A Guide to Building Products and Strategies for ...

FROM THE MARGINS TO THE MAINSTREAM:

A Guide to Building Products and Strategies for Underbanked Markets

National Community Investment Fund

RETAIL FINANCIAL SERVICES INITIATIVE

FROM THE MARGINS TO THE MAINSTREAM:

A Guide to Building Products and Strategies for Underbanked Markets

National Community Investment Fund

RETAIL FINANCIAL SERVICES INITIATIVE

PREFACE AND ACKNOWLEDGEMENTS

INTRODUCTION

Products and Strategies

BALANCING CONVENIENCE AND RISK: Developing Alternative Payday Loans

SEIZING THE TAX DAY: Acquiring New Customers With Free Tax-Preparation Services

USING FRINGE PRODUCTS AS A DOORWAY TO THE MAINSTREAM: Building Check-Cashing Partnerships

BUILDING A BETTER BANK CARD: Reaching the Unbanked With Stored Value Cards

MEETING CUSTOMERS WHERE THEY ARE: Using Community Partnerships to Reach the Unbanked

SHAPING BETTER CUSTOMERS: Building Loyalty Through Second-Chance Checking Accounts

MAKING THE BUSINESS CASE FOR SERVING THE UNDERBANKED: Customer Acquisition and Development

CONCLUSION: Creating Products and Services for Underbanked Markets

APPENDIX

Introduction | i

Section | 1 Section | 2 Section | 3 Section | 4 Section | 5 Section | 6

Section | 7 Section | 8 Section | 9

PREFACE AND ACKNOWLEDGEMENTS

The mission of the National Community Investment Fund is to strengthen community development banking institutions--community banks, thrifts, and credit unions--so they are both effective agents of local community development in distressed communities and sound financial institutions. Through direct investments, NCIF helps these institutions revitalize markets with loans, deposits, and innovative financial services for households and businesses. NCIF has invested almost $20 million in 32 banks and credit unions, bringing specialized credit and wealth-building financial services to the nation's underserved urban, rural, and reservation communities. NCIF investees have made over 42,000 development loans, with a total value of $1.52 billion, in low- and moderate-income neighborhoods.

As a complement to direct investments, NCIF promotes research, product development, and knowledge sharing through its network information services. Through these services, a network of senior executives of development banks and credit unions share business models, product research, and best practices in the areas of resource generation, financial performance, and development impact. Network services also support research and development for the financial services industry as a whole, focusing on capital delivery and financial services for low- and moderate-income communities.

In 2002, NCIF launched the Retail Financial Services Initiative, an effort to help bridge the gaps in the marketplace for financial services that were reasonably priced for the consumer and profitable for the institution. Over the past three years, RFSI invested in 12 banks and credit unions, helping them develop, test, and implement new products and strategies aimed at bringing the "unbanked" and "underbanked" into the financial mainstream.

This guide addresses the underlying strategic and operational issues RFSI institutions encountered as they designed and implemented their products and strategies. In most cases, local market conditions, along with the specific needs and capabilities of the institutions and their partners, were the principal forces shaping products and strategies. Consequently, the purpose of this guide is not to provide a blueprint for copying RFSI products and strategies, but rather to help representatives from other institutions think through some of the main strategic and operational considerations they are likely to encounter if they undertake similar approaches. This guide is geared to institutions, large or small, that want to offer retail services for unbanked/underbanked consumers. This could be a large national bank looking to develop a new product line, a regional bank considering a new retail strategy, or a small credit union looking to expand its charter.

NCIF would like to acknowledge the generous financial support of the Annie E. Casey Foundation, the Fannie Mae Foundation, the Ford Foundation, and the John D. and Catherine T. MacArthur Foundation. We also thank NCIF's investors, whose long-term support made RFSI possible: Bank of America, MBNA America Bank NA, and Washington Mutual. We thank Jennifer Tescher, Ellen Seidman, Christopher Tan, Esther Park, Bryant Woods, and Maryah Qureshi of ShoreBank Corporation for their stewardship of the project, and Janet Raffel for her integral involvement, excellent technical advice, and deft production of this guide. Thanks as well to Neil Carlson for writing the core chapters and editing the guide. But our most sincere expression of gratitude is reserved for the RFSI institutions themselves, whose dedication, innovation, humor, and hard work have demonstrated time and again that accessible, reasonably priced financial services can be within reach for low- and moderate-income families.

Sincerely,

DAVID MCGRADY, NCIF Chairman

LISA RICHTER, NCIF Fund Advisor

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