• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
REAL Solutions for Low-Wealth Households
 

REAL Solutions for Low-Wealth Households

on

  • 540 views

 

Statistics

Views

Total Views
540
Views on SlideShare
540
Embed Views
0

Actions

Likes
0
Downloads
6
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment
  • Who are the young adults of today, generally referred to as Gen Y? They look different, they are under the age of 25 – and if most of you can remember back to when you were that young, you probably looked different too. You distrusted government, institutions, parents – today you are those and this new breed have replaced us.

REAL Solutions for Low-Wealth Households REAL Solutions for Low-Wealth Households Presentation Transcript

  • REAL Solutions for Low-Wealth Households Colorado Credit Unions Introductory Conference REAL Solutions
  • REAL Solutions
    • Relevant
    • Effective
    • Asset-Building
    • Loyalty-Producing
  • Today’s Discussion
      • R.E.A.L. People! Defining Low-Wealth
      • R.E.A.L Facts! The Alternative Financial Sector
      • R.E.A.L. Stories! REAL Solutions in 26 States
      • R.E.A.L. Solutions in Colorado
  • State of the Movement
    • Stalled Growth
      • Membership and savings growth are just above population growth; 1.0% in 2007
      • 60% of CUs have no growth at all
    • Declining numbers of CUs
    • Median CU membership age is 47; US population is 39
    • History of collaboration
  • R.E.A.L. People – Families with Modest Income
    • Households with modest income
    • Median US Household Income – $44,334
    • Colorado Median Household Income $50,105
    • Texas Median Family (4) Income $70,300
    • A good estimate of modest and low income -
      • Modest income households earn 120% of the median income while
      • Low income households earn 50 to 80% of the median income.
      • They are largely underserved or unbanked
      • 2004 Census Data
  • Area Median Household Income - 2000 Area MHI $47,203 CO $41,994 US Denver $39,500 .84 .94 Colorado Springs $45,081 .96 1.07 Boulder $44,748 .95 1.07 Grand Junction $33,152 .70 .79 Fort Collins $44,459 .94 1.06 Vail $56,680 1.20 1.35
  • U.S. Wealth Distribution - 2001
  • Defining Low Wealth
  • Defining Low Wealth Income Quintile Median Wealth Lowest Quintile $ 6,650 2 nd Quintile $ 24,575 3 rd Quintile $ 36,988 4 th Quintile $ 61,366 Highest Quintile $142,937
  • Profile of Low Wealth Market
    • Low or Modest Income. . .
    • Unbanked. . . . . . . . . . . . .
    • No Credit/Credit Impaired.
    • Immigrants. . . . . . . . . . . . .
    • Minorities. . . . . . . . . . . . . .
    • Young Adults. . . . . . . . . . .
    • Unemployed. . . . . . . . . . . .
    • Larger Families. . . . . . . . . .
    • Higher Cost Services. . . . .
  • Low Wealth as Untapped
    • Low or Modest Income. . . High Income Density
    • Unbanked. . . . . . . . . . . . . Loyalties not Developed
    • No Credit/Credit Impaired. First or Second Chance
    • Immigrants. . . . . . . . . . . . . Remittances
    • Minorities. . . . . . . . . . . . . . Chance to Represent
    • Young Adults. . . . . . . . . . . Life Events
    • Unemployed. . . . . . . . . . . .Staffing Opportunities
    • Larger Families. . . . . . . . . .Multiple Relationships
    • Higher Cost Services. . . . . Difficult to Disappoint
  • Emerging Markets
    • What is the world’s most exciting, fastest-growth new market?
    • It’s where you’d least expect it: at the bottom of the pyramid.
    • Collectively, low income people have immense entrepreneurial capabilities and buying power.
    • The Fortune at the Bottom of the Pyramid by C.K. Prahalad
  • The Unbanked
    • Consumers without checking or savings
    • Estimated at 20 million HHs
    • Use check cashing stores and pay bills by money order or cash
    • Among U.S. born –
      • 14% non-Hispanic Whites
      • 34% Hispanics
      • 46% African Americans
    • Among Mexican immigrants –
      • 53%
  • The Cost of Being Unbanked - Opportunity
    • Check cashers
      • Charge $8 Billion annually
    • Payday loans
      • Charge $4.3 Billion in fees at APR’s of 400%+
    • Tax refund anticipation loans
      • Cost consumers $1 Billion in fees and interest
    • Remittances
      • Fees consumed 10-20% of the $20 Billion sent to family members
    $16 Billion Annual Fees Check Cashers $8 Billion Payday Loans $4.3 Billion RAL’s $1 Billion Remittances $3 Billion
  • No Credit/Credit Impaired
    • Economic struggles often the cause to overlook medical bills or to be late with a monthly payment
    • Some banks (CUs?) pre-qualify people for opening an account through ChexSystem or credit report
    • Are we forcing people to use AFS sector?
    • Why can’t we give them a first or second chance?
  • Minorities in Colorado - 2006 Race Percent U.S. % White – not Hispanic 71.7 66.4 Asian 2.6 4.4 African American 4.1 12.8 Native American 1.1 1.0 Hispanic or Latino 19.7 14.8
  • Hispanic Median Age in Colorado is 26.7
  • Opportunity for 1 st Time Homebuyers
  • Young Adults: Gen Y
  • Young Adults
    • 18 – 24 year olds represent only 5% of credit union membership; 15% of US pop.
    • Generation Yers perceive no differences between banks and credit unions
    • Likely to use the internet to research financial products --
