For many people – especially those of us working in the financial services industry – it can be difficult to understand why someone would not have a bank account (or if they do, why they would still use costly alternative financial services). Yet, legitimate and systemic reasons for a lack of traditional financial relationships offer a glimpse into the “why’s” behind our nation’s underserved communities.
At the recent 2014 CUNA Community Credit Union and Growth Conference, credit union leaders and I dug into the question “Why Are Consumers Unbanked” to uncover strategies that may help the movement better serve these individuals.
Below are just five of the “why’s” we discussed:
Misperceptions about money persist
Geography plays a role
Culture can be a driver
Past behavior predicts future
Language barriers are real
For credit unions, we discussed, there exists a great opportunity to provide a better alternative for these individuals. That’s because everyone has financial service needs – almost daily. Take a look at the five “why’s” above and ask yourself if your cooperative can address any or all of these for your local unbanked and underbanked community.Leave a comment
We get asked often why a firm focused on Hispanic outreach is based in Iowa, a state many consider less-than-diverse. In fact, the Hispanic population in our home state more than doubled from 2000 to
The change to our state’s consumer make-up has not escaped the attention of Iowa’s credit unions. Leaders of the state’s movement are right now exploring ways to invest in service to Hispanics, the largest, fastest-growing, youngest and most underserved group in the U.S.
To help, Coopera and the Iowa Credit Union Foundation (ICUF) recently facilitated a roundtable for Iowa credit unions. In the 4-hour session, we joined four credit unions already doing an excellent job with service to underserved consumers, many of whom are Hispanic.
Among the different ways we talked about adapting credit union products and services to this special market, the concept of unique payment products stood out. Because underserved consumers continue to use high-cost alternatives to pay bills, make rent payments and secure short-term loans, payment products present a sizable opportunity for credit unions looking to reach this market.
Here are just a few of the alternative payment providers already popular with the underbanked, Hispanics included:
PayNearMe: This provider issues plastic cards and PaySlips that can be printed or displayed on a mobile device.
Walmart: The retail giant continues to diversify its financial service products, which include everything from credit cards to money transfers. Most recently, it began marketing a low-cost checking account.
LendUp: Credit-building loans starting as low as $250 available with instant approval online. (Of course, it comes with a hefty price tag at 29% APR).
WipIt: Allows Boost and Sprint mobile phone users to make payments with cash directly from their phone.
OnDeck: Provides small business loans online, and underwriting is based on performance rather than individual credit.
Boom: A prepaid card with mobile banking features.
For each of the above, our expert panelists brainstormed alongside Iowa credit union leaders how cooperatives could compete and why they should. It was an excellent discussion, and one I’d be happy to share in more detail one-on-one. Send me an email with your thoughts or questions and we can talk through your credit union’s payments strategy and how it may be configured to appeal to the underserved Hispanics in your community.Leave a comment
I don’t think many of us were surprised to hear of Walmart’s unveiling of a new checking account with an $8.95 monthly fee and no overdraft or returned check fees. After all, the writing has been on the wall for some time, as we’ve watched the mega retailer dip its toes into financial waters.
What was less expected, however, was Walmart’s rollout of health insurance services this month.
So, who is Walmart targeting with these new products? We believe the target is a specific sector of its existing shoppers – the unbanked/underbanked and the uninsured/underinsured markets, and in particular the Hispanic market.
Unbanked individuals do not have a traditional financial institution account, providing a potentially large gap for Walmart to fill. As for the underbanked, these consumers may have a traditional savings or checking account; however they largely rely on non-traditional financial service providers, such as check-cashers and money transfer services, for many of their financial transactions.
Did you know that 1 in 12 U.S. households is unbanked and 1 in 5 U.S. households is underbanked? That’s a total of 34 million households in the U.S., according to the FDIC’s 2011 National Survey of Unbanked and Underbanked Households.
The health insurance market also represents a sizable opportunity for Walmart, as the U.S. uninsured rate is now at the lowest level recorded since 2008. For the Hispanic market, that means nearly 1 in 3 people are uninsured.
Why Walmart Sees Potential in These Markets
There is a misconception about the unbanked and underbanked market all being low-income, high risk and not profitable clientele. Walmart knows better. The U.S. unbanked and underbanked market does include low-income households, yet it also includes immigrants, young people, minority groups and single family households with financial needs.
