Here is a statistic to grab your attention: Underserved consumers spent $189 billion on fees and interest across five financial product categories in 2018 that included short-term credit.
It shouldn’t come as a surprise when the Center for Financial Services Innovation (CFSI) estimates that 57 percent of consumers in the United States, 138 million adults, are financially unhealthy.
Cultural and economic influences can also keep minority and immigrant consumers from accessing established financial institutions like credit unions who can provide the proper financial inclusion services that can help stabilize their lives. Regrettably, they tend to lump credit unions into the same category as any number of larger financial institutions while relying on potentially dubious non-bank players.
The reality is millions of consumers have little to no support from a reputable financial institution like their local credit union. According to the Federal Reserve, around one in five American adults have no bank account and relied on non-bank players rather than member-centric credit unions. If credit unions can make alterations and initiatives specific to marketing to these target consumers, they may just tap an entirely new member vertical.
So What Can Credit Unions Do to Take Action Now?
Credit unions take pride in serving their communities while offering the opportunities and savings on which larger financial institutions simply don’t focus. Unfortunately, a major portion of the U.S. population is unbanked and lacking in the financial education that could expose them to such advantages. This leaves a window open for credit unions to take action and address with a few adjustments.
Here are four suggestions on how to engage this segment of America’s population and solidify your status as a proponent of financial inclusion:
Apply to become a Community Development Financial Institution (CDFI)
CDFI Certification represents your credit union’s gateway to a network of mission-driven CUs that serve to empower economically-distressed communities. Such institutions and their programs translate into fundamental, results-oriented, and financially-inclusive change for the individuals, neighborhoods, and communities who need it most. To apply for CDFI Certification, go to https://www.cdfifund.gov/programs-training/certification/cdfi/apply-step for application materials and availability.
Consider digital fintech and how those products can benefit this audience
There are so many underbanked communities across the U.S., and financial technology (fintech) like QCash life event loans can be beneficial due to the instant and easy accessibility of smartphones. Digital fintech has advanced quickly in no small part due to the coronavirus pandemic, when many financial institutions closed and demand for remote banking skyrocketed. Such remote methods appeal to the underserved because it’s a more streamlined way to bank with your credit union. There is no need to travel or physically live near the credit union. In addition, implementing such advanced technology into your credit union shows your overall membership you’re a forward-thinking organization who considers their needs first.
Counter misinformation about credit unions through financial education
As we discussed earlier, financial education is a factor when communicating to the underserved that not all financial institutions are the same. Many of the unbanked lump all financial institutions together with bigger banks, negating the member-centric benefits, programs, and culture credit unions offer as opposed to bigger banks. They don’t realize smaller, member-owned organizations are more favorable to local individuals and families.
Diversify the tactics of how to reach out to these new audiences
If your credit union wants to get in front of minority groups you must consider the cultural barriers these audiences face every day. Launching campaigns in various languages while acknowledging the challenges they deal every day to get their heads above water will, over time, make these potential members feel more wanted and welcome.
By incorporating these recommendations into your credit union’s efforts to reach underserved populations, you should be well on your way to adding value and improved financial inclusion rates into your community.
Which of these four tactics do you think is the most effective in generating better financial inclusion for your credit union community? Tell us in the comments below!