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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