional financial services provider, and we approached this from a perspective (of) where people should be banking, and fundamentally believe being outside of the traditional services can be shown as more expensive.

“It tends to be transactional versus relationship oriented, and it really is in that relationship and trust that is created with the banker that you can begin to build a financial future,” Lonergan said.

Express Banking services include check cashing and direct deposit, Western Union money transfer and payments, money orders and cashier’s checks, Mobile Deposit with immediate funds availability, and an optional debit card with unlimited use at Fifth Third ATMs.

Lonergan said the ATM card is one of the most valuable features since it provides access to all ATMs — not only in the Fifth Third network but in any network if the consumer is willing to pay the associated fee.

“There is an important part of empowerment and financial freedom that comes with that,” he said.

“You can’t overdraw this account, by design. When we designed this, our team did a lot of research on what are the factors that have caused people who maybe had banking relationships but lost it.”

Individuals also can qualify for discounts on services through the program’s three-tiered loyalty system as they use Express Banking services. After completing 16 or more transactions, consumers can receive up to a 50 percent discount on check cashing, money orders, cashier’s checks, mobile deposit, identity alert and savings accounts.

John Zimmerman, senior vice president of marketing at Fifth Third Bank West Michigan, said typically an underbanked person is someone who will go to a retail shop or pay center to cash their checks and have to pay a fee for it.

“They will be losing part of the dollars they have earned, and these underbanked folks sometimes feel like they can’t be banked — don’t have enough money to be banked, or they spend their money paying bills so quickly that they are not accumulating funds within their account,” said Zimmerman.

“What we would like to do is present them with a product and say, ‘We can help you out.’”

Lonergan said the unbanked population includes those who have no banking relationship but instead are conducting financial service activities through money orders, payday lenders, check cashing or pawn dealers.

“The market we serve is about 40 counties — kind of everything but Flint, Detroit and Ann Arbor,” said Lonergan. “Our statistics show there are about 350,000 people that fall into the underbanked category, and that would include the unbanked, as well. Across the country, it is 28 percent of all the citizens in America are considered underbanked. It is a big number, and we are hoping to put a dent in that.”

The Federal Deposit Insurance Corp.’s Economic Inclusion division indicated, as of 2013, nearly 5.7 percent of Michigan households were considered unbanked and more than 18 percent of households were classified as underbanked in the state.

In terms of underbanked households, Hispanic households comprised 39.7 percent of that figure, while African-American households represented 28.2 percent, and white non-Hispanic households came in at 15.6 percent.

Unbanked households in Michigan consisted of 17.6 percent African-American households, 14.1 percent Hispanic, and nearly 3.5 percent white non-Hispanic, according to the 2013 FDIC National Survey of Unbanked and Underbanked Households.

When Fifth Third launched Express Banking in late November 2015, Lonergan said it conducted a series of community outreach meetings between Thanksgiving and Christmas with partner agencies to raise awareness of the new tool. Participating nonprofit organizations included Inner City Christian Federation, Grand Rapids Urban League and the Hispanic Center of Western Michigan.

“There were at least 26 agencies that we connected with, and each of them really thought this was great and have begun referring folks to us,” said Lonergan. “We chose to do that because an important part of this market segment is there is trust that needs to be built with that consumer. Having them help spread it by word of mouth was, I think, an important part of dealing with the trust issue.”

Zimmerman said one of the key reasons for reaching out to local organizations was not to “pitch a product,” but so they could use the program as a tool to give their members financial empowerment.

“That is really very key because we are constantly looking for ways we can provide financial literacy, financial empowerment, and get people out of debt so they can have that American dream of owning a car, owning a house,” said Zimmerman. “There are so many people who need assistance with their financial awareness, and this was a great opportunity for us to get out ahead of the game.”

Of the more than 4,800 bank accounts opened since Express Banking launched, about two-thirds are considered brand-new relationships, and the remaining third are individuals who were transferred to the new program as a better fit, according to Lonergan. Across Fifth Third’s entire market, nearly 43,000 accounts have been opened.

“I’ve continued to talk with numerous nonprofits since those initial rollouts and have (heard) just great response to it,” said Lonergan. “Folks are wanting us to stop by and do some of our training sessions, financial empowerment sessions, with the folks they serve.”

While the program was developed to address households considered underbanked, Express Banking is also available for those consumers who would like to become better at managing their finances, such as millennials or young consumers.

“It is a really very solid start account. If you haven’t managed a banking account, this is a great place to start because you will not get in trouble with it,” said Lonergan. “You can build great habits around managing your balances.”

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