Retailers can focus on the underbanked to bolster sales

During 2017's second quarter, retail sales in the U.S. began declining, falling 0.2 percent between May and June, according to data from the Census Bureau. After recovering slightly in July to reach about $475 million in total sales, the metric dropped again in August, contracting by 0.2 percent yet again. Retail trade, meanwhile, dropped 0.3 percent.

"U.S. retail sales have been on the decline for much of 2017."

Some of the August downturn resulted from Hurricane Harvey's ravages and couldn't be avoided. However, U.S. News and World Report pointed out that 2017's retail difficulties have effectively endured for the whole year, with each month showing declines, minor gains or no statistically significant changes.

It's clear the decline isn't an aberration and will require correction via changes in sector-wide practices. Businesses tailoring their approaches to the underbanked and making use of alternative credit data to assess the financial stability of unconventional spenders could be a boon to this flagging economic metric. 

An ignored demographic
According to the Federal Deposit Insurance Corporation's 2015 survey, 24 million American families can be considered underbanked - having a checking account but little else in the way of mainstream financial services - and 9 million are unbanked, lacking accounts altogether. The clearest reason why retailers should focus on this demographic is its sheer size. While it hasn't grown in the past few years, nor has it contracted, and many businesses haven't substantively approached these individuals. 

Trust matters
The Atlantic reported that those who use banks sparingly or avoid them often do so due to doubts regarding big banks' trustworthiness. Granted, the quick-fix methods they may rely on instead, like prepaid debit cards, payday loans and check-cashing services, aren't paragons of financial integrity either. Yet most underbanked Americans are lower-working class or working poor, and those alternatives are readily marketed to them. 

Retailers that accept the credit of underbanked customers can create a sense of trust that these individuals don't readily have in the financial system. And by employing alternative credit reporting services that count metrics such as rent and utility payments, they'll see that a low FICO score doesn't automatically indicate fiscal irresponsibility.

Companies catching on
Amazon is probably the most high-profile business catering to the American underbanked through its Amazon Cash credit service, but it's not the only one. The burgeoning fintech sector shows particular interest in the demographic: Finextra reported Santander recently invested $30 million in the PayJoy service, which helps those without credit histories buy smartphones, and app startups like BankMobile and Acorn target the underbanked with their services - an all-in-one mobile banking platform and small-scale investment app, respectively.

With sales in their current state, retailers can't afford to ignore any untapped market, including those lacking traditional financial resources. 

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