Five Financial Services Lessons Learned From Latino-Friendly Credit Unions

Latino-friendly credit unions aim to help people who have traditionally been underserved by the American banking system. This includes immigrants, especially from Latin America, who often avoid banks or find interactions, whether online or in person, a challenge because of the language barrier. Other obstacles may include credit history problems, or the lack of a credit history at all. Stable identification also often plays a role.

Making these consumers feel welcomed is a significant obstacle for all financial institutions. The potential is there: The percentage of unbanked Hispanic or Latino households in the U.S., at 16%, is more than double the national rate, according to market research from the Federal Deposit Insurance Corp.’s most recent survey of unbanked households. And nearly 30% of Latino households are underbanked, which means they have bank accounts but also rely on alternative financial providers such as check cashers, payday lenders or remittance transfer providers.

Bank accounts represent a safe place to keep cash and pay bills regardless of citizenship or immigration status. Credit unions that cater to Latino households have successfully figured out to bridge that trust. In fact, nearly 80 credit unions nationwide belong to a program titled Juntos Avanzamos (Together We Advance) that advocates for providing financial products to Latinos that are both affordable and successful.

So how they do it and what about these practices could be applied to all sectors of the financial services sector when targeting Latinos? Here are some examples:

Putting affordability first. The messaging for banking services such as money orders, check cashing, loans, and other products focuses on their affordability, from free to nominal costs. These can include first-time loans that are designed to build credit among those with either nonexistent or shaky credit histories, or simply free checking.

Offering alternative loans. These can be loans that target applicants with poor or nonexistent credit histories by accepting alternate proof of credit such as rental or utility payments, or identification ranging from foreign passports or taxpayer identification numbers. Messaging can stress a deeper understanding of Latino struggles than conventional banks, and even empathy with their frustration to build credit.

Loans can also be created to address specific needs within the Latino community — For example: A product by of Latino Community Credit Union targets DREAMERs, which covers the full cost of the Deferred Action for Childhood Arrivals application.

Building a bilingual staff and a library of materials in both English and Spanish. This may sound simple, but the impact is huge. By simply making it easier for Latinos to research financial products and interact with people speaking their language when they have questions creates a bridge of trust and security, especially when dealing with the sensitive subject of their financial future.

Presenting a front-line of Latinos both behind the teller booth and on the corporate board. How many Latinos are on the executive team? Board of directors? Hiring familiar looking faces behind the teller booth is not enough. Latinos want to see that diversity has deeper roots. Latino credit unions tend to show that heritage which makes their commitment feel authentic and not just a marketing ploy. The more an organization can show they understand the issues of Latinos from within, the more they will be seen as a partner to that community.

Offering free financial education. This is also essential for establishing a partnership with Latino consumers opposed to just selling them products. Financial service organizations can offer classes and coaching on a range of topics, from building credit to starting a business, to buying a first home to saving for retirement. They can assign families specific coaches who can meet with them one-on-one throughout the duration of a first-time experience, such as buying a home. The more these organizations can elevate these consumers so they can see the value of investing and more, the more they will retain those consumers as they grow into more sophisticated products.