Waiting for Genuine Connection

Who likes waiting? Waiting in that long line for the restroom at a concert. Waiting three hours at the amusement park for a roller coaster ride that lasts three minutes. Waiting for that hot cup of coffee when the person in front of you is having trouble paying with their mobile app. Yes, we’re all exposed to life’s waiting game. For those in professions where waiting can have life or death implications, these examples are merely trivial annoyances. But in the financial services space, waiting for financial access can have profound implications on financial health, especially for the most financially vulnerable households in our communities.

Your Members Are Waiting

Filene’s research over the past 30 years has always been about ending the financial access waiting game for consumers by helping credit unions understand shifting consumer challenges and equipping them with innovative solutions. Recently, Filene’s commitment to this work has gained focus to address the egregious access and wealth gap for households of color. Filene embarked on the Reaching Minority Households project to close this gap, a multi-phased effort made possible by the generous financial support and guidance from Visa.

The first effort was to quantify the opportunity. In the report “Reaching Minority Households: Learning from Minority Credit Unions” Filene highlighted the financial and consumer impact opportunity for credit unions to effectively serve households of color. This exposed the consequences of waiting for fair and equitable access to critical financial resources:

• 47.3% of black and 42.9% of Hispanic households are unbanked or underbanked, compared to 17.1% of white households. While these numbers have improved in recent years, the disparity in access remains unacceptable.
• Minorities account for roughly one-third of U.S. households, yet they are underrepresented in almost every category that measures financial standing. Households of color account for 23% of household income, 10% of household wealth, 8% of retirement investment balances and 5% of investments outside retirement accounts.
• Independent work and small business ownership are becoming increasingly important elements of pursuing financial health, especially with vulnerable populations. However, even with low credit-risk businesses, minority-owned firms are less likely to be approved for full financing than non-minority-owned firms (40% versus 68%, respectively).

The reality is, members of the communities that credit unions serve, especially households of color, are waiting to gain access to the financial tools they need to build better financial futures.

Next, Filene worked with 40 U.S. and Canadian credit unions testing five products that targeted the specific needs of households of color through the “Reaching Minority Households (RMH) Incubator.”

Credit unions that offered payday lending alternatives, small business microloans, non-prime auto loan refinancing, and Individual Taxpayer Identification Number loans for immigrant populations lent $84 million to over 18,000 consumers. Through this work, Filene assertively found that credit unions can effectively and sustainably offer products that meet the needs of households of color and other vulnerable populations in a way that makes a tremendous difference in the lives of those credit union members.

The work didn’t stop there. ITIN lending was so successful, Filene in partnership with Coopera, Inclusiv and PolicyWorks developed the ITIN Lending Guide. These partners, with support from national small business microlenders Accion U.S. Network and Grameen America, held five financial inclusion workshops across the U.S. to teach credit unions to implement ITIN Lending and a small business lending program, reaching 200 participants at 60 financial institutions.

End the Waiting Game

Through this extensive project, Filene believes there is a key message for credit unions waiting for an opportunity to practice true financial inclusion and meet the needs of everyone in their community. The only thing standing in their way is the will to act. Filene’s RMH project is just one of countless programs made by so many dedicated organizations in the credit union movement that have developed pathways for financial institutions to end the financial access waiting game for consumers in need; all backed with resources, tools, examples, case studies and testimonials. The question of if, can and should credit unions serve vulnerable populations and households of color must be put to rest. Serving households of color and other vulnerable populations is the future of the credit union movement and will drive its growth and community impact outcomes.

While credit unions should have a clear pathway to connect vulnerable populations with products and services, Filene’s latest (pending) RMH report showed this is often insufficient to fully meet the needs of this population. In this qualitative project, Filene followed 20 consumers for a year who received an ITIN or small dollar loan as part of the RMH Incubator. Filene sought to understand the long-term impact these products had on consumers’ lives. One of the most important discoveries is that financially vulnerable consumers are waiting for something equally as important as financial access: A genuine connection with the financial institutions that serve them.

A significant number of the consumers that were interviewed talked about a “dead zone” of interaction with their credit union. That is, they felt excited, elated and energetic about their financial future when they were offered the loan and when they paid it off, but there was often something missing. These credit union members wanted to know how the loan fit within the larger context of their financial journey and long-term goal attainment. They wanted customized advice and guidance about what to do next. They wanted someone to know their needs, hopes and dreams and help them develop a plan to achieve those aspirations. These consumers were waiting for a genuine connection with their credit union that went well beyond financial transactions, loans, products and an offering of financial education. Most consumers in the study came into the credit union’s doors because of the product, but they stayed because of the trusted relationship.

And Build Genuine Connections

Credit unions need to pay attention to these findings. In a time of rapid automation and increased interactions through virtual channels, credit unions must find ways to build genuine connections through in-person interactions and leverage technology to augment and maintain those trusted relationships. Additional research in Filene’s “The Credit Union of the 21st Century” report talks about different operating models credit unions can use to meet the needs of their members. It makes the case that credit unions must consider best practices within a relationship or “concierge banking” model to build deep connections.

Not convinced? Ask Coopera Client Relations Director Kenía Calderón Cerrón about the importance of credit unions conveying trust and extending genuine relationships to serve the Hispanic population. In a recent Filene podcast, Kenia talks about how a DACA loan made her a credit union member for life. It all started with a credit union ending her wait for a genuine connection – to take the time to understand her hopes and dreams, not just issue a loan.

Before you head to the next part of your day, pause and think about how the members you serve are waiting for you. Think about the fear of losing a job when waiting for that small dollar loan for a car repair. Imagine being a young immigrant in your community wanting to apply for lawful permanent residence under the DACA program but waiting for a loan to cover application fees. Envision a dream of living self-sufficiently by starting a small business, but waiting to be approved for a business loan.

Then think about those you’ve already served. Are they waiting for help with their next step toward greater financial health? I’ll bet there are communities of LGBTQ consumers, veterans, students, the list goes on … just waiting for you to build a genuine relationship with them. It’s no coincidence that the first credit union dedicated to serving the LGBTQ community was just chartered last month.

When credit unions serve their members and end the wait for financial access, there is a hidden opportunity to turn that engagement into a long-lasting loyal relationship that leads to improved financial health. Credit unions can accelerate their focus on serving financially vulnerable members by moving beyond the conversation of access to one around building genuine connections.

Adam Lee is Incubator Director for the Filene Research Institute. He can be reached at 608-661-3747 or adaml@filene.org.