When I was a young girl in the U.S., my parents – both born in Mexico – visited the local U.S. Postal Service (USPS) office to do more than buy stamps and mail packages; they also bought money orders. Without a banking relationship in our community, my parents considered the post office to be a dependable and acceptable way for them to conduct these specific financial transactions.
Today, as an adult and a strong advocate of the credit union movement, I find myself reflecting on my family’s experience. My parents bought money orders at the post office because it was convenient, reasonably priced and they weren’t asked a lot of questions. Simply stated: The post office fulfilled a simple need.
What if the post office had offered other financial services? Services similar to those offered by today’s credit unions? Would they have chosen to use those services?
The changing landscape of financial services, coupled with struggles faced by the USPS, is creating what could be perceived by credit unions as an unsettling reality: Competition from post offices, especially among minority populations, is a real threat.
Consider the following:
Financial institutions have closed about 1,900 branches over the last few years, leaving many low-income neighborhoods without a place to conduct banking. As a result, non-traditional financial entities that levy huge fees, such as payday and cash lenders, have become go-to spots for many who live in these areas.
At the same time, the USPS delivers more mail to more addresses in a larger geographical area than any other post in the world. It handles 40 percent of the world’s mail volume to more than 151 million homes. But in the age of technology, it struggles to keep up. First-class mail volumes continue to drop, and billions of dollars in net loss just this year threaten the livelihood of this “national treasure.” Post offices in rural communities across the country have experienced closures and reduced hours in recent years.
To recalibrate and create relevancy, the USPS is considering various ideas to leverage interest and loyalty from financially underserved communities, which includes Hispanics, the youngest, fastest-growing minority group in the U.S. One of its ideas capitalizes on continuing interest in e-commerce. The other is centered on postal banking. Their goal is to make check-cashing and other basic financial services part of their product/service mix.
The very approach my parents relied on when I was a child is what may challenge the entire community financial institution industry.
The USPS may be able to offer financial services, such as electronic money orders, bill payments, surcharge-free ATMs and affordable microloans, at a lower cost than credit unions. It’s also well-positioned to serve those who are currently underserved for several reasons. Among them:
Once an idea is more thoroughly understood, it’s easier to take a proactive approach. Knowledge can be leveraged; ideas exchanged. Consider the following questions: Can credit unions compete if post offices transition into financial services locations? Can they effectively connect with and earn the trust of underserved communities? Is it feasible for credit unions to develop personalized products?
Without hesitation, I believe the answer is “Yes!” to all of the above. You may be wondering why I’m so optimistic.
Credit unions have long prided themselves on knowing their members and potential members. They already provide consumers an alternative financial route to traditional banks. So, targeting consumers who do not want a relationship with a “mega bank” is already in the wheelhouses of U.S. cooperatives.
Currently, more than 100 million Americans are using credit unions. According to the World Council of Credit Unions’ annual Statistical Report survey, global credit union membership grew by an additional 10 million people in 2014. Growth resulted for various reasons:
All that said, staying ahead of the competition requires getting creative. Three ideas comes to mind:
Without question, it’s preferable to be in a position to choose one’s response vs. being in reactionary mode. Keeping a watchful and curious eye out for what’s transpiring with the USPS will empower credit unions to be at the forefront of growth trends.
It’s said wisdom comes with age. I’ve come to understand that when acclimating to anything new (much like my parents did when they arrived in the U.S.), it’s liberating to have alternatives. Being limited to one way of accomplishing something feels constricting. I’m confident had a credit union been an option for my parents, they would’ve felt welcomed, connected and understood the endless possibilities that occur with strategic financial guidance.
Instinct and experience tells me there are hundreds, if not thousands, of other immigrants interested in achieving their definition of financial success. The benefit of a credit union partner that proactively asks questions so as to guide members along the path of their entire financial journey – from selecting what types of accounts to open to planning for significant milestones such as college or a new home – is priceless. So is the peace of mind that comes with it. I know. I’ve walked in those shoes.Leave a comment
The movement added another Juntos Avanzamos-designated credit union this spring. Welcome, Community 1st Credit Union!
