Expanding Financial Services to Underbanked Consumers: How Tax Preparation Partnerships Can Help Bridge the Gap

This paper explores opportunities for using income tax preparation to bridge the gap between the underbanked consumers financial needs and services that can meet those needs. It looks at lessons learned from existing programs and considers additional approaches that might be tested in the future.

The paper states that financial institutions interested in reaching underbanked families with financial services are constantly searching for ways to effectively market their services to them. Financial institutions and other service providers have recognized the market gap for unbanked families that do not have access to financial vehicles and have developed efforts to reach these consumers at tax time. They use tax time as a marketing strategy for financial services through the provision of special account products, emergency loans, and deposit vehicles such as stored value cards. The paper discusses six opportunities for linking financial services and tax preparation for underbanked filers:

• Bank accounts for the unbanked;
• Alternative refund anticipation loans;
• Stored value cards;
• Individual development accounts;
• Retirement savings;
• Refund splitting.