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  • Post Offices Could Be Credit Unions’ Next Competitors

    Posted by on July 5, 2016

    IMG_2377

    Here I am at 9 years old!

    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:

    • There are offices in most communities
    • They have a trusted reputation
    • They can operate at a loss
    • Democratic Sens. Bernie Sanders and Elizabeth Warren, along with numerous community activists, support the USPS efforts to serve the financially underserved.

    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:

    • Credit union loans are more accessible to low-income buyers and to those recovering from poor credit ratings.
    • Aggressive first-time buyer programs for weary and inexperienced millennials are being offered by credit unions of all sizes.
    • They generally offer lower interest rates, especially for post-graduation debt management.

    All that said, staying ahead of the competition requires getting creative. Three ideas comes to mind:

    • Increase your loan pool – Given that immigrants and millennials represent a sizable chunk of the financially underserved, build a stronger community and digital presence to let them know you want their business.
    • Make social networks work for you – With so many platforms available to communicate with audiences, taking a more active role on such sites allows broader reach among target audiences.
    • Build upon current differentiators – Think about the attributes that make credit unions appealing and accessible and combine them with the financial needs of your local market. Design measurable marketing tactics around that brand model and proactively develop products that are culturally relevant.

    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.

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