The designation, which translates to “Together, we advance,” is a national recognition of the work and commitment made to offer financial services to the Hispanic community. On May 5, 2016, we were thrilled to join Guadalupe Sanchez Salazar, Consulate General of Mexico, and other local dignitaries in Ottumwa, Iowa, to celebrate the designation with Community 1st Credit Union.
For many Hispanics, navigating the U.S. financial system can be challenging. Credit unions make the process easier. Community 1st is leading the way and hopes to inspire other credit unions around the country to realize the importance of embracing Hispanic community initiatives.
Community 1st is the first credit union in Iowa to receive the designation, which our firm and the National Federation of Community Development Credit Unions (the Federation) recently expanded into a nationwide program. The cooperative worked with our team to set a strategic plan for becoming a fair, dignified and affordable option for the local Hispanic community.
Community 1st is an exemplary financial institution that understands the importance of achieving internal readiness before launching into a Hispanic growth strategy. Notably, 10 percent of Community 1st’s more than 200 employees are bilingual.
“As a credit union, we have a mission to serve underserved populations,” said Anne Hagen, Community 1st vice president of marketing. “We — all credit unions — are not-for-profit institutions. Part of our ‘profits,’ we give back to the community.”
Even though most credit union leaders are aware of the growing Hispanic population in their fields of membership, many are are unsure how to begin serving this young, fast-growing, influential community. Half the battle is developing the right mindset within the credit union. The ultimate achievement is a collective state of mind in which the entire organization believes serving the Hispanic community is not only the right thing to do, but also a profitable, priority business strategy.
Kudos to Community 1st for becoming the first credit union in Iowa to achieve this important milestone.Leave a comment
My alma mater, Iowa State University (ISU), has begun to examine how it can improve diversity and inclusion among its students and staff. Naturally, it’s an initiative about which our entire team is excited and happy to support however we can.
This spring, I had the terrific opportunity to share my student experience at ISU, as well as my thoughts on how the university can become even better at supporting multi-cultural students and staff. What follows is an excerpt of the article I contributed to the university’s alumni publication, Visions.
This particular issue is packed with insights from other passionate ISU supporters and students. Many of their thoughts are applicable to the credit union environment, as well. So, if you have a few minutes and are curious as to the ways in which multi-cultural consumers experience different facets of their life at different stages of their journey, I’d encourage you to give it a read.
My quest toward a college degree was far from a given for me. As the daughter of foreign-born parents who hadn’t attended college in Mexico nor the U.S., I knew it was up to me to own the responsibility. I was fortunate to have friends and advisors at Perry (Iowa) High School to guide me through the entrance exam, application and financial aid processes. Together, we navigated what could otherwise have been a long, confusing road.
I’m sharing this story because I believe it’s an experience shared by many first generation Latino Iowans.
I’m filled with gratitude as I as I think about ISU’s courage in choosing to ask the question: How can we be better [at attracting and serving Latino students]?” Imagine ISU as the premier four-year university attracting, retaining and graduating young, influential multi-cultural students.
Even though more multi-cultural students are attending college than ever before, they tend to choose two-year degree programs because they attend school part-time, live outside campus and have outside responsibilities (such as providing and caring for family members). If this dynamic is altered and multi-cultural students begin to feel part of a larger whole, I believe they, along with their families, will create thriving communities that perpetuate growth and change across the state and nationwide.Leave a comment
While more than a third of U.S. consumers use credit cards most often to make purchases, just 19 percent of U.S. Hispanics do the same. That is not to say members of this growing and increasingly influential minority group do not own credit cards. In fact, nearly 60 percent have one in their wallets.
Why, then, do Hispanic credit cardholders appear to prefer other methods of payment, such as cash and debit cards?
