Hispanics are among the nation’s fastest-growing populations, they’re largely unbanked, and their average age is more than a decade younger than the average American.
So por qué aren’t more credit unions courting the Latino community?
It’s hard to ignore the numbers. There are more than 50 million Hispanics in the U.S., and from 2000 to 2010, the U.S. Hispanic population grew 43%.
Current trends suggest the total Hispanic population in the U.S. will reach 133 million by 2050, and constitute nearly 30% of the total U.S. population.
By population alone, it’s an attractive market. Consider that less than half of Hispanics fully use mainstream financial services and the opportunity grows even larger. It’s a bit surprising, then, that credit unions aren’t tripping over each other trying to get Hispanics in the door.
Of course, there are some obstacles to serving this market, not the least of which is a language barrier. While more than half of the nation’s native Spanish speakers say they also speak English “very well” or better, 17 million don’t speak the language well, if at all. That makes conducting any business—let alone financial services—quite challenging.
And the language is simply where the service gap begins, not where it ends. There are cultural and behavioral differences that also can distance credit unions from the Hispanic community.
Thus, accommodating Spanish-speaking Latinos involves more than translating brochures and forms. Truly welcoming Hispanics with culturally sensitive products and services requires research, planning, policy changes, and, at times, unorthodox marketing strategies.
Plus, credit unions can encounter both internal and external obstacles along the way.
But for some credit unions the issue is far simpler: If they never consider the demographics of their markets, they might not recognize the vast opportunity available to them.
This happens too often, says Bill Myers, director of NCUA’s Office of Small Credit Union Initiatives. “Credit unions miss an opportunity when they don’t recognize and serve a substantial population in their community.”
Fran Godfrey, CEO of United Educational Credit Union in Battle Creek, Mich., agrees. Godfrey and other credit union staff had certainly noticed the area’s changing demographics, but she was surprised when she reviewed actual Census Bureau figures for the communities where the $115 million asset credit union maintains branches.
The growth patterns fueled further research, which led to formal Hispanic outreach efforts in 2009.
Godfrey suspects other credit union leaders would be surprised at the extent of the opportunity in their own back yards, and she encourages them to review recent Census figures to obtain population statistics for their service areas. The agency provides detailed data and reports about the Hispanic population down to the county level.
The Pew Hispanic Center also compiles data about the Hispanic population, and CUNA maintains a set of resources for credit unions as well.
United Educational not only used Census figures when planning its entry into the Hispanic market; the credit union still relies on the data to set targets and goals for Latino outreach efforts.
Joan Miller, an executive assistant who handles marketing for the credit union, would like individual branches to reflect the population of the communities they serve. So if a county has a 6% Hispanic population, she wants United Educational branches to have 6% Hispanic membership in that area.
NEXT: Other obstacles
Lack of awareness isn’t the only obstacle keeping some credit unions from serving the Latino community. Some discussions about serving Latinos are sidelined by lingering misconceptions and misinformation, says Miriam De Dios, CEO of Coopera, a consulting firm and CUNA partner that helps credit unions navigate the Hispanic market.
Some credit unions struggle with persistent, yet false, assumptions that most of the Hispanic population is undocumented, or that relying on foreign forms of identification will invite fraud, De Dios says.
A recent poll by the National Hispanic Media Coalition quantifies what De Dios has experienced. The poll found that more than 30% of Americans believe that more than half of Hispanics are in the country illegally. The reality is that 37% of U.S. Hispanics are immigrants, and only 18% of Hispanics are undocumented.
Even concerns about the validity of foreign-issued forms of identification are outdated and overblown, Myers adds. While it takes some training to ensure that staff can verify Matricula Consular (the most popular form of Mexican personal identification issued to immigrants living in the U.S.) and other foreign identification cards, the process is ultimately no different than training staff to recognize and verify driver’s licenses from other states.
“That’s really sort of an old controversy,” Myers says, noting that NCUA requires only that members show a government-issued form of identification, not that they possess a U.S.-government-issued ID. “The credit union has to develop a procedure on how to tell the difference between a legitimate ID and a fake ID. But that applies to a Virginia driver’s license as well as a [Matricula Consular card].”
Resources exist to help credit unions recognize valid IDs, Myers adds, whether they’re out-of-state driver’s licenses or foreign-issued ID cards. And any real documentation issues usually can be handled by formally changing policies and procedures.
Overcoming internal, external hurdles
This is where credit unions can run into hurdles or, at the very least, delays. Consider Greater Iowa Credit Union, which operates in Ames, Des Moines, and Denison. The $303 million asset credit union operates six branches, two of which are in areas with significant Hispanic populations.
When Michael Adams considered that in conjunction with the growth of Iowa’s Hispanic population—nearly 84% between 2000 and 2010—he saw an opportunity not only to serve a new market but also to generate a steady stream of new business.
“There’s the practical side of my nature,” says Adams, Greater Iowa’s vice president of marketing and public relations. “This really is the future in terms of profitability.”
His first step was to obtain a World Council of Credit Unions grant to allow the credit union to issue remittances. With that service in place, Adams looked at other ways to serve and boost product use among Hispanic members.
But most services beyond remittances required member identification, and Greater Iowa did not accept foreign-issued IDs. To do so would require a policy revision, which would require board action. That takes time even when everyone is fully supportive.
“I don’t know that there were really objections, but there was some hesitancy and some caution about going headlong into a Latino program,” Adams says. “It was more about asking important questions and wanting solid answers before we moved forward. We proceeded with caution, with a very conservative approach. It’s less conservative now. It’s actually pretty progressive, but we started very slowly.”
The initial policy change took about eight months, but it paved the way for more robust Hispanic outreach, including Individual Taxpayer Identification Number loans, credit-builder loans, and Spanish-language online banking.
