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Even concerns about the validity of foreign-issued forms of identification are outdated and overblown, Myers adds.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.
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