It’s an issue I’ve studied for several years as part of an Affiliates Management Company work group. The group counts Corey Skadburg, a credit card expert and the director of credit and risk for Coopera sister company TMG Financial Services, among its members.
“The majority of credit card products on the market today are not geared toward the specific needs of the Hispanic market, particularly for those individuals who may not have traditional credit or for whom fees are a major turn off,” Skadburg said. “It’s easy to see how that lack of focused attention and customization can feed an apathetic relationship. But this is a market the industry simply can’t ignore. We expect to see more credit cards issuers – both large and small – funnel increased resources toward getting it right with Hispanic cardholders in 2016.”
As Coopera has advised work groups, steering committees and industry associations, it’s important to recognize the Hispanic market is multifaceted. We know, for instance, not all Hispanic consumers lack traditional credit. We know there are niche and subgroups who all want different things from their financial products, including credit cards. This will be an important consideration as the credit union and other card-issuing industries evolve to serve Hispanic consumers.
Looking ahead, it’s possible we may see Hispanic consumers who own a credit card become more active as digital wallets (at least those powered by credit cards) become more popular. That’s because Hispanic consumers tend to over-index on all things mobile. Many are mobile banking users and a sizable percentage say they have used mobile payments in the last 12 months. As Apple Pay, Android Pay and Samsung Pay are accepted in more places, we may see more Hispanic credit cardholders activate, use and become increasingly loyal to their cards, albeit through a completely separate brand. Of course, credit cards are not the only payment method available to mobile payment users, so it will be interesting to see how Hispanic consumers, in particular, chose to configure their digital wallets.Leave a comment
Entrepreneurialism and a solid work ethic are strong tenets of the Hispanic culture. Given these characteristics, it’s no surprise the number of Hispanic-owned businesses in the U.S. has expanded as rapidly as it has. Since 2007, these firms have grown an astounding 57 percent to more than 4 million.
Like most small businesspeople, Hispanic leaders need strong guidance, both financial and otherwise, to achieve and maintain success. The potential to increase business revenues is seen in the fact Hispanic-owned businesses have a tendency to generate average annual incomes well below the average in the U.S. (even below the average for minority-owned businesses).
Credit unions, particularly those focused on the growth of their Hispanic memberships, are well-positioned to provide this guidance. That’s because many of the cooperatives that are planning – maybe even executing – strategies to attract Hispanic consumers are already on track to serve the community’s business owners.
Hispanics account for one out of every five new entrepreneurs in the U.S. Entrepreneurs rely heavily on financial services. Yet, credit unions will do well to consider creating programs that go beyond business loans and other financial products to help business owners optimize operations and grow their firms. Consider solutions that reduce business expenses, such as payroll costs, for example. Offering the employees of Hispanic businesses payroll direct deposit to checking accounts or to prepaid reloadable cards will help the owner eliminate payroll check printing and will provide employees more access to their money. This type of a program can be mutually beneficial, as the business saves time and money while the credit union establishes potentially long-term relationships with its employees.
Like any new product or service offering, the development of Hispanic business solutions should start with research and data analytics. This will allow the credit union’s product development team to segment the market and provide truly valuable, highly customized services. Start with your existing Hispanic members. You may be surprised to learn how many are business owners who may also be willing to help the credit union better understand their needs.
As your research is underway, begin to build relationships with local organizations that already serve Hispanic entrepreneurs and small businesses, such as Hispanic chambers of commerce. Your credit union can work in conjunction with these organizations to provide a much-needed service, connect with the community and begin to build trust.
Once you have a better understanding of the make-up, needs and behaviors of the local Hispanic business community, come back to your own capabilities. Evaluate your existing business and consumer service offerings to see where they fall short or how they may be adapted to the Hispanic business owner. Evolving your products, rather than expecting Hispanic members to adapt to them, is critical for success with this market.
