New MARKETS, New BUSINESS
Reaching into new markets isn't just good philosophy, it's good for the credit union's bottom line.
The message was repeated throughout presentations made during the PALS workshop here assembled by NCUA Board Member Debbie Matz. More than 280 more credit union officials from 35 states discussed initiatives to reach "New Markets, New Members, and New Business" during the meeting.
"I hope all participants at our Spring PALS workshop were inspired to reach new markets where there are few other insured financial institutions- and tremendous business opportunities for credit unions," Matz emphasized.
Below are some of the ideas and strategies shared:
Vantage Credit Union in Bridgeton, Mo., reached three non-traditional membership groups in one move by establishing a presence in underserved East St. Louis, Ill. The potential membership is 98% African-American, with an average age of 31, and a median household income of $21,000. "Some people asked, 'Why serve those people?' I asked, 'Why not?' Anybody can have a community charter," said CEO Hubert Hoosman. "The challenge is to serve everyone in the community. If you're going to talk credit union philosophy, live it!"
During the past 15 months VCU has signed up nearly 1,000 new members and made nearly $4 million in loans in the new market. According to Hoosman, astonishingly, the new members, who had few alternatives other than predatory lenders, are proving to be excellent credit risks. Delinquency at VCU's East St. Louis branch is only 0.28%-compared to 0.88% for VCU's membership at large. And while the membership is growing more ethnically diverse, it is also becoming younger, which has been a goal for the credit union, Hoosman said.
But Hoosman reminded his credit union colleagues that real-life success stories are not as simple as the movie fantasy "Field of Dreams." The movie's moral, "If you build it, they will come" does not apply to branching into new markets. Hoosman advised that before opening a branch and doing business, "you first have to be involved in the community."
Slow Approach Pays Off
* In Wichita, Kan., Lee Williams, CEO of the $46-million Central Star Credit Union, said CSCU did not just rush into its new community
"We worked in the Hispanic community for a year before ever putting out a brochure for loans," related Williams. "Without knowing anyone, I went to the Hispanic Chamber of Commerce and asked what services they needed in their community."
He said CSCU made a commitment to provide those services, including financial education, scholarships, and support for Hispanic organizations and events. "Once you develop partnerships, you can understand what's needed and expected in new markets."
The result has been to design specific financial services to attract Hispanics-including a "safe account" that doesn't require a Social Security Number, and "check-cashing with a twist." Check-cashing is available to everyone in the field of membership who has not yet joined the credit union. Every time these non-members cash a check, CSCU deposits the $5 fee into a frozen savings account. The twist: When non-members cash a check for the 10th time, the credit union frees up the $50 to open their first share account-so they become full-fledged members.
In Burnsville, Minn., US FCU is tailoring products at the branch level.
"You have to get away from only providing traditional products and services," said CEO Bill Raker. "We give each of our branches the opportunity to customize their products and services, their hours of operation, and their community activities based on the neighborhoods they serve. Each branch has its own 'Community Care Committee' of at least five people who work with community organizations to select their activities. In some branches the whole staff is involved. And to help all our employees volunteer in their communities, we give them up to 16 paid hours a year to do charitable work."
Raker told the PALS workshop those efforts are paying off, as this year USFCU has tripled its membership growth to 600 a month-with new members speaking 12 different languages.
English A 'Thing Of The Past'
Another mid-America-based credit union agreed with Raker when it comes to speaking the language of members.
"Don't say, 'If they're going to live in our country, they've got to speak English!' That's a thing of the past," emphasized Kris Lundquist, Director of Marketing and Business Development for The Family Credit Union in Davenport, Iowa. TFCU employees are encouraged to attend diversity training at local colleges and community organizations that teach sensitivity to different cultures.
To serve the growing number of Spanish-speaking workers in its SEGs, the $64-million credit union hired more bilingual employees so that at least one is on the front line in each office at all times. When those employees get outside the credit union, they are recognized in the community. They host bilingual seminars to inspire Latinos to achieve "The American Dream." They volunteer for "Ask the Expert" programs on Spanish radio. And every Friday, they set up tables at SEGs to do business with Latinos in their own language.
Today about 10% of The Family CU's members are Latino, which is double the ratio of just two years ago. Lundquist calls these new members "lucrative and loyal. Once they're with you, they're often here to stay."
In St. Louis, one credit union has "rebranded" a piece of itself in a new community. Anheuser-Busch Employees' Credit Union in St. Louis has literally reinvented itself to help immigrants from three continents. The SEG-based credit union changed its charter to do business as American Eagle Credit Union in an underserved area that's home to refugees from Bosnia, Somalia and Vietnam.
"We were asked by community leaders and neighborhood associations to be part of their revitalization efforts," related Senior VP Pier Alsup. "We opened an office in an old Taco Bell, sponsored community projects, offered money management counseling and home-buying workshops." Reaching out in several different languages, American Eagle developed a new tagline that appeals to all of the refugees: "Helping you build a better future."
At the same time, the new members are helping the credit union build a better future. "Our main sponsor is not growing domestically, and we already have good penetration," Alsup reasoned. "So expanding into this underserved area is a proactive approach to securing continued growth."
Selling To Employers
For credit unions striving to improve penetration within their SEGs, CEO Ed Jacob of North Side Community Federal Credit Union in Chicago offered this advice: "A lot of financial decisions for low-income workers are made on the job; we need to reach them in the workplace. Banks often do a better job with bank-at-work programs. Credit unions need to do a better job communicating the benefits of membership to employers."
With less than $10 million in assets, NSCFCU has raised penetration by finding new markets within its 42 SEGs-unbanked workers. "We're reaching them through their employers, by demonstrating that credit union membership can make workers more productive," Jacob explained. "Financially stressed workers spend up to 20 hours a month dealing with personal issues. But workers who get financial education and direct deposit through their credit union don't spend time worrying about going to payday lenders."
And by doing their taxes through a credit union, low-income workers effectively raise their wages by $2.50 an hour. That's the result of North Side's Volunteer Income Tax Assistance program, which is funded by Technical Assistance Grants from NCUA and partnerships with the IRS and the Center for Economic Progress.
Presentations from PALS workshops are posted at www.ncua.gov, click PALS, then click "Workshop Presentations".