Other Side of the Recession: Respect For Job Done By CDCUs
HOLLYWOOD, Calif.-One unforeseen side effect of the recession and slow recovery: community development financial institutions are earning a lot more respect.
That was the message from Jennifer Tescher, president and CEO of the Center for Financial Services Innovation in Chicago, and Mark Pinsky, president and CEO of Philadelphia-based Opportunity Finance Network.
According to Tescher, serving the underserved is a new opportunity. On one hand, she noted, the landscape is more complicated today, "but the economy might turn out to be a good thing because more financial providers are recognizing the importance of development."
Pinsky agreed, noting his company specializes in distressed markets and, "unfortunately, distressed markets are bigger now."
"[Federal Reserve Chief] Ben Bernanke himself said a few weeks ago community development financial institutions are not important just to a few people, not just to their communities, they are important to economic growth."
Tescher praised CUs for being "innovative" when it comes to helping consumers. She said there definitely is a future for small credit unions, but predicted their roles will change going forward.
"When we have enormous institutions that make decisions in a centralized fashion-even though they have large distribution networks-they cannot serve everyone," she said.
Financial services is become a scale business, Tescher continued, meaning perhaps small institutions will find a role distributing other providers' services.
"Collaborate with larger institutions that are good at manufacturing products," she advised. "The big challenge for small financial institutions is cost. Small credit unions must have collaborations and partnerships to create scale. There is power in numbers, but it can be hard to do."
Reaching Young Consumers
Credit unions have been fed a consistent message at conferences and in the media that they must reach out to young people and bring them into the fold. According to Tescher, this process is not about being "sexy" or "cool" but recognizing behavior, noting a generation raised with a mobile telephone in hand expects everything to happen immediately.
"There are many more ways to access financial services these days," he said. "People can get a car loan anywhere. They can get a credit card anywhere. Credit unions must find their way as a guide. Communicate that the credit union is a trusted source."
Thanks to instant communications such as text messaging, Tescher suggested CUs could give young members a "nudge" before they make a mistake, such as overdrawing their account.
Pinsky noted young people today will post just about anything on Facebook. "They feel they have to be transparent to the world," he said.
Tescher agreed young people will give up enormous amounts of personal information, but said only if they see it as having a benefit to them.