LAS VEGAS-Credit unions can serve a broader market and stay true to the principles of the CU movement by applying a little ingenuity, according to Josh Turnbull.
Turnbull, director of consulting for Chicago-based Center for Financial Services Innovation, noted some 10 million American households have no checking or savings accounts. Another 24 million have checking/savings accounts, but regularly rely on payday lenders or pawn shops.
"This makes 68 million people underserved," he said. "So many American consumers today have financial needs. Many have no retirement savings. Even those who are well above the poverty line need help-about 30% of households making more than $100,000 per year say they could not come up with $2,000 in 30 days."
Among those underbanked are younger consumers, Turnbull continued, including 9.5 million members of Generation Y. Of the people who are unbanked today, 45% used to have an account. Of the underbanked, 31% have no credit file and 11% have a thin file.
"Some people find too many hidden fees in traditional accounts," he said. "If you walk into a check cashing store, there is a menu listing prices-just like at a McDonalds. Many underbanked are satisfied with what they get."
The unbanked and underbanked market is big and growing, Turnbull asserted, accounting for some $78 billion in fees and interest paid in 2011. "They also are attractive to credit unions, which serve their communities. What are these potential members doing with other providers, for fees?"
Examples of Innovation
The big question, Turnbull said, is how to provide services of high value in a sustainable way? Turnbull spotlighted four CUs he said have done a great job of innovating:
Kinecta CU in Los Angeles, which acquired Nix Check Cashing and thereby "entered the underserved market in a big way."
"This bridged the gap between traditional and non-traditional financial services," he declared. "Nix still cashes checks, but right next to it is an opportunity to join the credit union."
Centris FCU, Omaha, Neb., launched Centris Express in the Omaha area. Its "credit-union-in-a-box" kiosks enable users to cash checks, buy money orders, transfer money, pay bills, buy cellphone minutes, and reload prepaid cards, all with the touch of a few buttons.
Redstone CU, Huntsville, Ala., offers Right Choice outlets, an opportunity for the underbanked to have a lower-cost check cashing option than traditional stores.
Self-Help CU in North Carolina opened"micro branches" that blend services.
"These credit unions wanted to serve a broader market and stay true to the credit union principles," he said. "The strategies to serve the underbanked do not need to be this comprehensive, they can be as easy as creating an account with no hidden fees."
