In some areas of central Appalachia, residents have to travel more than 45 minutes to reach a bank branch. With just 90 people per square mile, one third of what you’d find in major metropolitan areas, mainstream banks have closed up shop.
Appalachian Community Federal Credit Union (ACFCU), a CDFI headquartered in Gray, Tennessee, is helping to fill this financial void.
“It’s really a profit versus passion issue,” says Ron Scott, CEO of ACFCU, which serves an area of approximately 425,000 residents, of which 26 live below the poverty line and 28 percent are unbanked or underbanked. “Serving the underserved is expensive and not really profitable, so many mainstream banks have left. At the credit union, our purpose statement is building financial relationships one member at a time—we provide the passion and stay in the community.”
To reach current and recruit new members in Tennessee, Kentucky, and Virginia, the credit union employs a host of different technologies, including dynamic, state-of-the-art online banking. Even still, reaching people in remote corners of the tri-state region is difficult. Says Ron, “Low population density presents a very real challenge. How can you justify establishing a million dollar branch to serve a community of 100 people?”
After extensive research and strategizing, ACFCU found its answer, once again, in technology—this time in the form of an Interactive Teller Machine (ITM), a unique approach to bringing the credit union’s full suite of services to people who can’t easily access mainstream banks—or whose only other alternatives are payday and car title lenders.
An ITM looks like the ubiquitous ATM but with a video screen that enables members to speak face-to-face with a teller sitting in ACFCU’s headquarters hundreds of miles away. The ITM accepts deposits of cash and checks and dispenses cash and coin. Additionally, members can open new accounts and apply for loans directly at the ITM.
For ACFCU, it’s a win/win: consumers receive all of the traditional services a brick and mortar branch offers but in a convenient location and at a fraction of the cost to ACFCU.
In 2016 and 2017, the credit union will pilot ITMs with community-based nonprofit partners in Kentucky—Berea College in Owsley County and Mountain Comprehensive Health Corporation (MCHC) in Whitesburg—as well as at one of its branches in McKee.
“Having the ITM on site here will be a great asset for our patients,” says Van Breeding, MD, a physician at MCHC. “A lot of our patients have a hard time with transportation. When they do get transportation, they can come here to the clinic to receive medical care, and while they’re here they can do their banking.”
By testing the ITM in three unique locations, ACFCU expects to learn what works well, what doesn’t, and what to improve for further expansion.
The credit union has received a $2 million NEXT Opportunity Award for its innovative ITM strategy. With the Award, it expects to purchase three ITMs for piloting and to deploy $17 million in additional loans throughout its service area.
“The NEXT Awards is going to be huge for us,” says Ron. “I’m really hoping what we’ll do for the most rural areas is provide our members with the opportunity to sit down with someone, just as they would at a branch, even when they’re separated by vast distances.”