Credit Unions Urged to Pursue Unbanked

June 20, 2011

The University of Virginia's Darden School of Business warns in a new study that credit unions and banks are losing out on billions of dollars in deposit and revenue opportunities by not reaching out to Latinos and other unbanked households in the U.S.

Nationwide, the unbanked spend an estimated $169 billion "floating outside the formal banking system and attributed to unbanked households," and about $53 billion comes from Latino households, according to Greg Fairchild, Executive Director of the Tayloe Murphy Center at the Darden School of Business. Fairchild just completed a year-long study and published the results in a report titled Perdido En La Traduccion: The Opportunity in Financial Services for Latinos.

The study focused on unbanked Latino households in Virginia and North Carolina. Latinos are the fastest growing multi-ethnic group in both states, and the nation as a whole. Although the study was limited, geographically, the findings are considered relevant nationally, regardless of ethnicity or locale, the researchers explained.

"Using rigorous statistical analysis, qualitative filed research and case study, we focused on the challenges of serving Latinos and other unbanked households as well as how banks and credit unions can reach this market nationwide," said Kulwant Rai, Research Director at the Tayloe Murphy Center.

The researchers found 39,000 unbanked Latino households in Virginia, and the average annual income among these families is $23,500. "That adds up annually to almost $917 million unbanked by Latino households," the Center noted in a press release last week. Most of that money is serviced by local markets known as "Las Tiendas" and offering check cashing, money transfers and bill payment services.

The survey also revealed a strong correlation between banking and crime: the unbanked, because they carry cash, are more prone to robberies.

More than 8,200 federally-insured financial institutions were collecting deposits and/or making loans to the U.S. "banking public" as of March 31, 2009.

_-FDIC