When thinking about the underbanked, it’s easy to assume there are people at the bottom of the economic pyramid who are generally underserved.   What’s not so obvious is what appears as a small fringe of financially disenfranchised people, is actually a very large consumer market: over 100 million adults strong in the US, earning over one trillion dollars per year (that’s an average of $28,000 per household) and spending over $24 billion on financial services in fees and interest alone.

It’s easy to imagine the underserved not getting the best value money can buy.  What surprised me is just how expensive it is to be poor.  It’s not uncommon to spend 4% of the face value of your check to convert it into a currency you can use, cash.  A rainy day could well force you to take out an emergency loan at 500% APR.  Millions spend upwards of 12% to send part of their modest salaries to loved ones in countries like Mexico and Somalia.

Greed and ignorance, by companies and consumers, respectively, are the most commonly cited causes for this situation.  We are quick to blame industry for taking advantage of the vulnerable and quick to accuse the underserved for not knowing the basics of financial services, narrowly or broadly.

The truth is, most businesses which serve this super-segment of the underbanked are more inefficient than they are predatory.  I’ve been amazed by the costs of their legacy systems and fixed overhead, to say nothing of the lack of innovation or automation.  On the flip side, most underbanked consumers turn out to be much smarter and more rational about their choices than I would have ever guessed:  for example, while expensive, a check casher offers a service you can budget for and provides instant liquidity.  Banks take days to give you access to funds, and will routinely charge unexpected over draft fees in return for very little value, readily leading to the proverbial $37 quart of milk ($2 milk + $35 overdraft fee).

Luckily, there are solutions abound.  And the most exciting ones are mash-ups: banks offering check cashing to non-customers; retailers serving as banks; human lenders and automation jointly making credit decisions; products which teach its user, and many more.  I’m constantly amazed by surprising mash-ups yielding profit and impact.  What’s next: payday lenders creating deposits?  Lotteries helping people save?  Nonprofits selling virtual bank accounts?  Credit unions buying check cashers?  Subprime consumers more credit worthy than prime consumers?  Yes, actually.  What’s yours?  You might just discover a billion dollar market opportunity and change the face of poverty all at once