Twenty-two million households in the United States do not have a checking or savings account, according to a May 2005 research report by the Chicago-based Center for Financial Services Innovation. And bringing financial services to those households is quickly becoming big business.

The unbanked are a good market to reach, said Will Sowell, general manager of CashWorks, an automated check-cashing and bill payment solutions provider. "The underserved population … spends an estimated $10 billion annually on transactions such as check cashing, money orders, money transfers, prepaid cards and bill payments."

In general, the unbanked are people who have been ignored by financial institutions, so they've had to seek services like check cashing from other outlets.

Potential for revenue

According to CFSI's report, the majority of the unbanked and underbanked are more likely to go to retailers for financial services. As a result, banks and credit unions have their work cut out to get them in their lobbies.

Salisbury, Md.-based ESP Consulting Group found that only 52 percent of the U.S.'s ATMs are owned by financial institutions. The rest are owned and operated by independent sales organizations or retailers. The CFSI report noted, "A fifth of ATM transaction volume growth, which represents 1.19 billion transactions and $2.4 billion in revenues, has been picked up by non-bank firms. This substantial growth in non-branch ATMs signaled a major turn in retailers' involvement in the provision of financial services."

In other parts of the world, FIs have spearheaded the effort to reach unbanked and underbanked populations. But in the U.S., alternative service providers such as check-cashing companies and retailers stepped up to the plate before FIs.

There is a great deal of excitement about automated financial services at the retail level in the U.S., according to Dave Grano, president and CEO of Oregon-based VERO, a financial technology company that is developing check-cashing methods to help FIs and retailers reach unbanked customers through ATMs. That excitement is why many companies are joining the force.

"We're in the process of launching several projects in urban areas," said Vijay Chattha, spokesperson for advanced-function financial management firm Swipe USA. "Overall we are coming at it from a retail standpoint. Basically, our goal is to bring dignity to some of those customers who are underserved or unserved right now."

Kiosk developers Info Touch Technologies and Kiosk Information Systems have partnered to develop solutions to reach the unbanked. It's a niche the two companies fell into, said Info Touch chairman and CEO Hamed Shahbazi.

"Phoenix was our original market, and it's a heavily Hispanic market," Shahbazi said. The 2000 U.S. Census shows that of the unbanked, 46 percent are black and 34 percent are Hispanic. Some experts believe even those estimations are far too low.

"Just by matching some of the services up with a demo, we were able to see what services were going to take off. … We were the first in the market to work with this segment of the population, and that's where we're focused."