REAL Solutions Serving Emerging Markets

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REAL Solutions Serving Emerging Markets

• Lois I. Kitsch
• National Program Manager
• REAL Solutions

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REAL Solutions

• Todays Agenda
• REAL Needs
• REAL People
• REAL Opportunities For Credit Unions
• REAL Stories

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REAL Needs

• Real Needs
• Millions of people with low wealth need
  opportunities to build savings and assets. Many
  have no alternative but predatory lenders when
  they need cash in unexpected
• emergencies.
• 30 Million Unbanked Consumers
• Thousands of CU Members using AFS
• Payday loan outlets
• 88 of Americans drive to work low-score and
  thin file borrower have little access to
  affordable car loans
• 1.3 Million Foreclosures in 2007
• Up 79 from 2006 (Wikipedia)

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REAL People
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REAL Needs

• Living on the Brink
• 30 Million workers between 18 and 64 earn 9 per
  hour or less. This equates to 18,800 per normal
  work year and is at the poverty level for a
  family of 4.
• 1 in 4 working Americans are at or below the
  poverty line
• Minimum wage has eroded 26 since 1977
• Many families at the poverty level do not enjoy
  common benefits such as health care, sick leave
  or vacation time

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REAL People
Comparison Low wage workers (Under 9/hour) to
the total US Workforce
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REAL People
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R.E.A.L. People Young Adults

• Transactions
• First job
• First car
• Move away from home
• College
• First credit need
• Start career
• Rent an apartment
• Marriage? Kids?
• Buy first home
• Investing

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REAL People

• Young Adults (18 to 34)
• Want Convenience
• 6 do not use cash
• 12 never use checks
• 69 use credit cards
• 53 use debit cards
• 58 make direct payments
• 69 use electronic bill pay
• Right Product
• Want Service
• Filene Research Institute

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R.E.A.L. People Immigrants/New Americans

• 35 million
• 61.4 million Hispanics by 2025
• Fastest growing 13.8 of population
• Young
• Largely unbanked and would benefit greatly from
  credit union services

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REAL Solutions

• Signature Program of the National Credit Union
  Foundation (NCUF)
• REAL Solutions
• Reaches consumers of all ages and all ethnic
  groups.
• Relevant
• Effective
• Asset Accumulating
• Loyalty Producing

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REAL Opportunities - Growth

• Business Opportunity
• CU members are aging - Average age is 47
• Huge immigrant market - Mostly young and unbanked
• 30 to 40 Million Americans have no formal banking
  relationship
• Social Opportunity
• Credit unions have always strived to serve less
  advantaged families
• Advocacy Opportunity
• Serving the market enhances our efforts to tell
  our story

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Strategy for Financial Success
CREDIT UNION
LOW WEALTH FAMILIES
EDUCATION
CREDIT
TRANSACTION SERVICES
SAVINGS
HOME OWNERSHIP
PRODUCT AWARENESS COUNSELING STAFF TRAINING
PAYDAY ALTERNATIVE SMALL LOANS USED CAR LOANS
LOAN POLICIES STAFF AWARENESS
LOW MEMBERSHIP FEE SAVINGS AWARENESS SAFE
ACCOUNTS LONG TERM SAVINGS
CHECK CASHING FEE FREE CHECKING MONEY
ORDERS REMITTANCES TAX PREPARATION
HLPR LOAN COUNSELING STAFF TRAINING CREDIT SCORE
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Getting it Right Transaction Services
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Getting it Right Check Cashing
Program Components 1 fee .1 cent share
requirement 6.6 Million in checks
cashed 210,000 weekly 2,500 NEW
MEMBERS Savings 600,000 fees Credit Union
earned 660,000 fee income And 150,000 in
ancillary income
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Getting it Right - Savings
Pot of Gold Savings

• Member savings for a specific purpose
• 3 or 5 years to accumulate 2,500 5,000 or
  10,000
• Current balance is 4.4 (4 million) of credit
  union assets
• 1,000 members (of 12,000 members ) are using the
  program
• The member can borrow from the fund for 3 over
  the savings current rate

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Getting it Right - Savings
The change to an Upside Down savings account
Example of this dividend structureIf you have
3,000 on deposit, you'll earn the Tier 1 APY on
the first 500, the Tier 2 APY on the next 2,000
(the amount greater than 500 but not exceeding
2,500), and the Tier 3 APY on the remaining
amount (the amount greater than 2,500).
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REAL Stories

• Started in October 2006
• 50 Credit Unions making loans 12-07
• 65 credit unions currently
• 5,884 loans disbursed
• 2,831,253 total disbursed
• At least 350 users new members
• Estimated Savings to Members - 2 Million

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REAL Stories

• Freedom Suite of Products
• St Louis Community Credit Union
• 2nd change checking, Money Max Card and pdl
  alternative
• (product numbers for first six months of
  implementation)
• 774 members using product
• 1,114 advances done
• 275,000 current portfolio
• Average loan size 336
• Loans disbursed 374,424
• Default rate 1.2
• 27 interest with 25 annual fee
• 10 required savings
• 90 day terms
• Rollovers allowed no additional fee

Estimated Savings to Members 500,000
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Getting it Right Access to Credit
Providing Access to Affordable Used Cars is A
GREAT business Decision for Your credit union
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REAL Stories

• Used Auto Loans
• 8 million cars sold to low and moderate income
  borrowers annually
• 30 Banks
• 60 Sub Prime Lenders
• Credit unions have only 5 of the market
• Below FICO 600 expands opportunity by 15
• No Fico expands opportunity by 40
• Steer Clear of Predatory Car Loans NCUF July
  2008

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REAL Opportunities

• Used Car Loans
• Understand the underwriting
• Get in front of the dealer
• Hard close
• Insure the borrower
• Export the risk
• Keep in touch (immediate collection)
• Is profitable for the credit union and lower cost
  to the member
• Steer Clear of Predatory Car Loans NCUF July
  2008

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University Credit Union
Assumes a 60-month term - Steer Clear of
Predatory Car Loans Note This example uses the
interest-rate environment in place as of 12/31/06.
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REAL Stories

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Getting in Right VITA
Tax Prep since 2005

• Results
• 439 Returns
• 289 EITC Returns
• 564,000 Returns
• 195,000 EITC

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Getting it Right Prepaid Cards
fee
LOAD and GO
650 users/cards issued Most not qualified for
checking accounts - most with FICA less that 600
Less than 6 months old 200 average balance 2
per month fee plus small load
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Multi Cultural Banking Center
13 Growth Each Year
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REAL Tools
REAL Solutions Knowledge Center
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REAL Tools

• Impact Measurement

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REAL Solutions

• Meets 3 core credit union needs
• 1. Good Business Decision
• Grow loyal membership
• 2. Philosophy
• Improving the quality of life for members and
  other users
• 3. Political Goodwill

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CHANGE IS INEVITABLE

• What are credit unions doing to change and grow?

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Serving Emerging MarketsA Win-Win for
yourCredit Union

• Lois I. Kitsch
• Office 800 356 9655 x 6770
• Cell407 616 2409
• lkitsch_at_ncuf.coop