As a result of the financial crisis and the sweeping regulatory changes that occurred over the past few years, banks face a crucial question: how to offer sustainable, reasonably priced products to millions of moderate- and low-income consumers. This consumer segment often carries low account balances, makes numerous small transactions, and needs credit and savings options. The answer lies in forging innovative, bank-nonbank partnerships that are designed specifically to meet this consumer segment’s financial services needs. In these partnerships, banks engage with nonbanks to provide products that feature low barriers to entry, are easily accessible and come with transparent, upfront prices. Banks play critical, yet behind-the-scenes roles in these business models. They may issue the products, underwrite the loans, and provide back-office processing and customer support. Meanwhile, nonbanks may include retailers, processors, program managers, and many others. They perform a variety of functions, including developing, distributing, marketing and managing the products. It’s the nonbanks that typically interface with consumers. These partnerships open up vast new possibilities for banks to provide products that benefit consumers and that leverage each bank’s particular value-add.

Published on January 20th, 2011 by Banking Strategies