Financial institutions seeking to attract new customer markets, including the underbanked, need a variety of strategies to reach the millions of consumers that are conducting their financial business outside of the traditional financial arena. A major obstacle to accessing the underbanked population has been the lack of market research and the lack of conduits to connect to underbanked consumers. The existing marketing and distribution channels that financial institutions use to reach customers are often ineffective in reaching the underbanked population; partnerships with nonprofits can help to overcome those hurdles. Affinity marketing is a promising business strategy that could help financial institutions better understand and access this market. Nonprofits understand the needs and complexities of underbanked consumers and could help financial institutions successfully navigate the new market territory.
While nonprofits such as universities and hospitals have long-established affinity relationships with financial services firms, the types of nonprofits that are the focus of this research – those with a general mission of serving lower-income communities and minorities – have not traditionally held these relationships. At the same time, there are differences among nonprofits that do serve these populations: some are social service organizations, others have a community development mission, and others are true community-based nonprofits, such as religious institutions.
This paper identifies likely affinities among underbanked consumers and explores the potential of marketing financial products to these consumers through community-based nonprofits and nonprofits that provide advocacy and social services. Insights for this paper were gleaned from market research as well as 18 in-depth interviews with representatives from national and local nonprofits focused on improving access to financial services and asset-building; national marketing firms; community development credit unions; and a regional bank involved in an affinity effort with local churches.