The European experience suggests how U.S. banks can target the underserved.

Banks seeking to expand their revenues and profit need look no further than the estimated 40 million U.S. households that currently are underserved by financial institutions.

A recent white paper from Zoot Enterprises, Bozeman, Mont., points out the misconception that this segment has greater credit risk than existing bank customers.

"In fact, when surveyed, the reasons many of the underserved don't use traditional financial products had more to do with their lifestyles and mind-sets than it had to do with having failed in the traditional financial model," writes Tiffany Dood in the paper, "Giving Credit Where Credit Is Due: Serving the Underserved in the United States Through Insight into the European Credit Culture."

Zoot, a bank technology company that specializes in credit decisioning and loan origination, suggests that some of the successful European credit strategies targeting the underserved population might be model for similar initiatives in the United States.

Use of consumer credit products in Europe has been expanding at 7 percent annually for the last several years, despite the fact that Europeans traditionally have used far fewer credit products than Americans. A recent United Kingdom study, for example, found that half of the population is not actively using any credit product.

The underserved in Europe give similar reasons for their situation as the underserved in the United States. The four factors that shape the attitude of the underserved: a history of limited credit product use; preference for cash; stigmas associated with credit; and concerns about accessibility and convenience.

Much of the current European credit expansion is directly attributed to banks there increasing support for such technologies as online banks and mobile banking--and experimenting with new technologies such as embedded microchip products, says Dood.

Europeans accepted online and mobile banking much more quickly than bank customers in the United States. As early as 2003, about 20 percent of the European population was already banking online regularly. The ease and convenience of online and mobile banking made these two services more...