Micro-Branch Pilot John Herrera john.herrera@self-help Haydee Moreno

1. Micro-Branch Pilot John Herrera john.herrera@self-help.org Haydee Moreno Haydee.moreno@self-help.org NALCAB Conference September 24, 2009

2. Self-Help History Latino CCU CRL Formed California Expansion Founded in Durham, NC Secondary Market Program 1980 1990 2000 2010 • Self Help Federal Credit Union • Chartered in 2008 • 2-pronged strategy • Mergers • Micro-Branch Pilot

3. The Un-Banked Need Mainstream Financial Institutions ? Alternative Financial Service Providers

4. The Un-Banked Need Confidence Tomorrow Financial Stability & Economic Opportunity Needs Today

5. Micro-Branch Strategy Branch Description Size Look & Feel Location • Product Suite • Transaction Services • Deposit-Based Account • Loans: Personal / Auto / Mortgage

6. Micro-Branch Business Model Customer Acquisition Retention & Loyalty Economic Mobility Convenience 1-Stop-Shop: Transactions + Account + Loans Spending Wisely Saving Vigorously Living Confidently Branch Network Community Outreach

7. Micro-Branch Update

9. Micro-Branch Pilot Launch

10. Outline • Self-Help Background • Market Need • Self-Help Solution: Micro-Branch Strategy • Delivery Model • Business Model • Financial Sustainability • MB Status Update

11. Self-Help Background Founded Center for Responsible Lending Merged with 3 credit unions in NC Launched CRL & SH in California SH Founded in Durham, NC Small business and home loans Transform lending industry through secondary market program 1980 - 1986 2009 1990 - 1994 2002 - 2006 To-date, $5.24 billion in loans 1980 1990 2000 2010 • 29-year history • Extensive lending experience • Community credibility • Deposit-raising network • Proven innovation track record

12. Self-Help California • Background • Launched in 2006 • SHFCU Charter July 2008 • Financial Services Strategy • Community Development Credit Union Mergers • Micro-Branch Pilot

13. Self-Help CA Management Team • Steve Zuckerman Steve launched the Oakland office in 2006 after spending 15 years with McCown DeLeeuw, a private investment firm focused on middle market leveraged buyouts. Steve holds an MBA from Stanford and a BA from Yale. • Haydeé Moreno Haydeé joined SH in 2008 after four years in investment banking and two years in CDFI strategy. Haydeé holds an MBA from Stanford and a BBA from The University of Texas at Austin. • Jack Lawson Jack joined SH in 2008 after founding and running the Brooklyn Cooperative Federeal Credit Union for eight years. Jacks holds an MA from the University of London, a Masters in Economics from the New School for Social Research and a BA from the University of Vermont. • Ellie Carothers Kelly Ellie joined SH in 2007 after four years in consulting and foundation impact assessment. Ellie holds an MBA from Berkeley and a BA from Williams College.

14. Market Need Financial Mainstream Fringe Financial Services 51MM Un-Banked 55MM Under-Banked Source: Center for Financial Services Innovation

15. Micro-Branch Starting Point Mainstream Financial Institutions ? Alternative Financial Service Providers

16. Market Research Goals: • Who’s our customer? • What is the need? • How do we address our customer’s need? • What do we represent in the mind of our customer? Tactics: Observation Excursions In-Depth Interviews Focus Groups Surveys Street Interviews

17. Market Research

18. Target Market • Demographics • Un-Banked • Living paycheck-to-paycheck • Latino immigrants • Market Research • Value proposition • Selection criteria • Work-arounds

19. Target Market Insights • Pain Point: Fluctuation in Savings Cushion • “I used them (credit union) before but now I’m broke… I need the cash right away. I have to leave the check with them (credit union) for, like, at least three days.” – 1:1 interview Work-Around: Cash is King People stop using accounts to avoid overdraft / NSF fees and rely on check cashers when savings are depleted.

20. Target Market Insights • Pain Point: Lack of Clarity & Comfort • “It’s not that I don’t think banks are telling me the truth, it’s that I don’t know if the translation is getting everything right.” – 1:1 interview • “I never used the ATM card. I didn’t trust it. I don’t know how the ATM works.” – 1:1 interview Work-Around: Risk-Aversion Rather than feel rejected or embarrassed, people avoid banking products or use the products at a limited capacity to avoid making a mistake.

21. Target Market Insights • Pain Point: Documentation Anxiety • “I go to the Mexican store because they don’t ask for any ID. They already know me there.” –1:1 interview • “I don’t know what kind of documents [the bank] is going to want… I go to [the check casher] where I always go because I’m registered there. ” – 1:1 interview Work-Around: Trusted Referrals Recent immigrants rely on friends & family for guidance on handling their financial situation.

22. Value Proposition • Starting Point: Target market • Better understanding of needs • Pain points & work-arounds • Next: Value proposition • Street surveys & focus groups

23. Value Proposition Insights • What would you advise someone on what to do with their first paycheck? • Without an ability to open an account, consumers start their financial relationships with neighborhood check-cashers & keep money in their homes. For recent immigrants,habits are formed early on and only changed with the guidance from a trusted family member or friend.

24. Value Proposition Insights • How do you feel when you hear “money management”? • Worried (don’t know everything, disorganized) • Stressed (excessive expenses, keeping up) • Insecurity (am I doing this right? what else?) • Frustration (history of negative experiences) The obligation to support family, here and abroad, can be a stressful burden. Once settled, immigrants are cautiously optimistic towards opportunities to build wealth.

25. Value Proposition Insights • What is the main reason you come to this check-casher?

26. Value Proposition Insights • Is there a reason why you don’t do this transaction at a bank? • “The bank handles my deposits; the check casher sends money to my family. That’s the way it is.” – Street Interview • “I tried to send a remittance [at my bank] once. They had to call the manager and I was taken out of the line. They just didn’t know how to do it like they do [at my check casher] ” – Street Interview • “I used to have an account but I got charged fees. I don’t think I’d open one again. This [using a check-casher] is working for me.” – Street Interview

27. Micro-Branch Value Proposition