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Untapped: Business Development Opportunities in Underserved Markets Agenda Opportunity in underserved markets Five success factors Group discussion – what can my CU do? REAL Solutions and CU success stories Take-home messages Opportunity in Underserved Markets Market Opportunity

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Business Development Opportunities in Underserved Markets

  • Opportunity in underserved markets
  • Five success factors
  • Group discussion – what can my CU do?
  • REAL Solutions and CU success stories
  • Take-home messages
opportunity in underserved markets
Opportunity in Underserved Markets
  • Market Opportunity
    • High and growing demand
      • $1.5 trillion by 2009 in US
    • Source of new workforce
      • Outpaces growth in mainstream
    • Many profitable businesses
      • 100 fastest growing companies had compound annual growth of 54% from 2000-2005
  • Market Challenges
    • Can be hard to create profitable business
      • Example: Water management
  • What are the factors for success?
success story citibank access account
Success Story: Citibank Access Account
  • Banamex merged into Citigroup in 2001
    • Citibank began to explore product for remittances
    • Huge market – estimated $24 billion to Mexico in 2006
  • Market dominated by wire transfer services
    • Costs high, infrastructure expensive
  • Citibank developed “Citibank Global Transfers”
    • Can send money between any Citibank accounts for $5
  • But most immigrants were not Citibank customers
    • So developed “Access Account”
citibank access account
Citibank Access Account
  • Low-cost remittance and fund transfer options for sending money to friends and family in Asia, Mexico and Europe
  • MasterCard debit card for free point-of-sale transactions
  • Unlimited free cash withdrawals at Citibank ATMs worldwide
  • Free on-line bill payment
  • No minimum balance and the waiver of $3.00 monthly fees for Access customers who arrange for direct deposit of payroll, Social Security, or entitlement funds
  • Statements available in English or Spanish
  • Multi-lingual customer service agents in English, Spanish, and Chinese.
citibank access account7
Citibank Access Account
  • Launched in late 2003
  • Marketed directly and through partnerships
    • Also available on-line
    • Initial take-up was slow
    • Now selling well
  • Currently has 170,000 customers, adding about 8,000 a month
  • Similar products launched by Citizens and Sovereign
success story manpower tech reach program
Success Story: Manpower Tech Reach Program
  • Manpower’s business is putting people to work
    • 4 million placed in 2005
  • Strategic plan in 1999 found that Manpower needed to address coming shortage of US workers with computer/IT skills
    • Jobs will rise from 2.1 million in 2000 to 3.9 million in 2010
    • Need to tap underserved markets to meet this need
  • Developed Tech Reach Program to help find and prepare workers
manpower tech reach program
Manpower Tech Reach Program

“It’s clear when you look at the demographics, the age of people, the immigrant population and the change in diversity in the workforce, that if you don’t have a Hispanic, Asian and African-American strategy having to do with putting disadvantaged workers to work in a meaningful way, you’re not going to be able to run your organization in fifteen years. And you can’t just turn a switch and be there. You have to know how to do that, and we believe TechReach is one of those answers.”

-Jeff Joerres, CEO, Manpower, Inc.


