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Attract the Hispanic Community with Reloadable Prepaid Cards
By Miriam De Dios, Vice President of Coopera Consulting
Although the Hispanic community has traditionally been coined “emerging,”
the term isn’t all that fitting in today’s business environment. It’s no longer
appropriate to think of the Hispanic consumer as someone your financial
institution (FI) may need to understand in the future. You need to
understand this consumer today.
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The 2010 U.S. Census revealed that one in six U.S. residents is Hispanic,
and among children, it’s one in four. By 2050, analysts predict that
statistic will soar to one in three.
Our own independent research has shown a much higher concentration of
FIs focused on serving the Hispanic market in recent years. In cooperation
with the Credit Union National Association (CUNA), Coopera Consulting
regularly surveys credit unions of varying sizes, and between 2008 and
2009, we found that the number of credit unions either executing or
planning Hispanic-market programs had more than tripled.
While our consulting capacity has allowed us to observe almost all
best-practice tactics out there, we believe that FIs offering a reloadable
prepaid card to the Hispanic market will be among those achieving the
greatest success. Perfectly tailored to the Hispanic consumer, this type of
offering has the potential to ease consumer financial pain, to build trust
between cardholders and an issuing FI, and to generate fee revenue and
loyalty from a powerful market.
The Hispanic & Underserved Overlap
Nearly 50 percent of Hispanics in the U.S. are either unbanked or
underserved. While there is certainly an opportunity to gain market
share from those Hispanics that already have a strong financial
relationship, we consider the biggest opportunity to lie with those
segments of the Hispanic community that are being ignored by banks.
For FIs interested in the Hispanic market, it makes sense to think in terms
of products and services that would appeal to consumers who don’t have
a traditional banking relationship already in place. Creating affordable
alternatives to meet the needs of underserved Americans not only has
the potential to get a foot in the door of the Hispanic community; it also
helps your FI lead its customers down a path to financial responsibility.
Because they don’t allow for overspending, reloadable cards help
underserved consumers manage their budget-conscious lifestyle.
This puts issuing FIs in a position to nurture the financial growth of
prospective members, quite possibly turning underserved consumers into
some of their most loyal customers.
Nearly 50 percent
of Hispanics in
the U.S. are
either unbanked
or underserved.
1 “New Milestone: 1 in 6 U.S. Residents is Hispanic,” MSNBC, March 24, 2011
2 “U.S. Hispanic Population is Booming,” U.S. News, December 14, 2010
3 “U.S. Population Projections: 2005-2050,” Pew Hispanic Center, February 11, 2008
4 “Comparison of Unbanked and Underbanked Households by Race and Ethnicity,”
FDIC Household Survey, 2009
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Des Moines-based Affinity Credit Union has recently targeted the
Hispanic segment of the underserved population with the rollout of
its MiOportunidad reloadable Visa card. A part of Affinity’s long-term
plan to engage the local Hispanic community, the credit union and its
board of directors see the card as a way to help Hispanic-community
cardholders manage their money, as well as to establish a credit history
with the credit union. As the consumer direct deposits payroll onto the
card, and uses it to pay bills, the consumer is building a credit history
with the credit union. Affinity will be evaluating this credit history when
consumers request loans, particularly small-dollar and credit-builder
loans to start with.
What’s especially attractive about Affinity’s program, which the credit
union has built with the help of Coopera sister company The Members
Group (TMG), is that the MiOportunidad card is both a general-
purpose reloadable card and a payroll card. Cardholders can load funds
themselves online, at an Affinity branch or any Visa ReadyLink location,
which can be found at stores like Walgreens and CVS/pharmacy. They can
also make arrangements for direct deposit of their payroll.
Affinity worked closely with experts at Coopera to ensure all of the
materials used to market and service the card are bilingual, as are the
card’s online account access site, 24/7 member support services and
text alerts.
Coopera also recommended that the credit union take into account the
extended families of prospective cardholders. As such, the MiOportunidad
card allows up to six secondary cards, which can be used internationally.
Affinity has worked for several years on a strategy to court Hispanic
members. In conjunction with Coopera, the credit union has created
an internal task force dedicated to moving the tactics of this strategy
forward. Staff members have received training on the Hispanic
language and culture, and new products, such as a non-interest bearing
savings account and a money transfer service, have been introduced.
A foundation of trust has been built with Des Moines-area Hispanics
through a variety of marketing and community-outreach activities.
Creating affordable
alternatives helps
your FI lead its
customers down
a path to financial
responsibility.
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A $29 Billion Market
By one estimate, the underserved spend more than $29 billion each year
on nonbank and subprime financial services. Money orders and check-
cashing make up the majority of this spend, and quite often, consumers
without a traditional banking relationship are paying disproportionate
fees to access these services.
According to Lori Lambert of Seven Seventeen Credit Union, it’s not
unusual for consumers in the Ohio credit union’s area to pay as much as
$15 to cash their paychecks.
Like Affinity, the $775 million credit union recognized the potential of
the reloadable card to ease this burden for members of their community.
Targeting employers with a high proportion of Hispanic and underserved
consumers as employees, the credit union worked with TMG to roll out a
reloadable card program with several companies, among them hospitals,
nursing homes and manufacturing facilities.
