Large numbers of low and moderate income individuals do not have checking accounts or savings accounts and do not fit into the current service delivery format of most established financial institutions. Burger and Zellmer see these individuals as a vast, untapped market that can be served in cost-effective ways to the benefit of all members. This study first describes the characteristics of individuals in this market. They urge credit unions to treat approaching this market as a business proposition, not as charity. This means developing a business strategy, then implementing it through innovative packages of services tailored to the needs of the individuals being served.
What is this research about?
To develop key strategic factors for a successful plan to serve low- and moderate-income individuals, Burger and Zellmer conducted extensive on-site visits to three credit unions with successful programs. While the three credit unions were fairly diverse, the authors found many similarities in their approaches to serving individuals of low and moderate incomes. From their visits, the authors developed strategic guidelines for developing services to meet the needs of low and moderate income individuals.
What are the credit union implications?
People of low and moderate income are a large and growing segment of the American population and are underserved by mainstream financial institutions. This situation is widely recognized as a major social issue, but one that also presents market opportunities for credit unions. Above all, expansion into the low and moderate income market is consistent with traditional credit union philosophy, where financial services are provided in a cost-effective manner to groups of individuals that other financial institutions have chosen not to serve.