These individuals spend much of their paychecks on pricey alternative financial services, to now include Walmart’s checking account and prepaid cards. (If you’re thinking $8.95/mo sounds pretty affordable amid news of rising fees, keep in mind the average monthly service fee for a non-interest checking account fell 5 percent to $5.26 over the past 12 months.)
A large percentage of U.S. unbanked and underbanked households are made up of Hispanics. Much of this stems from cultural preferences vs. a lack of financial stability. Hispanics are also the largest, fastest-growing, youngest and most underserved group in the U.S. with more than a trillion in purchasing power – a prime untapped market for credit unions.
One thing is for sure, profit-hungry Walmart would not introduce these products if it did not foresee strong potential. It’s clear their executives have identified the above consumer segments, many of which include Hispanic consumers, as a hot, untapped market. Credit unions must not acquiesce – these markets are tailor-made for the “people helping people” philosophy and are primed for generating tremendous revenue and membership growth.
As Scott Butterfield from Your Credit Union Partner notes in Credit Unions and The Ultimate Category Killer, “Overlook the Hispanic community at your own risk.”Leave a comment
I recently appeared on an episode of the CU Broadcast to discuss the Hispanic market opportunity for credit unions. The host, Mike Lawson, and I talked through quite a few topics, most notably how credit unions can earn the trust of young, unbanked Hispanics.
The video is also archived at CUBroadcast.com, along with many other insightful episodes of the show. If you get a free minutes, visit the site and watch a few…Leave a comment
By Guest Blogger Michael Adams, Vice President of Marketing and Public Relations at Greater Iowa Credit Union
In working with Coopera, we have found it important to get the structural components in place before launching any significant outreach to the Hispanic community. This includes things like laying a solid foundation complete with Hispanic-friendly membership policies, as well as securing employee, leadership and board support. Only after this can you begin to do the fun stuff, like product development or marketing.
Not everyone on a credit union’s leadership team or board of directors may be fully supportive of an Hispanic outreach program, and some products, such as ITIN loans, for example, may be downright scary to them. A vocal board member who is not on board can create barriers to any proposal. We discovered early on that some credit union administrators and board members can have a knee-jerk reaction to the creation of an aggressive Hispanic initiative.
More often than not, education regarding the needs of this community is necessary. Once you do get a good customer identification program in place and board support, you can begin the rewarding work of reaching out to the Hispanic community with products and services that are useful to them, such as remittance services, free checking, reloadable debit cards, ITIN and other culturally relevant loans.Leave a comment
By Guest Blogger Oscar Porras, Community Liaison at Maps Credit Union
The 2010 U.S. Census showed that the Hispanic population increased 43 percent since 2000. In our neck of the words (Oregon), we’ve seen a whopping 63.5 percent increase over the same period of time. An essential part of reaching out to our Hispanic neighbors is presenting products and services in a way that is culturally relevant.
At Maps Credit Union, in cooperation with Coopera, we are working to add some of the services that are most important to the Hispanic community, such as credit builder loans, remittance services and prepaid reloadable cards. We have set up inter-departmental teams to discuss these products, and we look forward to rolling out our first new product in the first quarter of 2012.
It has not been easy. There have been some challenges, including negative attitudes from a small number of staff. Then again, anything worth fighting for always brings challenges. We are working to address our internal and external issues through open and honest communication. Racism, stereotypes, and the like all come from misinformation. Educating staff about their new neighbors will help foster a credit union culture of acceptance and understanding.
I look forward to my new role as Community Liaison at Maps Credit Union and adding another wonderful piece to our credit union culture. I would love to hear about your challenges and victories as your institutions move toward a greater focus on welcoming the members of your local Hispanic communities.Leave a comment
There’s no better time than the present to begin preparing for 2012’s month-long celebration of the Hispanic heritage and culture, Hispanic Heritage Month.
Credit unions across the country found ways to engage with their local Hispanic community’s during last year’s Hispanic Heritage Month. Our VP Miriam De Dios recently shared a few of those efforts with Credit Union Magazine’s online readers. Below is an excerpt from that article. For more, visit creditunionmagazine.com.
All over the country, credit unions are discovering opportunities to participate in community celebrations. Maps Credit Union in Salem, Ore., is partnering with Western Oregon University to launch the Latino Education and Access Program, which helps Hispanic students further their education with scholarships.
