JACKSON, Miss. — Known as one of the industry leaders serving the underbanked and underserved, Hope Credit Union is turning its focus from traditional branches to enhanced mobile apps.
And this move grew usership from 800 to more than 1,500 in just a few months.
"We came to understand that poor people are adopting mobile apps through smart phones at a higher rate than online banking through computers," Hope CU's Chief Financial Officer Richard Campbell said during a webinar hosted by Bluepoint Solutions. "We are seeing an uptick in 'mobile first' households."
Bluepoint's Chief Market Officer Andrew Tilbury said about 68 million Americans are either underbanked or underserved.
"This is a staggering number when you consider the population of the United States."
Tilbury added that there are many misconceptions about this demographic. For example, 52% of underbanked are homeowners and 41% sought Alterative Financial Services (AFS) in the last 30 days. "It's our position that many credit unions are better positioned than larger banks in communities to serve the underbanked."
While Bluepoint did not release the number of webinar attendees, the company confirmed that 65% were credit unions. Throughout the course of the hour-long presentation, a handful of polls were conducted in real-time.
When asked if the attending financial institutions offered mobile banking and/or mobile remote deposit capture (RDC), 25% responded using both platforms; 10% only used mobile banking with 40% currently in the process of implementing mobile RDC. Twenty percent polled said they use mobile banking and are looking to implement mobile RD, and 5% did not offer either service.
These unofficial findings that trend toward mobile banking are in line with a recent Javelin Strategy & Research study which found that more than 12.5 million Americans use mobile bill pay. Javelin estimates Americans are outlaying $2.1 trillion annually to pay bills central to a day-to-day living such as major credit cards, store-branded credit cards,utility bills, mobile phone bills, mortgages, vehicle loans and student loans.
"A wide range of companies have much to gain if they can stand out among mobile bill-payment providers. That starts with financial institutions that want to be the centerpiece of customer payments and jolt flat-lining growth in online bill payment, and billers that are seeking more efficient ways to collect payments and maintain direct contact with customers," said Mark Schwanhausser, director of Omnichannel Financial Services at Javelin Strategy & Research.
Javelin further estimates that more than140 million Americans are soon to adopt the mobile bill payment platform. One-third of which will be new users of bill payments at their bank or credit union. "It also extends to bill-payment innovators such as Bill.com, Check, Doxo, Manilla, Simplee, Volly, and Zumbox that are seeking to gain a foothold in a huge market ripe for disruption, as well as companies serving the underbanked, mobile wallet providers, and technology vendors," noted Schwanhausser.
Predatory Lending
Since the Great Recession, predatory lending business have spiked from an estimated 5,581 in 1997 to more than 10,000 in 2012. These brick and mortar stores are taking the place of the equaling increasing number of bank and credit union branches that have closed during the same time period. Campbell noted that 93% of branch closings occurred in low income communities.
Tilbury provided an example of a 30-day loan from Cash America, which underscores why these businesses are succeeding. The Annual Percentage Rate on a $100 note was 456.25%. "These services are keeping poor people poor," he said.
Campbell said the biggest challenge to date is competing with predatory lenders that dominate the market. He likened Hope CU to "Davey" fighting Goliath. And while astronomical APRs may seem impossible to conceive for some, he said there is psychology at play. The underbanked population, he noted, is accustomed to hearing "no" from financial institutions, many of which they don't trust. So when they hear a "yes," even at these high rates, they are satisfied. This accepted attitude he wants to change.
Raising Hope
Since 1998, Hope CU has grown it member base from 791 to more than 27,000. With 16 branches in four states (Arkansas, Mississippi, Louisiana and Tennessee) Scot Slay, the CU's vice president and marketing and communication director, explained that many of the members and people helped are from rural towns with low income. "These people have difficulty accessing mainstream providers."
With $1.7-billion in loans, which has helped more than 400,000 people in the region, Slay said the loans are a combination of home buyers, community projects and not-for-profit organizations. "These loans create jobs or services that don't exist or ones that need support."
To date, Hope CU has an approximate 2,300 registered mobile app users, 1,500 of which are active. Campbell expects that mobile will quickly outpace online computer banking. Part of this movement is the ability to compete with payday lenders and pawn shops via the web.
"The Internet is changing the field, and now it's a level playing field," said Campbell. "We can actually compete."
In an effort to effectively compete, Slay explained that a number of initiatives are under way. These include studying payday lenders marketing and branding as a way to attract their business. In addition, Hope CU is active on Facebook, Twitter, Instagram and YouTube. "Our intent is to connect with people and provide information and resources," said Slay. "We want them to see the results we are creating with their support."
This overarching campaign is also impacting braches. Campbell said Hope CU's newest branches are all "cashless," a trend that could migrate to other branches. "We say 'technology for transactions and people for advice.' " This philosophy has created an open-space branch design that is staffed with CU employees who are trained to provide advice and counseling. There are ATMs and kiosks for transactions, but the main purpose is to educate the underserved.
"We have to meet the underbanked where they are," said Campbell. "We have to look at what other vendors are providing and determine how we can provide better products and services."