Javier Palomarez, president and CEO of the United States Hispanic Chamber of Commerce, says Hispanic businesses are first and foremost American businesses. “Every tax bill we pay, every job we create, every product we manufacture and every service we provide goes to benefit our nation’s economy,” he wrote. And those businesses will do so to the tune of $660 billion this year.Leave a comment
Relationship marketing, the pursuit of long-term engagement rather than short-term sales, has been called a game-changing marketing trend for 2016. Credit union leaders may find that a bit amusing, given “relationship marketing” is less of a trend, more a way of life, within the movement.
What more credit unions are learning, however, is this deeply rooted competency for relationship building is better suited to some consumer segments than to others. As certain financial products become commodities for some individuals, they remain coveted, potentially life-changing, services for others.
Take Kenia Calderon, for example. The 21-year-old El Salvador native has been in the U.S. for nearly 10 years. After what she describes as a bad experience with a major U.S. bank, she watched her parents pull out of the U.S. financial system altogether. Today, the double-major university student and president of her school’s Latino student group manages her entire family’s finances with the help of Village Credit Union in Des Moines, Iowa.
“Serving the Latino community is hot these days,” said Calderon. “But for most big companies, that’s because they see dollar signs. My credit union put humanity ahead of profit. By helping me and my family better our lives, they have impacted generations to come. It’s a domino effect. In my family alone, we will have three college graduates leaving school debt-free thanks to the help of Village Credit Union.”
Earning the business of more Millennials like Calderon – the second largest Hispanic demographic in the country – may require a new way of thinking for U.S. industry. For credit unions, though, it’s about getting back to the basics of building mutually beneficial relationships, albeit with a twist.
Young Hispanic consumers have some unique, and somewhat conflicting, tastes. For instance:
For more on each of the above, see our article in the December issue of Credit Union Business.Leave a comment
Last week, I had the pleasure of serving as a panelist during a nationally-televised event. Hosted by the National Credit Union Administration (NCUA), the event brought together several credit union industry leaders to discuss strategies for improving financial service to Hispanic consumers. Rounding out the panel were Maria Martinez, president and chief executive officer of Border Federal Credit Union and co-chair of the Network of Latino Credit Unions and Professionals; Robert Peterson, president and chief executive officer of One Source Federal Credit Union;and Sergio Osuna, a supervisory examiner with NCUA’s Region V office.
Before both a live and a streaming audience of more than 200 individuals, I had the opportunity to share some of my own family’s story to illustrate the challenges credit unions may face as they look to execute financial inclusion strategies.
First Build Trust
Among the issues we discussed is unbanked, first-generation Hispanics simply aren’t being courted by traditional financial institutions. My family and I belonged to this group. My parents were intimidated by banks. We came from Mexico, and like many other Latin American countries, banks there tended to cater only to the wealthy.
My parents were used to dealing in cash, so that’s what made sense when we came to the U.S. Others in our community only used check-cashers and paid bills with money orders. They obtained these services from providers that asked few questions, were open around the clock and had personnel that spoke Spanish and shared similar backgrounds.
Another element we discussed during the event is that credit unions looking to serve this young, influential and fast-growing consumer segment to first build trust. Show the community you not only want their business, but that you are willing to invest in the success of the community. Employ people like those you want to serve; elevate them to board and other leadership positions; get involved in local groups, organizations and agencies that exist to better the lives of Hispanic people.
Chose the Right Products & Services
As for products and services credit unions should consider adding to better serve unbanked, first-generation Hispanic consumers, consider the following:
Adapt Account Opening Requirements. It’s important for credit unions to accept alternative forms of ID and documentation like the matricula consular and Individual Taxpayer Identification Number (ITIN), and to determine credit worthiness via alternative methods for those without credit.
Deferred Action for Childhood Arrivals (DACA) loans. These are young people seeking to further their education, buy homes, apply for credit cards, start businesses. The DACA application fee, however, can be out of reach, especially when multiple family members are going through the process at the same time.
