September 24, 2009

Micro-Branch PilotJohn Herrera

john.herrera@self-help.org

Haydee MorenoHaydee.moreno@self-help.org

NALCAB ConferenceSeptember 24, 2009

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

The Un-Banked Need

Alternative Financial Service

Providers

Mainstream Financial

Institutions

?

The Un-Banked Need

Needs Today

Confidence Tomorrow

Financial Stability &

Economic Opportunity

Micro-Branch Strategy

Network of Branches

• Product Suite– Transaction Services– Deposit-Based Account– Loans: Personal / Auto / Mortgage

SizeLook & Feel

Location

Branch Description

Micro-Branch Business Model

Convenience 1-Stop-Shop:

Transactions+

Account+

Loans

Spending Wisely

Saving Vigorously

Living Confidently

BranchNetwork

CommunityOutreach

Customer Acquisition

Retention &Loyalty

EconomicMobility

Micro-Branch Update

Micro-Branch Pilot Launch

Outline

• Self-Help Background• Market Need• Self-Help Solution: Micro-Branch

Strategy– Delivery Model– Business Model – Financial Sustainability

• MB Status Update

Self-Help Background

• 29-year history– Extensive lending experience– Community credibility– Deposit-raising network– Proven innovation track record

• 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

• To-date, $5.24 billion in loans

1980 - 1986 1990 - 1994 2002 - 2006 2009

1980 1990 2000 2010

Self-Help California

• Background– Launched in 2006– SHFCU Charter July 2008

• Financial Services Strategy– Community Development Credit Union Mergers– Micro-Branch Pilot

Self-Help CA Management Team

•Steve ZuckermanSteve 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 MorenoHaydeé 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 LawsonJack 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 KellyEllie 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.

Market Need

Financial MainstreamFringe Financial Services

51MM Un-

Banked

55MM Under-Banked

Source: Center for Financial Services Innovation

Micro-Branch Starting Point

Alternative Financial Service

Providers

Mainstream Financial

Institutions

?

In-Depth Interviews

Market ResearchGoals:1. Who’s our customer?2. What is the need?3. How do we address our customer’s need?4. What do we represent in the mind of our

customer?Tactics:

Observation Excursions

Focus Groups

Surveys Street Interviews

Market Research

To-Date 2008 2009

Touch Points

Total 127 69 58

Men / Women 55% / 45% 55% / 45% 55% / 45%

Latino Immigrant

91% 84% 100%

Methodology

1:1 Interview 12 12 0

Street Survey 30 30 0

Focus Group 11 groups85 people

4 groups27 people

7 groups58 people

Target Market

• Demographics– Un-Banked– Living paycheck-to-

paycheck– Latino immigrants

• Market Research– Value proposition– Selection criteria– Work-arounds

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 KingPeople stop using accounts to avoid overdraft /

NSF fees and rely on check cashers when savings are depleted.

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-AversionRather than feel rejected or embarrassed, people avoid banking products or use the

products at a limited capacity to avoid making a mistake.

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 ReferralsRecent immigrants rely on friends & family for guidance on handling their financial situation.

Value Proposition

• Starting Point: Target market– Better understanding of needs– Pain points & work-arounds

• Next: Value proposition– Street surveys & focus groups

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.

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.

Value Proposition Insights

• What is the main reason you come to this check-casher?

Convenience29%

Service23%

Product Offering

9%

Other4%

Friendliness23%

Price12%

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

Micro-Branch Value Proposition

Relevant Products

Customer Service Convenience

Players TodayTomorro

wFast &

FriendlyHigh-Touch

Location

Hours

Mainstream Bank/Credit Union

X X X

Check-Casher X XSH Micro-Branch