The credit union had to change a lending policy along the way—another process that took 18 months—but Adams says it was worth the effort because delinquencies are low and the credit union is hitting its targets. Next year, Adams expects to add a Spanish-language website.
While internal hurdles take time to clear, they might be easier to handle than the external hurdles credit unions sometimes encounter. The Latino market presents some unique issues that credit unions may not have encountered previously with more traditional memberships.
For starters, many Latinos have a vastly different approach to personal finances. Plus they can carry some prejudices of their own.
“Looking at the Hispanic community, there are some nuances that make it different from the traditional membership credit unions are used to serving,” De Dios explains. “The financial behaviors are different. They’re not integrated into the mainstream. Talking with them about finances is going to require some different tactics.”
Consider basic share and share draft accounts. A Federal Deposit Insurance Corp. (FDIC) survey released in September found that most Americans have both a savings and a checking account with a bank or credit union.
However, the same survey found that less than half of Hispanics are considered fully banked. The FDIC defines “unbanked” households as those lacking any kind of deposit account at an insured depository institution.
“Underbanked” households are those that have some type of bank account but also rely on alternative financial service (AFS) providers, such as check cashers or nonbank remittance providers.
Further, Hispanics were the most likely underbanked population to use AFS providers, with more than half of Latinos using some kind of AFS in the 30 days prior to the survey.
While this seems to amplify the growth potential within the Hispanic market, it also presents a challenge. Traditional arguments for using a credit union versus a bank, or for selecting a specific credit union, may not be compelling to a population that largely eschews formal financial services altogether.
To that point, the FDIC notes that the AFS-using population generally reports it finds the convenience, cost, and access of the services preferable to similar services offered at banks. That’s a consideration for credit unions, which will have to evaluate branch locations, accessibility, and hours; pricing; and any identification requirements before competing for Hispanic business.
De Dios believes credit unions still offer advantages over the vast AFS system on which much of the Hispanic population relies. She recommends focusing on the opportunity to build credit, which improves and increases future borrowing opportunities.
The credit union membership structure also is key. “Being an owner of a financial institution really resonates with the community,” she says.
However, how credit unions communicate these advantages is critical, De Dios acknowledges, and standard tools may not be as effective as they are with the general membership.
“Traditional marketing that is not culturally relevant is not going to work with this community,” she says, noting that advertising, event sponsorships, direct mail—some of the mainstays of credit union marketing departments—may not be persuasive to Hispanics who can be leery of mainstream marketing campaigns directed toward them.
NEXT: Build trust
Credit unions, after all, aren’t the first industry to recognize the growth of the Hispanic population and see dollar signs. Many financial institutions have launched efforts; few have sustained them.
Miller says United Educational encountered some of that skepticism in its early outreach efforts, and the credit union had to work hard to convince the Hispanic community that its efforts were part of a long-term growth and service strategy.
“You need to let them know you’re sincere; that you’re not just looking to make a quick buck,” Miller advises. “The Hispanic community has seen a lot of financial institutions do a cursory effort.”
That’s why De Dios advocates beginning with grassroots campaigns and community outreach prior to any product or service launch. She recommends identifying partners in the Latino community, establishing relationships with Hispanic business leaders and service providers, and providing financial education and workshops before actively recruiting Hispanic members or branding any Latino products.
Familiarity helps. United Educational and Greater Iowa both cultivate exposure by participating in local cultural festivals to raise their profiles and demonstrate commitment.
Another strategy De Dios recommends is formalizing some of these relationships by creating a Hispanic advisory board. “Credit unions can use that group as a sounding board for different ideas, to brainstorm, and to get feedback about what the community might think about specific products or services,” she says.
But the real benefit, De Dios says, comes when these advisory board members stop serving as simple resources and become advocates. Over time, these Latino community partners begin to refer new members and recommend candidates for employment or board appointments at the credit union.
Members of the local Latino community see that happening—they know when a neighbor becomes a loan officer or when a relative becomes a director—and that speaks more powerfully than any ad campaign or name on a 5K race banner.
“It shows trust,” De Dios says. “You will certainly employ some traditional forms of marketing, too, but the grassroots efforts are about building trust.”
Building trust, of course, takes time, and successful outreach to the Hispanic community won’t happen overnight. “Don’t wear rose-colored glasses,” Miller cautions. “If you do it right, [outreach] is a lot of work. It requires a lot of time, effort, and money. Look at it as an investment.”
Godfrey agrees. “It’s a growth strategy for the credit union,” she says, pointing out that building Latino business not only expands the membership base, it also lowers the average age of membership.
That’s important, Myers adds, because younger members borrow more than older members, and lending is where credit unions make their money.
The experts are quick to dispel worries that serving the Hispanic community requires creating a completely separate suite of products and services. Some of the products marketed to Hispanic members already exist under different names, and others appeal to the general membership.
A Quinceañera loan (used to celebrate a girl’s 15th birthday), for example, is really just a personal loan with specific branding and marketing. And United Educational’s American Dream loan, designed to help underbanked Latinos build credit histories, became a general credit-builder loan.
Plus, Godfrey adds, the policy and procedural changes the credit union made to serve the Hispanic community created opportunities to serve other populations. Now, United Educational serves the Amish, who generally do not use photo identification, as well as foreign students studying at nearby Albion College.
“Everything we’ve done when we started looking at the Hispanic community crossed over to our general membership,” Godfrey says.
While she recognizes the business benefit in tapping the Hispanic market, Godfrey says there’s more to it than that. For the 37-year industry veteran, Hispanic outreach ultimately boils down to mission and purpose.
“The bottom line is that this is what we do,” she says. “We reach out into the communities we serve. We are doing exactly what the credit union is supposed to be doing.”