This strategic planning season, two very hot-topic opportunities are expected to be on the minds of credit union leaders: payments and the Hispanic consumer.
Today’s payments landscape – rife with traditional and new competitors, fresh technologies and varying degrees of consumer demand for innovation – is complex to say the least. Undeniably important, the right payments offerings will certainly be a part of the strategic planning dialogue.
Equally as critical is the manner in which credit unions will service the largest, youngest, fastest-growing and most underserved population in the U.S. – Hispanics. Nearly every community across the country is feeling the influence of this powerful group of consumers. As planners look at the credit union’s strategy across different member segments, it will become obvious for many that a “one size fits all” approach will not work with the multifaceted Hispanic segment.
Interestingly, the nexus of these two opportunities offers its own set of possibilities for credit unions. Hispanic consumers place an incredibly high value on payments products and services. Cooperatives that identify and leverage this opportunity will have a leg up in the battle for long-term member loyalty. Of course, it will be incredibly important for credit unions to set trust-building strategies as a first step in any Hispanic-member courtship. Product development strategies will be much more successful when targeting an audience of members who understand the credit union is there to help, not to take advantage.
Hispanic consumers tend to over-index on smartphone and mobile application use, so mobile banking and payment products will be an important offering for credit unions looking to attract members of this community to their cooperatives. Recent studies show that Hispanic smartphone owners are especially interested in banking and payments apps. Nearly seven out of 10, according to a Zpryme study, use their smartphones for mobile banking, and 35 percent say they use their mobile banking app at least once each day.
When considering immigrant Hispanic populations, it’s easy to understand why mobile device use is higher than average. Coming to the U.S. with little-to-no experience with personal computers or broadband Internet, Hispanics new to the country may be attracted to the lower price points offered by mobile devices and WiFi connections. As purchasers of the newest, most connected devices, Hispanics are exposed to and become comfortable with technology like near-field communication (NFC) and apps like mobile banking and payments. This generated a decent amount of conversation at an event I recently attended in Lake Tahoe. I was part of a panel discussion of the topic of emerging markets and the future of payments, and credit union executives were especially interested in how Hispanics engage with mobile banking and payments tools.
Importantly, first-generation Hispanics are less skeptical about financial applications offered by alternative providers. Bad experiences with corrupt financial institutions in Latin America may have set the tone for how these new Americans view even the most community-minded financial institutions. You can see alternative providers leveraging this cultural nuance for profit. Take PayNearMe, for example, which allows cash-preferring consumers to pay for bills or even shop online at non-financial institution locations. Here again, as credit unions analyze the competitive landscape, prioritizing strategies that build trust over strategies that build products will be critical.
First-generation Hispanics are also looking for inexpensive, simple and secure ways to maintain connections with family all over the world, in Latin American especially. Therefore, they are keen to engage with payments and banking services that go beyond making payments. They need tools that will allow them to send money internationally in a way that is easy and safe. This is especially true given the declining availability of reliable remittance services in the U.S. Credit unions should consider wrapping these features into their mobile banking and payment strategies. Alternatively, cooperatives can look into establishing their own unique remittance services or offering Hispanic-tailored prepaid cards, such as the Coopera card. This card allows cardholders to name multiple account owners, removing the hassle and unease of transferring funds between family members internationally.
Hispanics are also interested in tools that will track their payment (and repayment) behaviors so as to begin building a history that may make them an attractive borrower in the future. With no solid credit history to lean on, many Hispanic families have difficulty locating a consumer- and fee-friendly lending institution.
The best place for credit unions interested in building relationships with Hispanic prospects is to assess its own readiness. Leaders of the cooperative should look at things like the number and qualities of current Hispanic members, as well as that of Hispanics within its field of membership. Only then is the credit union in a position to begin adapting its culture, services and products – payments or otherwise – to the Hispanic marketplace.