Many credit unions are right now creating strategies and evaluating tactics for attracting underserved consumers to their institutions. Some of them have found cards a useful tool in this effort, but more might consider the possibilities cards offer in this effort.
It’s not difficult to understand why credit unions have begun reaching out to underserved consumers. Similar efforts have been part of CU history for years, and when you consider that the market represents $29 billion annually–one estimate of how much money underserved Americans are spending each year on nonbank and subprime financial services, the reasoning becomes compelling.
Money orders and check cashing make up the majority of what underserved consumer spend, and quite often, consumers without a traditional banking relationship are laying out exorbitant amounts of money to access these services. Affordable alternatives are vital to meet the needs of the underserved, and providing them is fundamental to the credit union movement. Cards provide one of those alternatives.
According to Lori Lambert of Seven Seventeen Credit Union, it’s not unusual for consumers in the Ohio credit union’s area to pay as much as $15 to cash paychecks.
The $775 million credit union has been working with The Members Group to bring payroll cards to area employers. Targeting employers with a high proportion of underserved consumers as employees, the credit union has rolled out TMG’s ATIRApay program with seven companies, among them hospitals, nursing homes and manufacturing facilities.
Because the payroll cards carry Seven Seventeen’s name, and the credit union has taken an active role in employee signups, the program has given the credit union a valuable foot in the door with the community’s underserved market. Lambert reports that many new ATIRApay cardholders chose to open savings accounts with Seven Seventeen to ensure they are setting aside some of their income for the future.
Aside from the cost savings that payroll cards provide to employees without an established banking relationship (Visa estimates as much as $500 per year), the cards also save time. Typically, after paying for a check-cashing service to make their funds available, underserved consumers then need to secure money orders to pay their bills. This costs money, of course, but it also requires the employee to invest time, running across town, getting the money orders to several different entities, each in a different location.
With a payroll card, the employee can pay these bills online or over the phone, as well as enjoy conveniences like online shopping and pay-at-the-pump gas purchases and text message alerts.
Only an employer can load funds to a payroll card. For credit unions looking to offer the underserved even greater flexibility, general-purpose reloadable cards are an option. Providing many of the same benefits as the payroll card, reloadable cards have the added convenience of allowing cardholders to load additional funds on their own.
Because they simply don’t allow for overspending, reloadable cards also help underserved consumers watch their spending and create a budget-conscious lifestyle. This puts issuing credit unions in a position to nurture the financial growth of prospective members, quite possibly turning underserved consumers into some of their most loyal members.
So which consumers make up the underserved market and how do you find them? According to TMG’s sister company, Coopera Consulting–a Hispanic-market consulting group that serves credit unions–close to 50% of Hispanics in the U.S. are either unbanked or underserved.
Des Moines-based Affinity Credit Union has recently targeted this specific segment of the underserved population with the rollout of its MiOportunidad reloadable Visa card, created to serve the Hispanic community.
What’s especially attractive about this program is that the card can be both a general-purpose reloadable card and a payroll card at the same time. Cardholders can load the funds themselves on the phone or online, at an Affinity branch or via any Visa ReadyLink location, which can be found at stores like Walmart and CVS. They can also make arrangements for direct deposit of payroll.
Affinity worked closely with experts at Coopera Consulting and TMG to ensure all of the materials used to market and service the card are bilingual, as are the card’s online account access, 24/7 member support services and text alerts. Coopera also recommended that the credit union take into account the extended families of prospective cardholders. As such, the MiOportunidad card allows up to six secondary cards, which can be used internationally.
Affinity sees the card as a way to help Hispanic cardholders manage their money as well as to establish a credit history with the credit union and thus build a long-term relationship with the credit union.
Although the Hispanic community has traditionally been coined “emerging,” one can argue it has already arrived. Because the 2010 U.S. Census showed us that one in six U.S. residents is Hispanic, most credit unions already understand (or will very soon) the importance of learning to service Hispanic consumers.
The effort to engage underserved or unbanked consumers requires a multifaceted approach that often calls upon several different aspects of a credit union's products and services. Cards can provide one approach that deserves thorough consideration.
Jeff Russell is Executive Vice President for The Members Group CONTACT 515-457-2000 or firstname.lastname@example.org