Reaching the Underserved: How Credit Unions Can Grow with Purpose

Serving the underserved is not simply a noble aspiration for credit unions. It is also one of the most strategically sound paths to sustainable membership growth. Yet many credit unions, particularly Federal Multiple Common Bond institutions, are unaware of how much opportunity exists through underserved area expansion, or how to pursue it correctly.

In a recent webinar, CUCollaborate's advisory manager of market analysis and expansion, Dominic Patacsil, joined forces with Starlight's CEO, Shreenath Regunathan, to walk credit union leaders through the mechanics of underserved area expansion and what it actually takes to make that expansion meaningful for the communities it reaches. Starlight helps credit unions connect their members to potential financial assistance and government benefits.

In this post, we'll cover:

• What qualifies as an underserved area under NCUA guidelines
• Which credit unions are best positioned to pursue this path
• Why approval is just the beginning, not the finish line
• How to meet the real financial needs of members in underserved communities
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What Is an Underserved Area?

Underserved areas represent a unique opportunity for Federal Multiple Common Bond credit unions to expand their field of membership through geographic means. Unlike standard community charters, which are capped by population thresholds, underserved areas offer a distinct pathway to reach communities that lack adequate access to financial services.

To qualify, an underserved area must simultaneously meet four requirements as prescribed by the NCUA:

• Investment area: At least 85% of the area's population must come from geographies considered statistically distressed, largely defined by income levels below the federal poverty line.
• Lack of access: The area must demonstrate, through a ratio of qualifying financial institutions, that residents have reduced access to in-person financial services.
• Service facility: Every underserved area must contain at least one physical location, either at the time of approval or within 24 months, where a member can deposit shares, submit loan applications, and receive loan proceeds. Shared branches, without a formal memorandum of understanding, generally do not satisfy this requirement.
• Well-defined local community: The area must conform to one of three NCUA-recognized definitions: a single political jurisdiction, a statistical area community up to 2.5 million in population, or a rural district capped at 1 million inhabitants with a density of fewer than 1,000 people per square mile.

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Balancing all four of these requirements is not straightforward. It is an exercise in competing priorities, where expanding market opportunity must be weighed against maintaining federal compliance.

Who Is a Good Fit for Underserved Area Expansion?

Not every credit union is equally positioned to pursue underserved area expansion. However, certain institutions are naturally aligned with what these designations represent.

Credit unions with geographic ties to their foundation tend to benefit most from this pathway. Geographic means remain one of the easiest ways to qualify new members, and underserved areas give those institutions a data-supported mechanism to formalize and expand that reach.

Mission-driven credit unions are also strong candidates. If an institution is focused on deep trust-building and extending credit to those who need it most, underserved areas offer a tangible expression of that commitment. The NCUA approves underserved area applications against a standard they describe as "ability and intent," which means the regulator wants to understand not just that a credit union can serve an area, but that it genuinely plans to.

For ability, the NCUA looks for evidence that the credit union has adequate operational readiness to serve residents, whether in person, remotely, or through a combination of both. For intent, the application must demonstrate that the expansion is not just a geographic land grab, but a commitment to improving access for communities that lack it.

Approval Is Not the Finish Line

One of the most important points raised during the webinar was that gaining NCUA approval for an underserved area is only the starting point, not the conclusion, of the work.

After approval, credit unions are then empowered with the actual task of effecting change. Underserved areas represent an opportunity to bring greater financial access to people who need it most, and doing that well requires ongoing effort. It means asking questions like: How do we refine our outreach? How do we analyze product adoption? How do we deepen the way we are lifting people up in our community?

This iterative cycle, with data at its core, is where meaningful impact is built. It is also where credit unions often need the most support. Drafting a compliant application is one skill set. Turning that approval into a functioning, mission-aligned growth strategy is another.

Understanding the Real Needs of Underserved Members

Expanding into an underserved area without understanding the financial reality of the people who live there is a missed opportunity. Starlight's CEO, Shreenath Regunathan, walked through data that paints a clear picture of where many American households stand financially.

More than 67% of Americans are living paycheck to paycheck. Inflation continues to worsen financial stress year over year. Income volatility is high, with roughly one in five households relying on gig work as a primary source of income. Among Gen Z members specifically, the share reporting financial stress has grown from approximately 30% to 48%.

These are not abstract statistics. They show up in credit union data in the form of card balances, insufficient funds activity, and members seeking small-dollar loans. And they point to a gap between what members need and what credit unions are currently offering.

Research from Filene found that 80% of consumers are already coming to their credit union asking for help improving their financial health. Yet only 14% feel that need is being met. For credit unions expanding into underserved areas, that gap is both a challenge and an opportunity.

Building the Right Product Mix for Underserved Communities

Serving low-to-moderate income members well requires more than just opening a branch in a new geography. It means offering a bundle of products and services matched to where those members actually are in their financial lives.

For members who are early in their careers, recently unemployed, or navigating financial stress for the first time, relevant products typically include:

• Second-chance checking accounts
• Credit builder programs
• Small-dollar loan programs at rates that compete with high-APR fintech alternatives
• Local partnerships with nonprofits and community organizations
• Access to government assistance programs and benefits navigation

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That last category is often underestimated. There are currently more than $128 billion in child tax credits with only 12% of eligible families receiving them. Federal and state utility assistance programs total over $6.5 billion, yet only 17% of eligible households actually access those funds. Members in underserved areas are frequently leaving money on the table simply because they do not know what they qualify for or how to apply.

Credit unions that can connect members to these resources, whether through partnerships or technology-enabled tools, are doing something fintech competitors cannot easily replicate. They are demonstrating that membership has tangible, immediate value before a member ever takes out a loan or opens a savings account.

This matters for member engagement too. Credit unions that serve indirect or single-product members often struggle to deepen those relationships. Offering something practically useful, like a benefits navigator that identifies hundreds or thousands of dollars in available assistance, creates a second point of engagement and signals that the credit union is genuinely invested in the member's financial wellbeing.

Turning Expansion into Measurable Community Impact

The credit union movement has long operated under the principle of people helping people. Underserved area expansion gives that principle a concrete mechanism and a regulatory pathway.

Credit unions that approach this work strategically, by leading with data, building the right product offerings, and committing to ongoing community engagement rather than a one-time application, are best positioned to grow membership while creating real impact.

That combination is also what the NCUA is looking for. Demonstrating ability and intent through a strong application is important, but the credit unions that sustain and deepen their presence in underserved communities over time are the ones that ultimately make the designation meaningful.

For credit unions ready to explore what underserved area expansion could look like, the first step is understanding whether your institution meets the baseline requirements and where the greatest opportunity lies within your market. From there, the work of building an application, a service strategy, and a long-term community presence can begin.

At CUCollaborate, we help credit unions identify, map, and pursue underserved area expansions backed by data, regulatory expertise, and a 100% approval record. If your institution is ready to grow with purpose, let's start the conversation. Would you like to learn more about how Starlight connects members to unclaimed assistance? Our Director of Partnerships can help!