Profiting From The Underbanked (GDOT, NTSP)
Nearly 60 million Americans or about 7.7% of households fall under the category of being “Underbanked”. This term refers to individuals or households without a traditional checking or savings account. According to the FDIC, these people feel they cannot make use of a traditional bank due to insufficient assets or because they don't have social security numbers. The FDIC further states, that about 41.1% of the unbanked households said they are “not likely at all” to open a new bank account in the future.
A variety of alternative financial service (AFS) providers have crept into the market attempting to fill the void left by traditional banks. AFS offer services like check cashing, payday loans, pawn shops and prepaid debit cards. For investors, there are opportunities as well. Mercator Advisory Group forecasts that the prepaid debit card market will expand at an astonishing 92% compound annual growth rate until 2012 and will reach $118.5 billion in annual funds loaded.
For investors, that kind of growth could be too good to pass up. For those looking for a play on the underbanked, prepaid debit card companies Green Dot (NASDAQ: GDOT) and Netspend Holdings (NASDAQ: NTSP) could be the best way to participate in the sectors growth.
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