Because the payroll cards carry Seven Seventeen’s name, and the credit
union has taken an active role in employee sign-ups, the program has
enabled the credit union to become a valuable financial resource within
the community’s Hispanic and underserved market. Lambert reports that
several of the reloadable cardholders chose to open savings accounts
with Seven Seventeen to ensure they are setting aside some of their
income for the future.
Aside from the cost savings that payroll cards provide a consumer, the
cards also save time. Typically, after paying for a check-cashing service to
make their funds available, underserved consumers then need to secure
money orders to pay their bills. This costs money, of course, but it also
requires the consumer to invest his time, securing and delivering the
money orders to several different billers.
With a reloadable payroll card, a cardholder can pay these bills online or
over the phone, as well as enjoy conveniences like online shopping and
pay-at-the-pump gas purchases and text message alerts.
The underserved
spend more than
$29 billion each
year on nonbank
and subprime
financial services.
5 “Underbanked, Under Banks’ Radar,” American Banker, April 28, 2011
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Reloadable’s Appeal to Banked and U.S. Born Hispanics
To build and market a truly beneficial reloadable program, understanding
the makeup of your target audience is key. The 2010 U.S. Census
revealed that most of the growth in the U.S. Hispanic population was due
to birth, not immigration. Therefore, FIs marketing to Hispanics may need
to consider two completely different segments of the target audience –
those born in the U.S. and those who have recently immigrated.
What’s more, if half of Hispanics in the U.S. are unbanked or
underserved, it stands to reason that the other half of the community
is likely tied to a financial institution. So, FIs should also consider
marketing some of the mainstream benefits of a reloadable card to their
Hispanic prospects.
Some of these benefits include:
Travel – Reloadable cards will appeal to traveling Hispanics who see the
value of a safe, convenient alternative to taking cash on the road within
and outside of the U.S.
Budgeting & Credit History – Hispanic teens and young adults provide an
excellent target market for the reloadable card, as they work to learn the
principals of budgeting and build their own credit history at the FI in a
safe, controllable manner.
Mobile – Hispanics consistently over-index on studies regarding
smartphone use. Therefore, any reloadable card program targeting
Hispanic cardholders must include the ability to access funds and
account information remotely. Text alerts are another great feature that
cardholders not only enjoy, but many are coming to expect.
Money Transfer – U.S. Hispanics with family members outside of the
country will appreciate the safety and convenience of sending money
on a card, not to mention the cost savings from not having to pay a fee
every time they want to transfer money to relatives.
FIs may need to
consider two
segments – those
born in the U.S. and
those who have
recently immigrated.
6 “Among Mobile Phone Users, Hispanics, Asians are Most-Likely Smartphone Owners in the U.S.,” Nielsen Company, February 1, 2011
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Trust as the Core Value
Endearing Hispanics, in particular U.S. immigrants, can be an uphill battle
because of the history many have with less-than-honorable or struggling
FIs of their home country – or even U.S. institutions that have not treated
their Hispanic customers with dignity and respect.
In our experience, Hispanic consumers prefer high levels of member
services, valuing personal relationships over things like speed and
efficiency.
For that reason, community-based financial institutions and credit unions
are well-suited to providing the Hispanic community with the financial
services it needs. With a culture of “people helping people,” credit unions
in particular offer this population a unique alternative that mirrors the
Hispanic culture. Not only can the consumer turn to the credit union for
help with financial needs, he or she can also become a member of a
larger community – and a credit union owner at that.
Credit unions and community-based banks also have a tendency to be
more involved with the communities they call home, putting them in a
better position to legitimately pursue mutually beneficial relationships
with Hispanic communities in their area.
Before embarking on any Hispanic outreach, however, FIs must
understand the importance of building trust slowly. While product
offerings – such as the reloadable cards discussed in this paper – are a
great start, adding a healthy Hispanic membership base truly is a longer-
term effort requiring the support of FI staff and leadership.
For many FIs, building the trust of the Hispanic community is the first
challenge. This takes time, but partnering with community organizations
that have already established relationships with Hispanics and have
earned their trust is a good first step. These may include area-employers,
human services organizations, non-profits, colleges and universities.
Challenge your staff to think of all the different aspects of navigating the
U.S. payments system and reach out to the organizations who are already
doing a good job to help Hispanics build assets and wealth.
Hispanic consumers
prefer high levels of
member services,
valuing personal
relationships
over speed.
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In Conclusion…
Any courtship of Hispanic members – whether it’s based on product
development, community outreach or both – will require a strong
commitment to financial education. For many members of this
population, a reloadable card may be their first foray into a non-cash
environment. Teaching these cardholders how to use reloadable cards
is only the first step. Ensuring that they understand fully the terms and
conditions and how to apply that knowledge to their daily financial
habits will be vitally important. Remember, the ultimate goal is to turn
your reloadable cardholders, many of whom will have come to you as
unbanked individuals, into long-term, viable and contributing customers
of your financial institution.
Any courtship of
Hispanic members
will require a strong
commitment to
financial education.
ABOUT THE AUTHOR | A native of Jalisco, Mexico, Miriam De Dios has extensive experience working in the
financial services industry, having worked with State Farm Insurance and John Deere Credit. At Coopera, she
helps FIs throughout the U.S. grow by reaching and serving the largely underserved Hispanic community.
As vice president, Miriam oversees the company’s client service operations, marketing and public relations
strategies and manages the innovation of product, service and system solutions.
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