Three Facts About the Underserved All Credit Unions Should Know

October 15, 2012 at 7:37 am 1 comment

For an industry that has both a statutory mandate and a mission to provide services to people of modest means, the FDIC’s annual report on the unbanked and under banked provides an important source of information about what needs to be done to address the fact that millions of Americans do not access the most basic stepping stone of financial stability.  Three statistics speak volumes to me.

 

  • 17.7% of unbanked households are foreign-born non-citizens; and young people also make up a disproportionate number of those who do not access traditional financial services.
  • The unbanked and under banked are increasingly turning to alternative financial services, such as prepaid debit cards.  Those individuals who have had a bank account in the past are more likely to consider it important to have one in the future.  In fact, the FDIC estimates “that about 15% of previously banked  households may not choose to be unbanked but face institutional barriers related to opening or maintaining an account.”
  • Not having enough money or not needing or wanting an account are the top reasons for not having an account across all demographic groups.

Despite all the controversy about immigration policy lately, this is still a nation of immigrants and although they may speak a different language and/or have a different skin color than the Europeans like my relatives who went through Ellis Island in the early part of the 20th century, there is still as much need for financial institutions seeking out that immigrant as there was when credit unions took hold in this country.  Some credit unions have done a great job reaching out to this community and, as this recent post in CU insight points out, there are many more innovative things that can be done.  When I look at what a fast-growing segment of the market this is, I can’t help but think that there are many credit unions that should be doing more than they are.

The second great challenge  is as much a marketing challenge as it is a strategic one.  When Municipal Credit Union in New York City was the one of the first credit unions in New York to open its doors it did so because there was a broad-based consensus that the working class wanted and needed an alternative to the private banker.  Today there is a very good chance that the college graduate or new immigrant has already had experience with some type of alternative financial service and may not see the need for a full-fledged account relationship right away.  It’s obvious to me that a federally insured credit union account which can provide savings opportunities and help build up credit is superior to any financial product to be offered by your friendly neighborhood megastore anytime in the near future.  But realistically these alternatives will be too attractive in the short-term.

Credit unions should embrace these alternative financing mechanisms in hopes of establishing a longer-term relationship.

Entry filed under: Advocacy, General. Tags: , , , .

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1 Comment Add your own

  • 1. Gregg Stockdale  |  October 15, 2012 at 10:48 am

    Spot on!

    Reply

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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