Lena Robinson, Community Investment Specialist, Federal Reserve Bank of
Immigrant, unbanked, underserved, emerging, untapped:
labels used to identify different segments of a large potential market.
Are there any real distinctions, and if so, what are they? If the diversity
of the terms is any indication, these potential customers may be as difficult
to label as they are to serve. We try to define these markets and how
to serve them in this issue of Community Investments because untapped
markets can be significant to the business capacity of the banking industry
and perhaps the economy overall.
In identifying a potential market, labeling may be
the easiest part. The hard part is getting beyond the label to a quantitative
value of the return on investment for pursuing a new market. Labeling
should be thought of as the first step and perhaps the most critical step
towards clarifying the appropriate strategies, partners, products and
Following are a few definitions intended to distinguish
the labels and clarify their nuance.
Unbanked: a consumer without an active checking
or savings account
Underserved: a consumer with a checking or savings account who
may be ready for more sophisticated products such as an investment account
or a credit account
Emerging: potential candidates for significant financial commitments
such as homeownership or small business loans
Immigrant: underserved, unbanked or emerging customers that are
not native born and may be unresponsive to mainstream outreach or marketing
Untapped: the revenue potential associated with any of the above
"In the Search for
New Customers, Start Here," James Ballentine asserts that immigrants,
or newly arriving Americans, are increasing at a rate of 3,000 every day.
His article outlines a six-step process for attracting new immigrants
or working with existing minority populations. This article is excerpted
from a handbook entitled, "Reaching
the Immigrant Market: Creating Homeownership Opportunities for New Americans,"
which describes successful strategies for working with immigrant communities.
Step five of the above-mentioned process talks about
the need to tailor effective products. Ronald Rawson illustrates this
step in his article, "The Keys to the Kingdom
of Financial Empowerment for the Unbanked," which describes an
innovative partnership that is enabling migrant workers in California's
Central Valley to safely and economically handle their financial transactions.
While language and national origin are neat ways
to categorize and target potential immigrant customers, the task becomes
far less clear cut with a category such as the unbanked. Perhaps the single
most significant barrier to serving the unbanked is finding them. Three
stories illustrate the value of grassroots outreach and community involvement
for overcoming this obstacle. In his article, "Providing
a Headstart with CRA," Brian Scrip provides a compelling and
innovative example of how to make connections with low-income populations
and how to begin a dialogue about financial service needs.
Connecting with a local site that provides volunteer
income tax assistance (VITA) is another way to find the unbanked. Every
year, the Internal Revenue Service trains volunteers to prepare basic
tax returns for low-income individuals. In addition to helping poor taxpayers
keep more money in their pockets, this service saves many of these taxpayers
from the scourge of predatory "rapid refunds." There is a national
effort underway to create relationships with local financial institutions
to open accounts for the many unbanked customers who otherwise rely on
check cashers or pawn shops to cash their tax refund. Ana Marie Argilagos's
article, "Reclaiming Native American
Tax Dollars," will help you learn more about the VITA effort
in Native American communities and beyond.
Supporting community-based financial institutions
is yet another mechanism to ensure that consumers who want bank accounts
but do not have access for various reasons are served. Notwithstanding
the convenience and ubiquitousness of electronic banking platforms such
as ATMS, the lack of a local financial institution may deter some consumers
from opening an account. Other consumers may be shut out due to past transgressions.
Increasingly, community-based financial institutionssuch as People's
Community Partnership Federal Credit Union in Oakland, Californiaare
opening their doors to address these concerns in low-income neighborhoods
across the country. Maeve Elise Brown discusses the process of creating
"A Credit Union from the Ground Up"
and the positive impact it is having for the area's unbanked.
Underserved and emerging consumers present a different
set of complications beyond just locating them. Issues such as the modest
amount of money they may have to invest or desire to borrow and the high
cost of providing these products to them is a challenge for traditional
banks. Intermediaries and innovative products such as those described
in "Investing for Social Good and Investing For 'The Little Guy',"
In "Investing for Social
Good," Kerwin Tesdell and his associate Charity Shumway provide
an update on how the community development venture capital industry is
helping emerging entrepreneurs capitalize their businesses and share details
about the first investment made by Central Fund, CDVCA's own fund. Developing
a small business is one way that individuals seek to build assets, another
is portfolio investing. "In Investing For
'The Little Guy,'" Mark Maruyama introduces us to a new approach
that is helping small dollar investors afford a piece of the pie.
Somewhere among these stories may be just the idea
you need to serve a special niche in your geography. Each of these articles
offers something that can be adapted or adopted to realize the potential
of untapped markets
|CRA Roundtables are Back!
is a regional association of financial institutions around the 12th
District. The purpose of the roundtable is to enhance each member's
ability to understand and meet the requirements of the Community Reinvestment
Act. Through participation in the Roundtable meetings, financial institutions
share their resources and knowledge to effectively ascertain and address
community credit needs.
Go to the 2004