Moving Forward: Issues

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Moving Forward Issues Answers for a Changing
IndustryTrends Competition

• 22nd FiSCA Annual Conference and Expo
• October 1, 2010

William McCrackenCEO SYNERGISTICS Research Corp.
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Large Segment that is getting more attention
Per Synergistics Research Corp. data, Low Income
Households (under 40k) are 45 Underbanked and
8 Unbanked As a percentage of total HHs, it
would be 27 Underbanked and 5 unbanked
FDIC National Survey of Unbanked and Underbanked
HH
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Trends Competition

1. Banks Government
2. Wal-Mart other Retailers
3. Mobile Banking
4. Social Media

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I. Banks Government

• Over half of banks offer limited extended hours
  and foreign language capabilities at their retail
  branches.
• Almost two-thirds (64 percent) of banks report
  that they have modified their retail operations
  in the last five years to make the bank more
  appealing or convenient for unbanked and/or
  underbanked
• customers. Thirteen percent of banks added
  non-traditional locations in community centers,
  supermarkets, etc. and 20 percent of banks added
  branches in low-to-moderate income (LMI) areas.
• Almost two-thirds (62 percent) of banks offer an
  entry-level checking account with no minimum
  balance.

FDIC National Survey of Unbanked and Underbanked
HH
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Government/Bank Initiatives
Plan Promotes Bank Accounts for Consumers (WSJ
8/23/10) Federal and local governments are
trying once again to persuade some of the 17
million US adults who rely on check-cashing
services to open their own bank accounts. The
FDIC approved a pilot program last week to
encourage banks to create simple, low cost
deposit accounts Meanwhile, the Treasury, in
its latest budget proposal, is seeking 50
million from Congress to create a Bank On USA
program to extend local initiatives that
encourage people to set up bank accounts
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Bank Examples

1. Second Chance Ckg
2. Free Tax Preparation
3. Bi-lingual branches

1. Second chance ckg
2. Credit rebuilder program
3. Ind. Development accts

1. Nuestro Banco completely bilingual
2. Small dollar loan programs
3. Ck Cashing

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Bank/Check Cashing Hybrid

• Bronx opened in 2008
• Mix of customers people who dont want a bank
  account, people who opened their first bank
  account, and people who have bank accounts but
  use check cashing because of its immediacy and
  close location
• Customers of this alternative bank who open
  checking and savings accounts receive matching
  funds for their deposits, free money orders among
  other benefits.
• Plans to expand by buying up check cashers
  stores and opening branches to grow market share

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Percentage of Gen Population and LIHwithout a
Checking Account

Source Synergistics Research Payments Study,
March 2010
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II. Wal-Mart and other Retailers Who is Your
Competition?

• One in six households currently use non-bank
  financial centers located at retailers such as
  Wal-Mart and visit an average of 4.2 times a
  month.
• Current users overwhelmingly find these centers
  valuable, half rating them very valuable.
  One-third of nonusers see value in these centers.
  
• Retail is probably the fastest growing
  distribution channel in underbanked financial
  services.  Wal-Mart leads with a fairly broad
  suite of low-cost products, from check cashing to
  bill pay to money orders and remittances.  Sears,
  Kroger, Best Buy and others are joining. 
• A sub-set of retail are convenience stores. 
  Folks like 7-Eleven, Circle-K, ExxonMobil and
  many others are quite active in this field.  For
  all these retailers, financial services
  represents not just fee-based revenue (without
  additional overhead), but more importantly
  increased spend in the store .

Synergistics Research study The Threat of
Financial Alternative Providers
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Average Visits per Month (by LIHs)
Bank Branch 2.8
Financial Service Center 2.4
Wal-Mart 4.2
Convenience Stores 6.1
Grocery Stores 7.1
Synergistics Research Corp study titled The
Threat of Alternative Financial Providers
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Where are Prepaid Cards Purchased?

