SAN DIEGO -Credit unions are only doing an “average” job inreaching out to the underserved and unbanked, forcing tens ofmillions of people to seek out alternative financial services suchas check cashers and payday lenders. And credit unions only receiveaverage marks for serving the young. A 20-year-old business owner,for example, questioned why credit unions stop marketing to memberswhen they turn 18 years old, a time he said when “everyone else”was starting to target that age group. Those were some of theconclusions of both credit union leaders and others during athree-hour workshop prior to the official start of CUNA Mutual'sninth annual Discovery Conference. The conference, held June 9-12at the Manchester Grand Hyatt Hotel here, attracted some 900people. Those attending the pre-Discovery work session gave creditunions a “C” grade when asked how they would rate the industry inserving the underserved. Credit unions received the same grade fromthe participants when it came to serving young Americans from18-24. Credit unions were told they needed to do more if theywanted to attract and keep members of “low wealth.” Somealternative lenders are providing better, faster, more convenientand friendlier service than that being offered by credit unions,according to Mark Meyer, director of innovation with the FileneResearch Institute. “They (alternative lenders) are recognizing . .. that they need to look for ways to offer savings and investmentsand insurance,” he added, noting that many alternative financialservice firms were also “starting to go upscale.” And credit unionscan expect to face even stiffer competition in the future, with thenumber of payday lending stores expected to nearly double to morethan 40,000 locations within the next 15 years in the UnitedStates. In 1990, there were fewer than 50 locations. Other entrantsinto the financial services marketplace, such as retail giantWal-Mart, have apparently recognized the potential of serving the25 million to 35 million people who now utilize check-cashingservices and who might welcome offers of other financial productsand services. Those who are treated well by the alternativefinancial service institutions are “intensely loyal,” noted BobHoel, executive director of Filene Research. “They go to a goodplace that gives them a good deal that meets their needs and theywill go and park all of their business with these people,” he said,adding that they will remain with those institutions as theirwealth increases. “If you're making $200,000 a year, everybodywants to do business with you,” Hoel said. “You've got lots ofgreat choices. But if you don't have much wealth, you don't havesuch good choices.” Meyer described Wal-Mart's foray into checkcashing as a “first step” into the financial services marketplace.He also pointed to Washington Mutual as a bank which was taking anaggressive retail approach to attract low- to moderate-incomecustomers. “As a traditional (financial services) industry, we'vemoved forward developing very sophisticated products and services .. . leaving pieces of the marketplace behind,” Meyer said. One ofthose who has picked up a big piece of that forgotten market is TimLanham, president of the Mister Money chain of 61 pawnshops in theU.S. and Mexico. The stores also provide payday loans, cashadvances, check cashing, money orders, bill payments and moneytransfers to other countries. Lanham also offers what he calls theAlternative Financial Solution, a kiosk that offers consumers cashadvances/payday loans and processes loan transactions. He saidthere are currently about 60 kiosks installed in five states,including one machine for check cashing at the CUNA credit union.Lanham said he serves the “sub-prime” market, consisting of peoplewho have little or no credit, or less than perfect credit. He alsoserves people who are either unbanked – with no bankingrelationship whatsoever – or those who are underbanked, which hedescribes as those who use alternative financial services.Customers include new immigrants or “emerging Americans.” Meyercited figures that showed 33 million new immigrants currently werecoming into the United States. He said that number would increaseto 55 million by 2025. Lanham said the sub-prime market represents35% of the adult population or approximately 76 million people. “Ibelieve that credit unions need to begin to look at this market,”Lanham said, adding that it offered credit unions high profits, asocial mission and customer loyalty. He said that credit unions,convenience stores and grocery stores posed the greatest threat toexisting payday lenders and check cashing outlets. Bryan Sims, a20-year-old college student who founded brass/MEDIA, chastisedcredit union officials for failing to market properly to youngadults. His magazine addresses issues of young adults, money andhow it affects lives. His motto is “young today, rich tomorrow.” Hedescribed the18-25 age group as the credit union industry's“forgotten market.” He suggested that officials change that agecategory to 17-25 to give credit unions a chance to better reachthat demographic, since most companies wait to target young peopleonce they turn 18. “Credit unions stop marketing when everyone elsestarts,” Sims said. “We (young people) can be very profitable ifyou set it up right.” Sims also urged credit unions to better crosssell to young adults, to do “lifestyle/life event” marketing and toadd young people to boards and advisory groups. -

[email protected]