Fundraising for the program will be kicked off by former Mexican President Vicente Fox.
Maps Credit Union will also be a silver sponsor of the Hispanic Heritage Month Breakfast, Oregon’s official kick-off celebration for Hispanic Heritage Month.
Des Moines Metro Credit Union also plans to participate in its community’s Hispanic Heritage Month celebrations. The ninth annual Iowa Latino Heritage Festival will take place in Des Moines in September.
The credit union will not only have a booth at the festival to meet with current and potential members, it will also sponsor an elote (corn) eating contest.
How can your credit union participate in 2012’s Hispanic Heritage Month? It can be as simple as:
• Informing your members and the community about Hispanic Heritage Month events;
To read the full article, visit creditunionmagazine.com.Leave a comment
The following is an excerpt of a newly released white paper by Coopera’s Miriam De Dios covering the potential for reloadable prepaid cards in the Hispanic market. If you’d like a copy of the full paper, send me an email, and I’d be happy to send it over.
While our consulting capacity has allowed us to observe almost all best-practice tactics out there, we believe FIs that offer a reloadable prepaid card to the Hispanic market will be among those achieving the greatest success. Perfectly tailored to the Hispanic consumer, this type of offering has the potential to ease consumer financial pain, to build trust between cardholders and an issuing FI, and to generate fee revenue and loyalty from a powerful market.
For FIs interested in the Hispanic market, it makes sense to think in terms of products and services that would appeal to consumers who don’t have a traditional banking relationship already in place. Creating affordable alternatives to meet the needs of underserved Americans not only has the potential to get a foot in the door of the Hispanic community; it also helps your FI lead its customers down a path to financial responsibility.
Because they don’t allow for overspending, reloadable cards help underserved consumers manage their budget-conscious lifestyle. This puts issuing FIs in a position to nurture the financial growth of prospective members, quite possibly turning underserved consumers into some of their most loyal customers.
Before embarking on any Hispanic outreach, however, FIs must understand the importance of building trust slowly. While product offerings – such as reloadable prepaid cards – are a great start, adding a healthy Hispanic membership base truly is a longer-term effort requiring the support of FI staff and leadership.Leave a comment
Hispanics continue to be an important group for many of America’s states. Thanks to the newly published 2011 Hispanic Opportunity Report, commissioned by the Texas Credit Union League (TCUL), we understand even more about this population in the state of Texas.
A long-time partner of the TCUL and supporter of the Juntos Avanzamos designation, Coopera was commissioned to write the report to help Texas credit unions better understand data revealed by the 2010 Census.
Here are a few of the report’s highlights:
Two-thirds of the state’s growth over the past decade came from Hispanics.
Hispanic Texans are five times more likely to be unbanked than are the state’s whites.
Hispanics will comprise 53% of the state’s population by 2040, and whites will make up just 32%.
If credit unions attain 10% penetration of the state’s Hispanic adults, it would mean an estimated $326 million in total income and $3.5 billion in loans.
Of the nearly 1 million children added to the Texas population in the last decade, 95% of them were Hispanic.
In Texas, one in five dollars of purchasing power is in Hispanic hands.
We are pleased that TCUL has been so proactive in providing this report to its members. Texas is the first state to request specific information about credit unions’ Hispanic opportunity since the 2010 Census was finalized. Coopera believes the information in the report will motivate Texas credit unions to pursue this market more intentionally.Leave a comment
The 2010 U.S. Census revealed that one in six U.S. residents is Hispanic, and among children, it’s one in four. By 2050, analysts predict that statistic will soar to one in three.
When you look at the numbers, it’s easy to see why the term “emerging,” which has been used to describe the U.S. Hispanic community, isn’t really all that fitting today. For that reason, it’s no longer appropriate to think of the Hispanic consumer as someone your credit union may need to court in the future. Rather, you need to understand how to market to this type of consumer today.
In cooperation with CUNA, Coopera regularly surveys credit unions of varying sizes. This research has shown that a much higher concentration of credit unions have focused on serving the Hispanic market in recent years. Between 2008 and 2009, we found that the number of credit unions either executing or planning Hispanic-market programs more than tripled.
Undoubtedly you have witnessed the growth of the Hispanic market in either yours or a neighboring community. While getting ahead of the curve may no longer be possible, there is still a tremendous opportunity to tap into the power of this population now. We advise you not to wait another year.Leave a comment