• Retailers becoming the LIH preferred channel for
  prepaid cards FSC only 4
• Avg visits to FSC is 2.4 vs. Wal-Mart 4.2

Synergistics Research Corp study titled The
Threat of Alternative Financial Providers
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Wal-Mart

• MoneyCard 3 a month payroll direct deposit
  reload with Green Dot MoneyPak ATM now..1
  cash back on gas purchases!!
• Wal-Mart announced on 3/10 that it's going to add
  Money Centers to 400 more stores in addition to
  the 1,000 Wal-Mart stores that already have one.
  3-6 to cash checks
• Owns part of Green Dot who is buying Utah based
  bank more focus on wire transfers
• How Wal-Mart Is Making Itself Into a Bank for
  the Unbanked BNET Retail

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Sears/Kmart

• Testing financial service centers since 2009 in
  Chicago
• Ck Cashing 3, next day bill pay 1.50, same day
  bill pay 2
• "This cash-based, underserved customer is
  shopping our stores today," she said. "If they
  need shampoo and toilet paper, there's an aisle
  for them. When they need money services, we're
  going to have that location in the store
  available to solve those problems for that
  consumer as well. Susan Ehrlich, Head of
  Sears financial Svs unit

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7-Eleven and Circle K

• 7-Eleven V-com Kiosks that dispense cash, cash
  checks, bill payment
• Circle K check cashing, money transfer, prepaid
  wireless, bill payment
• Convenience stores will soon realize they're not
  just in the Beer and Cigarette business. 
  McDonald's and Taco Bell will decide that burgers
  and tacos aren't enough to satisfy their
  customers, or their shareholders.  And all of
  them will excitedly look to the hundreds of
  millions of dollars in sales and profit increases
  offered by these services targeting the
  Unbanked.  These locations will quite simply
  become banks for the unbanked Keith Brand

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Value Types of Activities Done at In-Store Fin
Ctrs
Types of Activities Done at Financial Center in
Retail Store
Value of In-Store Financial Centers

Synergistics Research Corp study The Threat of
Alternative Financial Providers
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III. Mobile BankingMarket Penetration
Synergistics Research Corp study Mobile
Payments The Consumer Perspective
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Mobile and the Underbanked/Unbanked

• Mobile banking is gaining more popularity with
  the underbanked than it is with conventional bank
  customers. For the underbanked, who use the
  service with prepaid cards, the attraction of
  mobile banking lies in its price, ease-of-access
  and portability, compared to other means of going
  online.

Javelin Research Strategy
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How Likely Would you Be to Conduct Financial
Activities on a Cell Phone?

• LIH are more likely to use mobile phones for
  financial activity than more affluent HHs

Synergistics Research Corp. study titled Mobile
Payments The Consumer Perspective
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Innovations in Mobile for the Underbanked

• Plastyc, a prepaid card company, said it began
  rolling out a modern mobile account-access system
  after it noticed that about 30 of its users were
  gaining access to their accounts from
  Internet-connected mobile phones within a given
  month.
• Green Dot offers mobile account access through
  text messaging and said it plans to improve its
  mobile experience by developing a dedicated
  application. For example, it may offer a remote
  deposit capture feature to let users fund its
  prepaid cards by snapping photos of checks with a
  mobile phone's built-in camera.

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IV. Social Media
Social Media represents an important contact
point used by 87 of internet HH. 44 of
population has had contact with a FI through a
social network
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Extent Receive E-Mail from Current Financial
Institutions

• Three-fourths of Internet households receive
  e-mail from financial institutions with which
  they have accounts. LIH (less than 50k) were
  receiving these emails at a slightly smaller
  incidence.

Synergistics Research Corp. study titled Using
Social Media in Financial Services Marketing
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LIH use of Social Media for Fin Svs
Activity lt35k 35k-50k
Use Facebook? 48 57
Twitter users? 19 20
Visit social network sites regarding fin topics? 19 23
Read financial topics on Twitter? 26 27
Financial decision due to comment on web forum/BB/fin comm? 26 22
Established rel w/ FI or FA due to contact on web forum/BB/fin comm? 14 12
Synergistics Research Corp. study titled Using
Social Media in Financial Services Marketing
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Action Plan

1. Your biggest competitive threat are retailers,
   who have LIH traffic and are a weekly
   destination, provide the core LIH products and
   are using pre-paid cards to capture this segment.
   Banks, with assistance from government
   programs/subsidies, could become more of a
   threat. FSCs must become a Destination!
2. FSCs must integrate Mobile based delivery
   channels that is where the younger generation
   manages their life
3. Do not ignore social media young get advice,
   share experiences and interact regarding
   financial services become a social media
   participant!