When it comes to lower income and underserved consumers, thechief challenge facing some mainstream credit unions and banks maynot be how to serve them competitively but whether to serve them atall.

Some analysts argue that consumer banking is increasingly movingtoward using technology and communication platforms that may becomesteadily less available to lower income consumers.

With the constant changes in the marketplace, some financialinstitutions are also finding it necessary to assign fees to thesorts of services that primarily lower income consumers use inorder to offset their costs. This will likely only increase thebarriers to access for consumers who have already shown littleappetite for paying banking fees.

“What we need to comprehend is that the future of technology infinancial services is no longer in the future,” said Brett King,author and financial services consultant. “The future is now. Weare in the future.”

King is the author of Banking 2.0, a book that depictsthe changing market for financial services as technology meetschanging consumer demands. This is particularly true forconvenience, a demand which King estimates will drive the marketfor at least the next decade.

“There will be very little, if anything, that will trump thedesire for convenience,” King told an audience of over 500 creditunion executives attending CO-OP Financial Services THINK 2012conference in Boca Raton, Fla., in April.

King illustrated his point by showing the THINK attendees avideo of an 18-month old infant interacting with different sorts ofcommunication technology. In the first minutes of the video, theinfant is shown playing with a tablet computer, using the icons tomove images on the screen, smiling and squealing in delight. Insubsequent minutes of the video, the infant is given two differenttypes of magazines. Rather than treat them as magazines by flippingthe pages and looking at the pictures, the infant treats them inthe same way she did the tablet computer and looks up frustratedfrom the effort.

“Clearly, for this child, magazines are merely iPads that do notwork,” King told the audience. “The future is happening right nowand we have to prepare to meet it as financial institutions.”

The effort to meet consumers demand for convenience, Kingexplained, may mean financial institutions will continue to movemore of their consumer banking services to mobile phones, smartphones and other electronic platforms so that they will be able toobtain financial services no matter their timing and location. Mostconsumers actually enter a bank or credit union branch as little astwo or three times year and some not that often, he pointed out,adding this trend will likely continue.

David John, a financial services analyst and expert at theHeritage Foundation, a primarily conservative think tank, agreedwith King that the trends toward both convenience and technologywill likely continue. However, neither banks nor mainstream creditunions have addressed the need for banking platforms or othertechnologies that might be available to lower income consumers.

“It's a fascinating question and I don’t think we have yet seenit answered, but I remain optimistic that it will be answered,”John said.

His optimism is rooted in the likelihood that few mainstreamcredit unions or banks will develop their own proprietarytechnologies or platforms for lower income customers to use due tothe expense of doing so, but will instead license these platformsfrom technology companies which will find the broader financialservices market sufficiently large to justify the investment.

John also acknowledged that those technologies have not yet beendeveloped and until they are, steadily larger numbers of lowerincome consumers may find themselves using third party financialservice providers such as payday lenders, check cashing firms,title loan firms and large retailers for basic financialservices.

The largest and most familiar of these is Walmart, theBentonville, Ark.-based retailer that offers products and servicesto primarily lower income consumers who lack relationships withfinancial institutions. The products include check cashing, checkprinting, bill payment and money orders, domestic and internationaltransfer services and ATM services. The retailer also offersprepaid cards and prepaid card reloading, a credit card issued inpartnership with Discover Financial Service as well as aproprietary charge card good in Walmart stores as well as VISA,MasterCard and American Express branded gift cards.

Sarah Spencer, Walmart’s director of corporate communications,said the retailer merely wanted to provide another service. “Weknow that many of our customers either don’t have a bank account orare poorly served by banks given the costs and service issues theyfind with them,” Spencer wrote in a response to questions aboutWalmart's retail financial products. “Walmart’s goal is to providethese unhappily banked or unbanked customers with affordableproducts and services that help take care of their everyday moneyservice needs such as cashing a check, transferring money or payinga bill.”

John largely applauded the efforts of Walmart and otherfinancial service third party providers but agreed that, comparedto some financial institutions, all those entities can provide issomething of a financial dead end. Other than a credit card loanissued with in conjunction with another firm, Walmart cannot offerloans or any of the other mechanisms that might help lower incomeconsumes climb the financial services ladder. John pointed out thata few years ago, Walmart applied for a financial services charterthrough a mechanism provided by the state of Utah but was blockedfrom doing so.

The current emphasis on having financial institutions be theprimary providers of payment and financial transaction services islargely out of step with the rest of the world, John said. Herecounted a story from this past summer where, while traveling inBritain, he needed to have some reimbursement funds added to hisbank account. John said his British hosts were perplexed at howmany steps he had to take to get this relatively simple taskaccomplished. Had he been in Britain, a firm would have sent a textmessage to his bank authorizing the transfer.

“But of course, that can't happen here because we haven’timplemented text message transfer yet,” John observed. Healso noted that in certain African countries, the chief means forconducting financial transactions is the cell phone – not a smartphone or a fancy mobile phone – but a cell phone with textmessaging enabled.The service is widely accessible, inexpensive touse and familiar to almost everyone, he said. However, the provideris a telecommunications company. One organization that is watchingthese developments closely is the National Federation of Community Development Credit Unionswhose member credit unions serve a predominantly lower incomemembership. Pablo DeFilippi, NFCDCU director of membership, seesthe potential challenge but is optimistic.

“Cellular phones, particularly in the immigrant communities, arealready widespread and popular,” he said.