The Financially Underserved Market: What Drives A $173 Billion Opportunity?

Financial Health Network
3 min readDec 1, 2017


Building financial health can be a challenge for financially underserved consumers. What products address their needs in this evolving marketplace?

To learn more about the underserved market opportunity, download CFSI’s 2017 Financially Underserved Market Size Study.

How did financially underserved consumers borrow, spend, save, and plan in 2016? From the increased prevalence of digital product offerings to the rapid growth of alternative small business credit options, CFSI’s 2017 Financially Underserved Market Size Study explores key dynamics and opportunities in the $173 billion industry.

The report, the seventh in an annual series, sizes consumer spending on 29 financial products and services across five market segments in 2016:

  • Single Payment Credit: $39 Billion
  • Short-Term Credit: $58 Billion
  • Long-Term Credit: $52 Billion
  • Payments and Deposit Accounts: $17 Billion
  • Other Products and Services: $7 Billion

The overall market grew by 6% last year, and the report projects a further increase of 8% in 2017. But the market’s large size and continued growth are only part of the story. Several significant trends are driving market opportunities for providers to support the financial health of underserved consumers:

Retail Credit Dominates Consumer Spending, While Secured Cards Hold Further Growth Potential

Included for the first time in this year’s report, retail credit cards resemble subprime credit cards in terms of average balance and interest rates, but constitute a much larger credit card segment for underserved consumers. Promotional features like product discounts and no-interest startup periods may drive a high rate of account opening, but consumers who don’t pay off their balances soon enough can see the cost of credit increase rapidly.

Secured cards may not rival retail or subprime cards in volume of usage, but the potential market to serve credit-challenged consumers is vast. New data show that the segment has grown steadily over the past several years. Security deposits allow consumers with low or non-existent credit scores to begin building or rebuilding their creditworthiness, and cardholders looking to do just that represent a majority of secured cards’ customer base. Broader adoption may require secured card providers to adopt attractive features prevalent in unsecured card markets.

Frequent Users Drive Vast Overdraft Revenue

Overdraft spending dominates the single payment credit segment, but the largest portion — nearly 75 percent — of overdraft revenue comes from a relatively small number of frequent users. These consumers cling tenuously to the formal financial system, and there is an opportunity to help them find a more secure foothold.

Lack of Risk Assessment Leads to Opportunity

Many credit products accessible to underserved consumers feature one-size-fits-all rates and fees, which means these products aren’t typically priced according to risk. Meanwhile, millions of consumers remain unscorable through traditional credit risk assessment. Both of these factors spell opportunity to develop more nuanced underwriting and credit-building techniques, especially if regulatory attitudes towards such techniques remain favorable.

Nonbank Small Business Credit Grows by Leaps and Bounds but Unmet Demand Remains Widespread

Supply of formal small business credit continues to lag demand, particularly in the markets for businesses with under $1 million in revenue. This shortfall has driven small businesses towards nonbank small business loans and other substitutes. These products have grown accordingly, but small businesses face a diverse array of financial issues. Addressing issues like insufficient capital reserves and lack of time for financial management will require innovation on other fronts as well.

FinTechs Make Inroads as Storefront Products Scale Online Offerings

Several product markets are feeling the impact of increased digitization. The rise of online tax filing, digital wire transfers, and even ecommerce rent-to-own shops points to the rapid incursion of new technology into previously brick-and-mortar domains. Even products that involve exchange of collateral — such as auto title loans — are beginning to experiment with digital systems.

To learn more about the underserved market opportunity, download CFSI’s 2017 Financially Underserved Market Size Study.



Financial Health Network

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