Wooing the Underbanked – With a Special Focus on Prepaid Cards Markets & Markets – Analyst Briefing Research Analyst : Srabanti Mukherjee Moderator: Sushmita Roy Choudhury

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Agenda for the briefing Introducing the subject Overview of the market Challenges and how to overcome them Analysis of product set - Market perspective Competitive scenario

Market Segmentation Fully banked Mature market Too competitive Underbanked Opportunity for banks They have basic bank accounts Have made long term financial planning i.e., though they are aware of the financial products for long term benefit, they do not use such products for short their short term financial needs Easier to cross sell and up sell Unbanked Long gestation period due to absence of transaction accounts with banks Very low creditworthiness Highly expensive to cater Identifying sweet spot for banks

A Glimpse of the Underbanked Market Underbanked population in the U.S. total 43 million as of Approximately 18% of the addressable population are underbanked Make little use of the services provided by mainstream financial institutions primarily due to fear of hidden costs and inconvenience Have traditional checking/ savings account Households more likely to be underbanked include those with: African-American, American/ Alaskan Indian, or non-black Hispanic; An unmarried male or female as head of the family; Earning below $50,000 per year; Having less than a college degree; Headed by someone under 55 years of age

A Glimpse of the Underbanked Market Popular AFS used among underbanked are: ranked by frequency of use (reasons why these AFS are used) Check cashing facilities Cashing non-bank money orders Payday lending Rent-to-own agreements (RTO) Refund anticipation loans (RAL)

A Glimpse of the Underbanked Market Underbanked prefer alternate financial service to banking services for their credit and transaction (financial) purposes for the following reasons: Convenience of AFS in terms of accessibility and, customization Perceived high fees for banking productsFear of overdraft penalties Lack of customer satisfaction with behavior of bank employees

Strategy Formulation Bank’s cross sell and up sell strategy to tap the underbanked

Strategy Formulation Fulfilling bank objectives while serving the underbanked

Strategy Formulation Profitability issues Effective product development to tackle profitability issues Fraud Concerns Strategic alliances with AFS to avoid frauds High cost of customer acquisition Kiosks in retail stores to mitigate cost of customer acquisition Overcoming challenges in serving the underbanked

Strategy Formulation - Reaching the Underbanked

Strategy Formulation – Relative impact of financial products

Strategy Formulation - Identifying product sets for underbanked segments

Strategy Formulation – Special analysis of prepaid cards Volume of loaded amount ($billions) AAGR 13.3% AAGR 17.2%

Competitive Landscape MAJOR VENDORS eCommLink, Fidelity National Information (FIS), First Data, FSV Payment Systems, Green Dot, i2c Inc., NetSpend, TSYS, TxVia MAJOR FOCUSED SEGMENTS Prepaid cards, Small dollar loans, Alternative payday loans, Debit cards, and Credit cards MAJOR MARKET STRATEGIES Modifications to retail operations, extended hours and more languages at banks

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