Immigration loans. Three individuals in my family went through the process at the same time, which forced us to borrow from friends and family to pay for the fees. In some cases, we had to wait to file the applications until we had the money.
Know the Business Case
Importantly, we discussed during the NCUA event that there is a strong business case for serving Hispanic communities. To drive this home, I shared some of the results of a 2014 national study Coopera conducted in partnership with the Credit Union National Association (CUNA). The study examined the overall membership growth and financial performance of 86 credit unions across the country, each of which had implemented a Hispanic growth strategy. Among these credit unions:
Overall membership growth accelerated by 3 percentage points from pre to post program implementation, from 2 to 5 percent.
Loan growth accelerated from 5 to nearly 9 percent in the third year after implementation of the program, and loan delinquency was practically negligent changing from 1.5 to 1.52 percent.Leave a comment
New consumer profiles are emerging as key to the growth of credit unions, including the growing Hispanic market, immigrants, low-income households and Millennials. While the movement’s leaders may clearly see the need to adapt products, services and strategic plans to a new type of member, the resources to do it may not always be there.
Fortunately, there are programs designed to help, specifically the low income (LI) and community development financial institution (CDFI) designation programs.
This was one of several insights coming out of a collaborative round-table event we were proud to host alongside the Iowa Credit Union Foundation (ICUF) and the Iowa Credit Union League (ICUL). The topic was building understanding of the financial need of emerging markets and learning about resources available to best serve both existing and prospective members who comprise these critical consumer segments.
One of the things we discussed during the round table was that all the resources in the world will not help move the needle if credit unions don’t first understand the market they are trying to serve. To this end, attendees had the opportunity to participate in a live poverty simulation. The poverty simulation, or Life Simulation, is designed to help credit union employees, volunteers and leadership begin to understand what it might be like to live in a typical low-income family, one that is trying to survive from month-to-month.
In the simulation, participants assumed the roles of families whose members are unemployed, homeless, living on disability or raising grandchildren on a fixed income. At the end of the exercise, participants were more aware of the daily realities faced by many American families. In a post-event survey, 100 percent of attendees rated the poverty simulation very good or excellent, and ICUF Executive Director Jaimie Miller says plans are underway to offer the event to more Iowa credit unions in the future.
One attendee had this to say about the experience: “I was able to take away from the poverty session how frustrating it can be for people trying to find the right places for help. As a credit union professional, I think we can be more empathetic towards these members and also educate ourselves to learn and understand the resources available to them so we can help them even more.”
The poverty simulation was accompanied by a panel discussion. Our expert panelists included Joann Johnson, superintendent of credit unions in the state of Iowa; John Parks, CEO/manager at Sioux Valley Community Credit Union; Traci Stiles, business development manager at Des Moines Metro Credit Union; and Dale Owen, CEO/president of Ascentra Credit Union. They spoke about benefits of the low income and CDFI designations such as grant funding opportunities and also shared how these designations fit in with their work to better serve their entire field of membership.
Attendees were surprised to learn many Iowa credit unions, including Des Moines Metro Credit Union and Sioux Valley Community Credit Union, have already earned LI designations.
They also were excited by the types of programs these credit unions were in the process of developing or had developed thanks to their special statuses. Financial counseling and education, new technology and an expansion of loan programs are helping more cooperatives grow while more consumers find well-intentioned and fair services designed especially for them. In addition, if a credit union has a Hispanic growth program or is looking to start one, these designations can help further those efforts.
A strategic Hispanic growth program can become an important part of a credit union’s CDFI designation action plan. If we can assist you with the development of such a plan, please get in touch.Leave a comment
An intentional, strategic focus on the Hispanic member experience has become a top priority for Idaho Central Credit Union (ICCU). The cooperative’s home state saw the Hispanic population increase by 17 percent from 2000 to 2010, and several of its 26 branches are located areas rich in Hispanic culture.
