It’s not surprising that more banks are closing branches. Banks have been doing so for many years now. Most people cannot remember the last time they went to a bank. Online banking coupled with banking software has eliminated the need for many to physically get to a brick and mortar bank, wait in line, and start a transaction with a teller.
A recent study by the Federal Reserve Board, however, points out that rural customers and small businesses in rural communities have been affected far more than those customers in urban areas. Of the counties analyzed in the report, more than half lost bank branches between 2012 and 2017. Many people have found technological substitutes, but still issues like solving problems, submitting loan applications, and simply making deposits and withdrawals can be a challenge.
For the specialty finance community, including buy here-pay here dealers, this poses both challenges and opportunities. BHPH customers are already underbanked. Poor credit and other financial issues may even make it difficult for them to open a bank account.
That’s why dealers need to work with their customers and cater to their specific needs. Today, only 10 percent of all payments are made using cash. Dealers must be ready and willing to find alternatives.
Many BHPH customers are paid by receiving pre-paid debit cards. Having the ability to take a payment, and issue a pre-paid debit card with the balance is just one of many conveniences dealers can offer customers. Dealers can also set up a “pay-by-text” system, and there are many providers for this service. It not only gives dealers the ability to send a text reminding their customers of payments due or overdue payments, but it also gives them the ability to communicate with their customers with special offers, holiday messages, and reminders for service maintenance.
Most of the technological alternatives to banks are typically costly, and these costs must be factored into the dealer’s overhead, but there is no better money spent than making it easier for your customers to pay your ontime.
The Federal Reserve study also found that adoption of digital banking services has been more gradual among consumers who are older, have lower incomes or fewer years of formal education, or who live in rural areas. This lower adoption rate suggests that bank branch closures may present greater challenges for these individuals. This is definitely important information for the BHPH dealer, who should take these factors into account when underwriting a finance contract, and with collections efforts.