Project management, assessment,

work-readiness training,and

placement of individuals

Recruitment, Life Skills, Case Management, & Support Services





Skills training,

Facilities & Equipment

Educators &




Funding & Outreach

Advisory Boards,

Work Experience,

& Employment

tech reach program design
Tech Reach Program Design
  • Initial assessment
  • 220 hours of training
    • Work-readiness/soft skills
    • Technical skills
  • Placement at employer sites as Manpower staff
    • Six month internship (fully paid) with mentorship and support
    • Permanent placement after six months, or continuation as Manpower staff
expanding the program
Expanding the Program
  • Manpower created partnership with US Dept of Labor
    • Links thousands of Manpower branches with “One-Stops” across the US
    • Connects Manpower to community-based organizations
  • Manpower has placed 10,000 individuals from underserved markets into jobs
  • Now exporting model to Canada and Europe
success story cemex patrimonio hoy
Success Story: CEMEX Patrimonio Hoy
  • In mid ’90s, CEMEX was hit hard by Mexico’s currency devaluation
    • Decided to pursue sales in “do-it-yourself” homebuilding market
    • Sent a team of managers into low-income neighborhoods for a year to study how and when people built houses and used cement
      • “We needed to put aside all our assumptions”
    • Found that common approach for savings for long-term projects was the “tanda” – cooperative money-pooling plan
      • Small amount contributed by each person each week
      • Pool pays out to an individual for important event or project
    • Built on this approach to create “Patrimonio Hoy”
patrimonio hoy
Patrimonio Hoy
  • People interested in building homes join Patrimonio Hoy clubs
    • They each pay about $14 a week, for 70 weeks (total of $980)
    • Participants get
      • Consultations and inspections by Cemex staff architects
      • Scheduled deliveries of materials divided into building phases that cover the 70 weeks.
      • Fixed prices for all building materials through the life of the construction project
      • Social support for keeping up with payments and for completing their construction
patrimonio hoy19
Patrimonio Hoy
  • Results
    • Patrimonio Hoy participants built an average of a room every 1 ½ years – much faster than previous pattern of a room every 4-5 years
    • 18% more families built rooms
    • Families used 25% more concrete per cubic meter
    • Less material was wasted
    • Families increased their plans to build additional rooms
  • CEMEX has 70,000 families enrolled and is expanding program to other countries.
challenge pathmark s harlem store
Challenge:Pathmark’s Harlem Store
  • Pathmark decided to open Harlem store in early ’90’s
    • Previous success in Bed-Stuy, other neighborhoods
    • Vacant full block of City-owned land on 125th Street
    • Studies showed 60% of Harlem retail spending occurred outside the neighborhood
  • But met with strong resistance from bodegas – and wholesalers who supplied them
    • Portrayed Pathmark as greedy corporation going to put local stores out of business
    • Played on racial and ethnic tensions
    • Slowed progress to a crawl for years
challenge pathmark s harlem store22
Challenge:Pathmark’s Harlem Store
  • Pathmark worked with community groups to counter political attacks
    • Abyssinian Black Baptist Church showed Pathmark would
      • Significantly reduce grocery costs
      • Create hundreds of jobs
      • Primarily compete with bigger stores outside Harlem
  • In 7-5 vote, Pathmark deal was approved by NYC Council
  • Pathmark store opened in 1999
    • Pathmark has opened additional stores in other neighborhods
    • Many additional major stores have opened on 125th St
  • What do you see as potential success factors from these case studies?
five success factors
Five Success Factors
  • Mine and translate local market information
  • Adapt business model to community realities
  • Change internal incentives and challenge cultural assumptions
  • Create partnerships and strategic alliances
  • Improve the enabling environment
mine and translate local market information
Mine and Translate Local Market Information
  • What’s different
    • Heterogeneous
    • Poorly documented
    • Different culture, assumptions
  • Case study solution
    • CEMEX
      • Send study team
    • Pathmark
      • Pilot stores in community
adapt business model to community realities
Adapt Business Model to Community Realities
  • What’s different
    • Costs per unit high
    • Harder to reach goodcandidates
  • Case study strategies
    • Citibank
      • Build on ATM infrastructure
    • Manpower
      • Use community groups for recruitmentand screening
change incentives challenge cultural assumptions
Change Incentives & Challenge Cultural Assumptions
  • What’s different
    • Structure and incentives aimed atmainstream
    • Inaccurate assumptions
  • Case study strategies
    • Citibank
      • Build incentivesinto performance reviews
    • CEMEX
      • Deliberately identify and test assumptions
build partnerships and strategic alliances
Build Partnerships and Strategic Alliances
  • What’s different
    • Market barriers:cost, information, complexity
    • Distrust of corporations
  • Case study strategies
    • Manpower
      • Create network ofpartnerships to enable successfuloperations
    • Pathmark
      • Work with allies to show how company will improve community income and well-being
improve the enabling environment
Improve the Enabling Environment
  • What’s different
    • Inadequate infrastructure
    • Cumbersomeregulations
  • What to do
    • Invest in infrastructure
      • ATMs
    • Advocate for change
    • Self-regulation
      • Equator principles
five success factors30
Five Success Factors
  • Mine and translate local market information
  • Adapt business model to community realities
  • Change internal incentives and challenge cultural assumptions
  • Create partnerships and strategic alliances
  • Improve the enabling environment
group exercise
Group Exercise
  • What products and services does my CU already provide to underserved markets?
  • What do I see as potential ways to expand my CU’s products and services in underserved markets?
  • What do I need to know to do more?
r e a l solutions for low wealth households

R.E.A.L. Solutions for Low-Wealth Households

What Credit Unions Like YOURS

Are Doing to Serve

Low Wealth Households

Lois Kitsch

Director of Field Projects

Filene Research Institute

successful education programs
Successful Education Programs

What Credit Unions and FRI Have Learned….

  • Education of Members
  • Education of Your Staff
  • Product Awareness
r ea l transaction products
R.EA.L. Transaction Products
  • Check cashing
    • Stored value cards
    • Money orders
  • International wire transfer
  • Tax preparation
  • Short term small loans
check cashing and real credit unions
Opportunity for Credit Unions

Easy membership/special accounts

Particularly important in branches that serve low-wealth communities

Fees to cover costs and build revenue

“Cheap” money orders


Simple spreadsheet or software providers



Mr. Money


Can purchase check guarantees

Charter Oaks Credit Union

Must be a member

Par share is .01

Do not sell other products

1 time $5 fee

1% Fee

Cash 2700 cks/month

$100,000 annual income

No fee with a $500 balance

Check Cashing and REAL Credit Unions
r e a l credit union stories vita
R.E.A.L. Credit Union Stories - VITA





