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Table of Contents

Lead Story

Oct. 1, 2011: D-Day for debit cards?


Industry Update

New Visa, MasterCard rates take effect

Heartland offers Durbin impact insights

Operation Swiper succeeds, cyber theft continues

World payments growing in recession

Trade Association News


An interview with Douglas Bergeron

Ken Musante
Eureka Payments LLC

Underbanked in America

Patti Murphy
ProScribes Inc.

Research Rundown

Helping to expand services while minimizing costs

Square versus the payments world

Tim McWeeney

Payroll and gen Y

Excelling at social media marketing

Selling Prepaid

Prepaid in brief

First Data powers prepaid for Google Wallet

Prepaid spot-on for incentives


Merchants lack focus, fraud eats profits

Patti Murphy
ProScribes Inc.


Street SmartsSM:
Vertical market tradeshows hold many helpful surprises

Bill Pirtle
MPCT Publishing Co.

Fraud's twists and turns in 2011

Nicholas Cucci
Network Merchants Inc.

Customer longevity in the new commerce chain

Dale S. Laszig
Castles Technology Co. Ltd.

Steps toward efficient IRS 1099-K reporting

Troy Thibodeau
Convey Compliance Systems Inc.

Company Profile

Lead Source Call Center

New Products

A complete online payment center

Transaction Express
TransFirst LLC

Cloud-based POS comes in three flavors

Moneris Solutions Inc.


It really is about you



Resource Guide


A Bigger Thing

The Green Sheet Online Edition

October 24, 2011  •  Issue 11:10:02

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Underbanked in America

By Patti Murphy

Editor's Note: This article was published by Sept. 24, 2011; reprinted with permission. 2011 All rights reserved.

It's scary, but it's true: a large and growing number of Americans would be hard-pressed to get their hands on money to cover emergencies, such as illnesses or unexpected auto repairs.

The National Bureau of Economic Research revealed in May 2011 that half of all U.S. households would be unable to come up with $2,000 within 30 days to cover an emergency of this sort. What's more, an additional 19 percent said the only ways they could obtain that kind of money would be to pawn possessions or strike deals with payday lenders.

More recently, a National Foundation for Credit Counseling survey found that only 36 percent of Americans would be able to tap into savings accounts to cover an unplanned expense of $1,000. The remaining 64 percent said they would have to turn to family, friends or nontraditional lenders; pawn possessions; or forego paying other financial obligations to cover a $1,000 emergency, the NFCC reported.

This is not just a data exercise. I know folks in this situation; I suspect many readers do, also. A few years ago, I urged my friend Linda to open a savings account and to start making regular (albeit modest) deposits. A single mother of three who lives below the "poverty line," Linda agreed, but reaching and maintaining her goal of at least $1,000 in savings has been a struggle.

"Every time I get close, something comes up. This time it was the truck," she said recently. Sure, but things would have been worse had she not had $600 in a bank that she could use for those truck repairs. "People often say they can't afford to save, but the truth is they can't afford not to," said Gail Cunningham, a spokeswoman for the NFCC. "Without adequate savings, consumers have poor resolution choices when an emergency arises."

Washington hosts topic

Washington was abuzz this week with talk of the unbanked and financially underserved - a sector of the U.S. population that exceeds 25 million households. There was a public policy forum on Capitol Hill Sept. 21, sponsored by several think tanks, including the National Urban League, the Competitive Enterprise Institute and the Hispanic Leadership Fund.

A day later the House Financial Services Subcommittee on Financial Institutions and Consumer Credit brought together regulators, academics and advocates for consumers and banks to address the availability of credit for consumers, or more precisely the lack of affordable bank credit for low-income Americans. (The Federal Deposit Insurance Corp. estimates two-thirds of unbanked and underbanked U.S. households earn less than $50,000 a year.)

One witness at the House hearing, Gerri Guzman, Executive Director of the nonprofit Consumer Rights Coalition, gave a compelling account of how this plays out. "I know first-hand that traditional bank products don't always offer a realistic solution for people without a significant financial cushion to help absorb unexpected expenses," Guzman said. "I relied on a payday loan when I was in danger of losing my home.

It was simple, transparent, and less expensive than bouncing a check or making a late payment. And I knew it wouldn't damage my credit rating."

Representing the Center for Financial Services Innovation, Melissa Koide, the group's Policy Vice President, raised concerns about lax oversight of nonbank lenders and called for stepped up regulatory scrutiny and better consumer protections. And she pointed to the newly opened federal Consumer Financial Protection Bureau as a logical starting point.

Earlier in the week, the full Financial Services Committee announced that it has five bills under consideration that address small company credit needs.

And what about consumer credit and the unbanked? My research suggests only one bill addressing unbanked Americans is on the panel's docket. That bill, titled the FFSCC Charter Act, would direct the Office of the Comptroller of the Currency (the federal regulator that charters many of the largest banks in the country) to establish procedures for chartering national, nonbank credit providers to the unbanked.

Patti Murphy is Senior Editor of The Green Sheet and President of ProScribes Inc. She is also the founder of Email her at

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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