Recent data1 shows that more than 68 million consumers in the United States fall into the ‘underbanked’ category. This designation includes those who have existing banking relationships — usually a checking account — but for various reasons lack, or choose other, traditional credit options. Revenue from interest and fees paid by the underbanked exceeds $78 billion annually, so an immense opportunity lies with them. Still, lenders continually face the challenge of effectively and intelligently managing lending risks for these consumers. To that end, FactorTrust, the leading provider of underbanked consumer data, analytics and risk scoring solutions publishes The FactorTrust Underbanked Index.
This quarterly analysis offers a range of data points including Demographic and Seasonal Effects. It is constructed from 125 million loan transaction records and a consumer sample population strikingly similar to the actual U.S. population. (Examples: 10.16 percent of FactorTrust consumers live in California, a state with 12.12 percent of the country’s population. Florida comprises 6.15 percent of the U.S. population; 6.33 percent of the FactorTrust consumers live there.) The current edition addresses Loan Behavior trends and statistics and reveals surprisingly positive credit scores from FactorTrust, portraits of banking relationships and a thorough dissection of default rates.
“The FactorTrust Index paints a detailed and accurate picture of behaviors tied to this very valuable but underserved segment because we’ve compiled the industry’s most comprehensive data on it,” states Greg Rable, CEO of FactorTrust. “We know lenders need to be innovative every single day, especially with the challenges of reaching the underbanked. This data enlightens lenders as to who these people are and how to best accommodate that market segment.”
Key findings outlined in the Loan Behavior edition of The FactorTrust Underbanked Index offer revealing data points on:
- Credit Scores
- Average Loan Amount Requested
- Approval Rates
- Default Rates by State & Age
- Banking Relationships
- Loan Types
- Borrowed Principal by Age
A copy of the Loan Behavior edition of The FactorTrust Underbanked Index as well as an infographic that depicts the data can be viewed at: ws.FactorTrust.com/UnderbankedIndex.
Key learnings from the Loan Behavior edition of The FactorTrust Underbanked Index include:
Credit Scores. The average FactorTrust credit score in its extensive database is 701.
Average Loan Amount Requested. Since Q1 2012, the average loan amount requested was $490.
Approval Rates. 43.6 percent of scored applications pass lenders’ initial criteria.
Default Rates by State. Minnesota (7 percent) and Georgia (8 percent) reported the lowest loan default rates in the country, followed by Maine (10 percent), North Dakota (12 percent) and Massachusetts (13 percent). South Carolina (46 percent) and North Carolina (42 percent) have the highest, trailed by New Mexico, Kentucky and Mississippi, which all tied with a default rate of 33 percent.
Default Rates By Age. One of five borrowers is a millennial (18-30 years old) and the average default rate for this consumer was 22 percent in the last year. The 31-40 year old bracket owns the next highest default rate (17 percent).
Banking Relationships. Over 18,000 banks are represented in the index, which equates to virtually every U.S. bank. In the U.S., three of the top 10 consumer banking relationships exists with Texas banks: First National Bank of Texas, USAA and Woodforest National Bank. Additionally, 99 percent of underbanked consumers have checking accounts.
Loan Types. 93 percent of loans in the FactorTrust database are online.
Borrowed Principal by Age. In the past year, the 31-40 year old bracket borrowed the highest principal (29 percent of the total borrowed) closely followed by 41-50 year olds (28 percent). 61 year olds and older borrowed the least (8 percent). Comparing the past year to the lifetime of the FactorTrust database, the 18-30 years olds gained the greatest share, moving from 12 percent of the total borrowed to 17 percent.
A copy of the Loan Behavior edition, as well as past issues of The FactorTrust Underbanked Index, can be viewed at: ws.FactorTrust.com/UnderbankedIndex. To receive the quarterly Index automatically via email, sign up at ws.FactorTrust.com/UnderbankedIndex, or simply contact media@FactorTrust.com.
About The FactorTrust Underbanked Index
Published quarterly, The FactorTrust Underbanked Index provides a range of data points including demographic, loan behavior, seasonal effects and others, to help shed light on underbanked consumers. The Index assists financial institutions, associations, analysts and media interested in tracking, benchmarking or understanding the needs of underbanked consumers. Data is based on expert analysis from FactorTrust’s database of millions of records related to underbanked consumers collected by the company each quarter. For more information, please visit ws.FactorTrust.com/UnderbankedIndex.
FactorTrust has compiled the most comprehensive data on the underbanked market in the industry through lending portfolios that report data daily, in real time. This daily loan performance data on millions of underbanked consumers is analyzed and combined with leading third-party data attributes in order to provide instant lending decisions using the company’s comprehensive scoring platform. Lenders are continually faced with the challenge of how to effectively and intelligently manage risk to capitalize on this segment. This analysis uses data not typically reported to the credit bureaus, and is invaluable in helping consumers have access to better borrowing options, while also providing a more accurate assessment of the consumer for lenders. For more information, please visit www.factortrust.com or contact FactorTrust at 1-866-910-8494.
1 Data based on a report by the Center for Financial Services Innovation.
- Banking & Budgeting
Carrie Crabill, 404-214-0722 Ext.102