$529 million in assets

46,399 members

7 branches

8 counties and parts of 4 counties in Wisconsin & 1 county in Michigan

Minonimee Nation

establishing vita sites
Identify locations (s) & site coordinator

Recruit volunteers/preparers

Obtain electronic filing ID number from IRS

Set up location (equipment & software)

Train & certify preparers

CUs and VITA

VITA Sites

Provide volunteers

Provide equipment

Add new members

Promote sites

Build community relationships

Establishing VITA Sites
2005 for 2004

Prepared 81 Federal Income tax returns

EITC claims $35,853

Federal refunds for $86,007

Estimated savings $22,275

2006 for 2005

Prepared 335 Federal Income tax returns

EITC $187,000

Federal refunds for $454,000

Estimated Savings


R.E.A.L. Credit Union Stories


Do your members save?

  • Safe Accounts
  • Pot of Gold Savings
  • Indirect Savings – Tax Time
predatory lending and credit unions
Predatory Lending and Credit Unions
  • Do your members use payday loans?
  • Do your employees use payday loans?
  • Do your children/family use payday lending products?
do our members use payday lenders
Do Our Members Use Payday Lenders


100% of Wisconsin Credit Unions

100% of Ohio Credit Unions

91% of Maryland Credit Unions

Of the 48 REAL Solutions Credit Unions Surveyed

do our employees use payday lenders
Do Our Employees Use Payday Lenders


50% of Wisconsin Credit Unions

67% of Ohio Credit Unions

75% of Maryland Credit Unions

Of the 48 REAL Solutions Credit Unions Surveyed

your family and payday loans
Your Family and Payday loans


All kinds of people use

This most often predatory product

Which can create financial disaster

credit three credit unions stories
Credit – Three Credit Unions Stories

Energy Federal Credit Unions

  • Charges a flat $25 fee payable upon application
  • Loans are 30 days loans
  • Interest is 15%
  • Average Loan is $750
  • Must have a direct deposit
  • Can get the loan only once every 45 days or 6 per year
  • Will lend no more than the amount of their next paycheck
energy fcu
Energy FCU

The credit union completed a survey and found that on average…

  • Income was $53,000
  • Credit score was 619
  • Savings balance was $825
  • 11 year credit history
  • 9 year employment history
  • 12 year home ownership
energy fcu48
Energy FCU
  • Delinquency is very low - .15%
  • Charged off 24 loans over 5 years totaling around $20,000
  • Disbursed over 3,000 loans in five years
  • Most are NOT repeat users
benefit to the credit union
Benefit to the credit union
  • Good income
  • Build strong member relationship
  • Favorable media coverage
  • Providing a service their members want at more affordable rates than the competition
credit the real story


CUSO - of Ohio Credit Unions – Joint Guaranty

Cost reduction for members

Cost reduction through market penetration

$250/$500 loans

$35/$70 annual fee

18% interest

12 up to advances/yr

No underwriting

90% principal guaranty

Credit – the REAL Story

It’s Quick and Easy


Members Love it!!!

to implement
To Implement
  • Obtain approval
  • Join CUSO
  • Pay membership fee ($25/million)
  • Adopt policy
  • Set up data processing
  • Prepare documents (Loan forms)
  • Train employees
  • Set up monthly accounting (Fees & Losses)
  • Set up collection program
  • Market
  • Implement
measure the difference
Stretch Payday Loan

The total cost to a member for 12 advances of $250 and 30 day repayments –


Payday Loan Stores

The total cost to a customer for 26 advances of $250 at $20 / $100 for 14 days (includes rollovers)


Measure the difference!
your credit union can join
Your Credit Union Can Join
  • For more information:

Contact John Florian

Ohio Credit Union League

Phone: 800 486 2917


R.E.A.L. Credit Union Stories

Service to anyone

Payday Loans


2 Week Terms

More than just a payday loan - Financial education programs

Opportunity to join the credit union

Ken Eiden

Prospera Credit Union

Appleton, Wisconsin

innovation one example love and marriage
Innovation - One Example – Love and Marriage

$3800 Av Balance

“Members Love It!!!

Geri Dillingham

North Island Credit Union

San Diego, CA


r e a l solutions 2006 coming soon
R.E.A.L. Solutions 2006 - Coming Soon -

An Online


Available for

Download by

All interested

Credit unions

coming soon
Coming Soon


Data Base

For business

Models, tools

CU Best Practices

a parting thought
A parting thought…..

Progress is the constant replacing of the

best there is with something better still.

Edward A. Filene

filene research institute
Filene Research Institute

To Learn More

Visit our Website –

Lois Kitsch

Director of Field Projects

Cell Phone 407 616 2409

reflection and summary
Reflection and Summary
  • Ten minute reflection
    • Key points from this session
    • Specific “to do” list based on what you’ve learned
    • “Wish list”: what else you need to move forward
  • Report out
    • Thoughts you’d like to share with the group