NEW YORK-In taking on the low-income credit union designation (LICU), Cathie Mahon cautions CUs to avoid some common misperceptions about low-income consumers-that they are without means and are not technologically savvy.
The National Federation of Community Development CUs president and CEO pointed out to Credit Union Journal that just because someone is low income does not mean the person can't pay their way.
"In fact they have many banking needs, all of which they are willing to pay for and would prefer to pay their money to a responsible financial institution instead of some fee-gouging bank or fringe financial services provider," said Mahon. "There is a big marketplace willing to pay for good service, good reputation, and good products-all of which credit unions have."
Mahon continued that it is commonly thought that low-income people won't use online banking, and they prefer in-person service. "I recently worked for the city of New York's Office of Financial Empowerment and conducted a study in multiple low-income communities. We found the level of mobile technology used by low-income people to be off the charts. We looked at several communities in which there is a high level of unbanked individuals and found that about 90% of the people there, across board, were using some sort of smartphone technology."
Pockets Within Pockets
Within those communities, Mahon acknowledged, there are the typical member pockets that demand personal service, especially older members. But Mahon also emphasized that these low-income markets should not be treated as homogenous, and that CUs entering the space should pay attention to the unique differences inside the low-income markets they are serving, and that the Federation can help.
"We do emerging markets reviews with the credit union, look at the credit union's inventory of products and services, engage them in conversations about the different types of marketplaces they will serve and help them develop strategies for each," said Mahon. "So, for example, the CU will develop strategies for serving older Americans, youth, very poor families etc."
Mahon also emphasized that the credit union does not have to tackle all market segments at once.
"Just because you are now an LICU does not mean you have to immediately become a 24/7 cash operation. But it may mean you want to move toward opportunities in the transactional service area and plot the best course to do that."
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