Although the credit union has long worked to translate materials and hire bilingual personnel, there has not been a formal plan in place for actively engaging the Hispanic community and the credit union’s existing Hispanic members. Before developing that plan, however, Marketing Manager Michael Watson wanted to ensure the credit union did its homework.
“There’s a lot of national research out there specific to the Hispanic consumer to which we could have turned,” said Watson. “Yet, we wanted results specific to our local markets. What may be true for most Hispanics may not be true for the Hispanics in eastern Idaho, for example. We needed to truly understand the unique needs specific to our community members.”
To do so, Watson worked with Coopera to organize three focus groups, each set in a different area of the ICCU field of membership. The goal was four-fold:
Among the many learnings generated by the focus groups, Watson said several stand-outs will shape the way the cooperative’s Hispanic member experience plan is drafted. These include educational and product development opportunities, as well as guidance on how and where to market the credit union’s services. Digital banking, emphasis on family/childcare and strong attention to consistent internal training were other high-priority issues identified through the focus groups.
Initially, Watson was skeptical about the authenticity of the results if participants knew ICCU was the host of the focus groups. However, he now believes revealing the credit union as the organizer has been beneficial.
“Sharing that it was ICCU behind the effort allowed us to gain a deeper level of feedback about actual experiences we may not otherwise have gotten,” said Watson. “Additionally, because the participants knew it was us, there is also now an expectation that we use the data to make a difference in their experience. In fact, a couple of our participants said, ‘We’ll be watching.’”
Watson and the ICCU management welcome this attention, as they look to prove their commitment to serving this important and growing segment of members. More focus groups and a unique plan for ongoing engagement of focus group participants are expected in the near future.Leave a comment
Credit unions with strong Hispanic growth programs have three things in common – intention, cultural alignment and an adaptive spirit.
Cooperatives most successful at earning Hispanic engagement started with a strategic plan to serve this particular community of influencers. Take Arizona’s Vantage West Credit Union, for example. The $1.4 billion institution knew a solid strategic plan had to begin with equally as solid research. Working with Coopera, the cooperative did not stop with demographics alone. The credit union’s leadership worked to identify other factors, such as language preference and product adoption rates. It also used research to determine which of its branches served the most Hispanic members and which had the greatest potential for growth based on population trends.
As the number of Hispanic professionals leading the movement becomes a stronger reflection of the country’s population, cultural alignment will become easier. Today, however, it may take work. Building the right organizational mentality and internal culture to serve a new market is absolutely critical. That’s precisely how Travis Credit Union has been so successful at earning the trust of its local Hispanic community. Yet, as Travis’ Sherry Cordonnier points out, building the internal culture may come from outside influences. The $2.3 billion California credit union has learned this first-hand from the impact of its own Hispanic Advisory Committee, made up of 13 Hispanic leaders in the community.
“On the committee, we have a broad spectrum of individuals who can talk about what it’s like for an immigrant family, or how to talk to the migrant worker, or how to reach out to the educated Hispanic who wants to start a business,” Cordonnier told Credit Union Magazine.
Most credit unions understand their membership strategy must evolve. Those that have developed an achievable plan to actually implement that strategy are stand-outs in Hispanic member growth. These credit unions are adjusting everything from products and departments to marketing and operations to become highly relevant to their new target market.
River City Federal Credit Union in San Antonio provides an ideal model for this kind of organization-wide evolution. Since beginning its Hispanic outreach initiative, the $131 million credit union has expanded its branch strategy, upgraded core business systems and invested in new electronic services, including bilingual mobile banking.
That this list of must-haves begins with intention is not a coincidence. It’s the most important component to achieving success in Hispanic growth efforts. The credit unions above have demonstrated excellence within each of the three must-haves for successful Hispanic engagement; but each began with a commitment and the intention to see that commitment through. The same can happen within your cooperative. If you feel a pull for a deeper, more emotional connection with the youngest, fast-growing and most underserved community in your market, gather up a team and begin putting thought to your own intentional growth strategy.Leave a comment