After many years as the ugly ducklings of the credit union industry, lower income credit union members are poised to become a good deal more like swans in 2013.
This is partly because it has begun to dawn on credit union executives that being lower income does not automatically or necessarily translate into being higher risk or lower profit. Credit for this discovery belongs partly to community development credit unions which have taken the time to exhaustively document their experience working with lower income members and to have shared their experiences with mainstream credit unions that are interested in learning from them. But credit also belongs to the legions of payday lenders, check cashers, title lenders, pawn shop lenders and rent to own places that have made it clear that serving the needs of lower income consumers, even poorly, can definitely be a money making business.
Credit unions that treat lower income members with dignity and offer them financial services for a profitable but still better deal than the high-cost alternative down the street can both improve their bottom line and help those members onto the path which will lead them to other and even more profitable credit union profits.
But the path forward to working with lower income members in 2013 cannot be taken lightly. Competition from products like the BlueBird Card, the joint debit product being offered by Walmart and American Express, means that credit unions cannot merely count on lower fees and better service to draw lower income members. Instead, they will need to learn what is important to the lower income members, such as refinancing an expensive auto loan might be a more valuable approach than offering a new one and having the ability to deposit money easily via a mobile phone and not in a branch or at an ATM might mean gaining a family’s business that the credit union didn’t have before.
This year is liable to see credit unions both shine and stumble working with lower income members but, fortunately, the industry has also shown itself capable of learning from its mistakes.