    • But often rely on family and friends for advice and recommendations
  • Think life events (and needs)
    • Transactions
    • First job
    • First car
    • Move away from home
    • College
    • First credit need
    • Start career
    • Rent an apartment
    • Marriage? Kids?
    • Buy first home
    • Investing
  • REAL Solutions Tested Business Models
    • Families with Modest Incomes
      • Payday Lending Products
      • Check Cashing
    • Immigrants/New Americans
      • Safe Accounts
      • Remittances
    • Young Adults
      • First Time Mortgages
      • Youth Credit Union Branches
    • Unbanked and Underbanked
      • Free Tax Preparation
      • Starter Accounts
  • R.E.A.L. Solutions…
      • Meets 3 core credit union needs:
      • 1. Good Business Decision
        • Grow loyal membership
      • 2. Philosophy
        • Improve the quality of life for members and other users
      • 3. Political Goodwill
  • A National View
    • Serving low-wealth households is an increasing opportunity that credit unions should not miss!
    • REACH OUT TO Serve LOW-WEALTH HOUSEHOLDS
  • A Credit Union Opportunity... Really ?
  • R.E.A.L. Facts: Who is Serving This Market?
    • Check Cashers
    • Pawnbrokers
    • Payday Lenders
    • Title Lenders
    • Rent-to-Own
    • Finance Companies
    • Buy Here Pay Here Auto Dealers
    • Convenience Stores
    • Grocery Stores
    • Tax Preparation Offices
    • Banks (very limited)
    • Credit Unions (very limited)
  • Check Cashing Industry
    • 2000 – 6,000 check cashing outlets
    • 2005 – 13,000 outlets
    • 180 million checks worth more than $55 billion are processed annually by industry
    • Avg. check value is $500 to $600
  • Fees to Cash Checks
  • Auto Title Loans
    • Median charge of 25%/mo or 300% APR + $25/loan
    • LTV about 50% of car’s value
    • Usually due in 30 days
  • Rent-to-Own
    • Weekly or monthly payment
    • Typically no down payment or credit check
    • Can return merchandise at any time without obligation
    • Or purchase usually over 12 to 24 months
  • R.E.A.L. Actions – For R.E.A.L. People
  • Transactor Day-to-Day Living Bills Overdrafts Overdue
  • TRANSACTOR
    • Living paycheck to paycheck
    • Short financial time horizon
    • No savings – no assets
    • Informal Economy
    • Unbanked
    • Non-Depository Service Providers
  • Safe Harbor Products
    • Liquidity/Payment Services
      • Check Cashing
      • Bill Payment
      • Money Orders
      • Remittances
      • Stored Value Cards
    • Step Up Services
      • Fresh Start Accounts
      • Safe Accounts
      • Alternative to Payday Lending
  • Saver Seeing the Vision
  • SAVER
    • Decision to Engage
      • Goal Orientation
        • Pay yourself first
        • Build assets
        • Expand financial horizon
        • Know that you can progress
      • Products
        • Savings accounts, CDs, IRA
      • Financial education
        • Strong correlation between having a formal banking relationship and the accumulation of assets
  • Beginning Savings Products
    • Regular Savings
    • Member Advantage Savings
    • Step Up CD/Goal CD
    • Individual Development Accounts
    • No Excuses Savings
    • The Savings Challenge
    • Fresh Start Checking
    • Safe Account
    • Prize-based Savings
    • Auto Savings
    • Envelope Savings
  • Borrower Double-Edged Sword
  • BORROWER
    • Build your credit score without borrowing your future
      • Productive Credit
        • Builds a platform for future borrowing
        • Increases income
        • Evens income inflows
      • Non Productive Credit
        • State of financial crisis
        • Chronic borrower
        • Unpaid bills or debt
        • Payday Loan Products
  • Small Loans
    • Payday Alternative Loan
    • Share Secured Loan
    • Citizenship Loan
    • Quincianera
    • First & Last Rent
    • Refinance Credit Card
    • Credit Re-builder
    • Score Builder
    • 2 nd Chance Visa
    • Emergency Loan
    • Low Score Used Car Loans
    • Risk-Based Lending
    • Alternative Credit Report
    • Non-Score Based Lending
    • Alternative Student Loan
    • Youth VISA
    • Small Business Lending
  • Wealth Building Home Ownership Investments
  • OWNER
    • Build Equity
      • Home Ownership
      • Business Ownership
      • Stock Ownership
    • Diversify Income Stream
    • Financial Education
      • Personal Investing
      • Estate Planning
  • Innovative Mortgages
    • HLPR Mortgage
    • Rescue Refi
    • Timely Payment Reward
    • No PMI Mortgage
    • Low Downpayment
    • ITIN Mortgage
    • First Time Homebuyer
  • Education Education Keeps the Process Moving
  • Financial Education
    • Product awareness
    • Staff Training
    • Counseling
    • Incentives for participation
    • Education without the right product menu has little chance of success
  • R.E.A.L. Relationships! Low Wealth Households = Good CU Members
    • Lots of them!
    • Concentrate their business with their credit union
    • Have fewer good choices in the financial world
    • Loyal
    • Are borrowers and future borrowers
    • Good risks and manageable risks
  • Contact Information
    • Nancy Pierce
    • REAL Solutions Field Coach - NCUF
    • Tipton Research Group
    • [email_address]
    • 816-532-4865