Redstone’s Strategy for Serving

Underbanked Consumers

Making the RightChoice!

Presentation Overview

1. About Redstone Federal Credit Union

2. Decision to serve the Underbanked

3. Strategic Considerations

4. Making the Right Choice

5. Challenges & Solutions

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About Redstone Federal

Credit Union

Redstone Federal Credit Union

• Headquartered in Huntsville, AL, known as the “Rocket City” for its close history with US Manned Spaceflight

• Huntsville is home to: – Redstone Arsenal - US Army – NASA MSFC – The US. Space and Rocket

Center – Space Camp

• Huntsville’s Concentration of High Tech Workers is 2nd in the nation only to San Jose’s Silicon Valley

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Redstone Federal Credit Union

• On November 28, 1951, eleven individuals on Redstone Arsenal with assets totaling $55, stored in a shoe box, became the first members of Redstone Federal.

• Today Redstone is the largest credit union in Alabama with over 3.3 billion in assets and close to 350,000 members.

• Redstone is a Multi – SEG chartered Credit Union with over 1200 Service Groups in our Field of Membership.

• We have a total of 22 branch locations spread throughout Northern Alabama and two in Tennessee.

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Redstone Federal Credit Union

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North Alabama

Tennessee

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Part 2:

Decision to serve the Underbanked

Serving the Underbanked Redstone’s Journey

Board of Directors

Hispanic Initiative CFSI Research and

Analysis

Broader Underbanked Opportunity

Business Case

1. Member Growth

2. Non-Interest Income

3. ROI Board of Directors

+ We’re a Credit Union!

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Serving the Underbanked My Journey

“The Withdrawal Slip” that started it all…

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Part 3:

Strategic Considerations

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Products and Scope Options considered Business Case

Products:

Check Cashing

Limited vs. Full Service Full Service

Vendor Guarantee vs. provision for losses Vendor Guarantee

Money Transfer Agent relationship Agent

Bill Payment Agent relationship Agent

Money Orders Agent vs. Issuer Agent

GPR Prepaid Debit Card Agent vs. Issuer/Program Manager Agent

Scope:

Target market Existing members only or Existing members & broader market

Broader market opportunity & existing members

Branding Existing RFCU brand or create new brand New Brand

Distribution Existing Branch Network or Specialized Branch Specialized Branch

Hours of Operation Current Hours of Operation vs. Extended Retail Hours Extended Hours

Product and Business Considerations

Distribution Considerations

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Excess Capacity in existing RFCU branch

Vs

New Low cost store front location

Retail Integration – Addition of AFS Product Set

Specialized branch for Underbanked market featuring AFS model

Reputation risk Special branding to differentiate branch from traditional RFCU branches. Smaller footprint will allow for risk mitigation

Target locations already high volume branches

New brand will allow Redstone to focus on target market

Cultural conflict with staff (bankers vs. check cashers)

New staff that understands the financial needs of the Underbanked. Hired from the local community

Modify CIP throughout the CU in order to serve more cultural segments including Hispanic Market

Welcoming of all cultures. Designed for inclusion and access.

Approved Underserved Designation

• In 2010, RFCU was approved by the NCUA to add several underserved designated areas to RFCU’s field of membership

• One requirement of the approval is that RFCU must

have a presence in the underserved designated area within 2 years

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Decatur Underserved Area

RFCU Branch

RFCU Branch

Strategic Objectives

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• In 2010, RFCU’s Board of Directors approved the launch of two specialized storefront locations offering Alternative Financial Services to serve Decatur and Huntsville’s Underbanked populations as a Pilot program.

• The storefront in Decatur is also meant to satisfy RFCU’s regulatory requirement to have a presence in the underserved designated area within 2 years.

Decatur Storefront – 2012 Huntsville Storefront – 2012/2013

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Part 4:

Making the Right Choice

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About Right Choice Money Services

• Right Choice is a Credit Union Service Organization (CUSO) that is a wholly owned subsidiary of Redstone Federal Credit Union.

• It is a de novo hybrid Money Service Business that offers Alternative Financial Services as well as a limited number of Redstone Federal Credit Union products to consumers who wish to become members.

Right Choice • Low cost inline store • Deliberately resembles a check

casher • Conveniently located • As a CUSO, can serve non-CU

members • Full suite of AFS products • Competitive pricing

• Transparent • Culturally friendly staff

• Bilingual: English & Spanish • Extended hours of operation • 24 hour ATM access • Financial education

RFCU Footprint in Store • Limited Redstone products

– Membership – Share Accounts – Checking Accounts – Small Dollar Loan: Stretch

Loan – Share Secured Loan – Secure Credit Cards

• Dual employees • Right Choice and RFCU products

available at each CSR window • Full service Redstone branches

conveniently located nearby

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The Right Choice Delivery Model

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The Right Choice Model

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The Right Choice Model

The Right Choice Model

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Right Choice Lobby Poster Set

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Part 5:

Challenges and Solutions

Right Choice Challenges & Solutions

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Full support from Board of Directors laid the foundation

1st Retail store has been the pathfinder for developing processes

Engagement by Legal and Compliance is critical

Engage your team of “Believers” to drive progress

Clearly communicate concept, strategy, and purpose throughout org.

Organizational buy-in takes times

Uncharted territory

Compliance & Regulations

Limited Resources

Communication Breakdown

• There’s no blueprint for the perfect model. Every FI will have to find its own path to serve the Underbanked based on their market, resources, and organizational goals

• No Man Is An Island - Reach out to others that have launched similar initiatives for help and advice

• Understand your own organizations implementation processes to avoid unnecessary delays

• Don’t lose site of the end result: Inclusion, Trust, Success, and Opportunity

People helping People

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Right Choice Challenges & Solutions

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Contact info: Peter Alvarez General Manager RightChoice Money Services palvarez@rightchoicemoney.com 800.234.1234 ext. 3765