The underbanked, those who rely somewhat routinely on alternative financial services, make up a more lucrative potential market for big banks than one might think, according to a recent study.

The Center for Financial Services Innovation, in partnership with Core Innovation Capital, released a report this week detailing the market value of underbanked customers. According to their research, in 2010 alone, underbanked customers paid an estimated $45 billion in banking fees and interest. The CFSI and CIC put the report together to “investigate the large and diverse revenue opportunity from financial services in the underbanked marketplace.”

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Growth in Extending Credit to Underserved

The lion’s share of this revenue, about $27 billion, came from the credit portion of the financial industry, with overdraft fees making up nearly $7 billion of that segment. Other popular forms of credit extended to the underbanked included rent-tow-own merchandise financing ($5.1 billion), payday lending ($4.7 billion), and internet payday loans ($2.7 billion).

The report shows that not only are underbanked customers a market worth tapping in to, but that they’re also a growing market. According to the study, revenues from issuing credit to the underbanked grew 2%, and revenue from payments collections grew by 6%.

The biggest grower in the credit segment was internet payday loans, which grew by 35% year-over-year. In payments, prepaid cards showed the strongest year-over-year growth, with 33%, followed by payroll cards (25%) and walk-in bill pay services (12%).

Check Cashing on the Decline

The report also shows that revenues from more traditional forms of alternative banking services are on the decline. Tax refund anticipations loans were down 18%, and check cashing was down 5%.

The CFSI and Core Innovation Capital both work in the interest of underbanked Americans, a group they estimate to be about 60 million strong — almost one in five Americans. The CFSI is a nonprofit research group that tries to compel the financial services sector to better serve underbanked people; Core Innovation Capital is a venture capital firm that invests in financial services companies that serve the underbanked.

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