Jul 18 '18
Serving Immigrants is the Right Thing To Do…and it’s Smart Business
Although immigration has slowed in recent years, a high birth rate among immigrants in the U.S. is contributing to steady growth of this vibrant community – a community of more than 43 million that continues to be overlooked by mainstream financial services.
The lack of access to culturally relevant, fair, dignified – and vital – financial education, products and services is made worse by a cloudy legislative commitment to fixing the nation’s broken immigration system. With so much in flux, not to mention wild headlines about walls and undocumented immigrants, there is confusion, worry and anxiety from segments of the immigrant community and financial organizations alike.
It’s true we need reform, and sometimes it feels far away. But that is all the more reason for credit unions to step up and fill a growing and critical need for the 43 million and counting.
It all begins with understanding the immigrant community, a diverse and multifaceted population spanning every culture, race and socio-economic background on the planet. Being all things to all people is rarely a good strategy, particularly for credit unions that pride themselves on truly knowing their members and providing custom, personalized experiences. The same research, technology and digital transformation strategies credit unions are deploying to learn more about their mainstream members can be applied to hyper-local immigrant segments.
Foreign-Born Hispanics Pay Closer Attention to Financial Wellness
Mexico is the top origin country of the U.S. immigrant population, accounting for 27 percent of all U.S. immigrants. The Hispanic people who comprise these segments are paying closer attention to their financial wellness as their communities begin to grow in size and influence. Because many remain skeptical about engaging with large financial institutions, they are drawn to the possibilities of credit union membership. It’s one of the reasons multicultural consumer groups have accounted for 61 percent of credit union growth over the past five years.
This growth is only the tip of the iceberg. The FDIC says more than 45 percent of Hispanic households were unbanked or underbanked in 2015. Credit unions who feel the calling to open their doors to this growing and upwardly mobile community have a great opportunity to capitalize on word-of-mouth momentum.
Serving Immigrants is the Right Thing To Do… and it’s Smart Business
Although credit unions exist to serve, they must also be sustainable. And, many are discovering, the immigrant Hispanic profile exemplifies the ideal credit union member. Here are just a few facts that support the notion that serving Hispanic immigrants and the Hispanic market as a whole is not only the right thing to do, it also makes good business sense:
- The annual spending growth rate for Hispanics is 4.1 percent, compared to 1.4 percent for whites.
- At 2.9 percent, the U.S. Hispanic gross domestic product (GDP) experienced the third highest growth rate in the world, behind only China and India.
- As young Hispanics enter the workforce and older non-Hispanics leave it, the Hispanic GDP will account for 24 percent of total U.S. GDP growth by 2020.
The annual Financially Underserved Market Size Study, conducted by the Center for Financial Services Innovation (CFSI), illustrates the tremendous opportunity that exists to address the needs of financially underserved consumers. Here are some highlights from the 2017 study:
- Underserved consumers spent $173 billion in fees and interest to use $1.94 trillion in financial services in 2016. This demonstrates the outstanding opportunity for low- or no-fee credit unions to differentiate themselves.
- Spending by financially underserved consumers increased 6.6 percent, or $10.7 billion, in 2016.
- The market opportunity expanded an estimated 8.3 percent to $188 billion in 2017.
The Credit Union Opportunity is Massive
Who better to address the financial needs of the U.S. immigrant population than credit unions? Here are some reasons immigrant communities and credit unions are perfectly matched for mutual growth and success:
- Serving immigrant populations is people helping people. Serving the underserved is in a credit union’s DNA. The heart of the cooperative movement is built around a mission to serve people of modest means. Credit unions should commit to helping all people in their communities – immigrants and non-immigrants, documented and undocumented, those with traditional identification and those without. Serving immigrants is within a credit union’s regulatory framework and deeply embedded in the Equal Credit Opportunity Act.
- Serving immigrant populations is a clear path to sustainable growth. As the above numbers confirm, credit unions desiring to grow their memberships, assets and loan balances should place a strategic focus on their outreach efforts to Hispanics and other multicultural consumer groups. Approximately 20 credit unions with Hispanic market strategic plans worked with Coopera to grow their Hispanic membership by 56 percent in 2017.
- Programs are available to help credit unions serve immigrant populations. For credit unions that want to grow their immigrant outreach efforts, there are numerous resources available. Juntos Avanzamos, Together We Advance, is a national designation offered by the National Federation of Community Development Credit Unions (Federation) in partnership with many credit union industry organizations. The program provides credit unions committed to Hispanic communities the resources they need to better serve and empower underserved consumers. Coopera offers a variety of assessments, including the Hispanic Membership Analysis, the Hispanic Opportunity Navigator and the Hispanic Target Market Analysis, to help credit unions understand growth opportunities within Hispanic segments, both immigrant and non-immigrant.
Coopera is also excited to work with Filene and others in the credit union industry to create the Individual Taxpayer Identification Number (ITIN) Lending Implementation Guide, currently in development, as a tool for credit unions to expand their lending programs to include ITIN borrowers.
For more information and resources on serving immigrant populations, check out Filene’s Reaching Minority Households Incubator, and be on the lookout for the ITIN Lending Implementation Guide when it’s released this fall.