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Groundbreaking Technology May Save the Credit Union Industry

Groundbreaking Technology May Save the Credit Union Industry

During last month’s National Directors Roundtable Conference, National Credit Union Administration (NCUA) Board Chairman Debbie Matz delivered a stern warning to industry leaders.

“If the trend of aging credit union membership continues,” Matz said, “many credit unions may have no future. A credit union cannot survive without lending, but the average age of credit union members is over 47. This is critical, because the peak borrowing years are between ages 25 and 44, which means the average member is already past those peak years.

Matz posed a number of questions that every credit union should consider, which involved how to remain relevant and successful.

What Credit Unions Should Be Doing

Credit Unions Online reached out to Matz’s office and asked what credit unions should actively be doing to bridge the gap between the aging and the “coming of age” member.

“To attract younger members, I suggest that credit unions deliver information in digital conversations, rather than relying solely on brochures or newspaper ads,” Matz explains. “For instance, credit unions that have a visible presence on Facebook, Twitter, and YouTube can speak to young people in their own language. These credit unions can become part of the conversations in young people’s spheres of influence. I encourage more credit unions to connect to young potential members in their own domains.”

When it comes to attracting young borrowers, Matz suggests adding the latest technology.

“Today’s young people may never visit a branch,” she says. “They expect to receive a full range of financial services on their laptops, tablets and smartphones. They expect to open accounts and receive loan approvals online. They expect to make all their deposits electronically, and make all their payments through their digital wallets. They expect immediate service, 24/7—wherever they are, on whatever device they are using. If credit unions don’t offer what they expect, young people take their business elsewhere.”

Matz adds that credit unions must make sure their website and mobile apps are transaction-driven and user-friendly. “It’s essential for young people to find what they’re looking for in one click, and do everything they need to do without being inconvenienced. Unfortunately, for example, some remote deposit capture apps too often prompt members to retake photos of their checks. Yet tech-savvy consumers expect these systems to work flawlessly. So if they find glitches in a credit union’s technology, they’re likely to become frustrated and quickly move on to other institutions whose apps are higher rated.”

Industry Trends Point to Banking Behavior Shifts

The NCUA referred to a Filene Research Institute Report titled Coming of Age: Young Adults in 2015 that tracked several specific banking trends:

“Young demographics are huge potential markets, as 33% of the U.S. population is under age 20,” Matz says. “Yet younger demographics are underserved by credit unions. Members between ages 18 and 24 account for just 9% of all credit union membership.”

However, “Last year the credit union industry broke the 100 million member barrier, due in large part to increased participation from 18-35 year-olds,” counters Samantha Paxson, chief marketing officer at CO-OP Financial Services. “Millennials do not trust banks because they are too big and were a major reason for the financial turmoil that began in August 2007.”

Paxson warns there is still a catch. “Without digital optimization and innovation, we will lose this audience. Credit unions have become an obvious alternative for a generation that can relate to an industry that seeks to add value, not extract value from individuals and communities. Just be sure it is an alternative that is relevant to the modern consumer.”

Being relevant to the modern consumer means understanding how they perceive and value service.

Surveys of credit union members typically find a correlation between age and satisfaction, Matz says. Older members tend to value a personal touch and stability in their institutions—two qualities that are traditional strengths of credit unions. But, younger people place more value on convenience—which millennials often find in other financial institutions.

Credit Unions That Attract Younger Members

While the picture may look bleak or credit unions could be missing the mark when it comes to attracting younger members, Paxson says all is not lost.

“I would not use the words missing the mark, but I'm passionate about credit unions rethinking the member experience, especially when it comes to millennials,” Paxson says. “By looking at every part of our business through the eyes of these digital natives, we can examine the process of why 18-35 year olds join a credit union, how they navigate through our mobile apps, our websites, our social feeds, and how they search for more information. There is room for the credit union industry to strive towards making every single interaction a positive, educational and memorable experience that millennials want to share.”

Matz provides examples of a number of credit unions that are doing a remarkable job reaching younger memberships.

Vacationland Federal Credit Union ($170 million, Sandusky, OH) has targeted millennials as part of a strategic plan, Matz says. “The credit union dedicates significant resources to attract millennials via social media, blogs, text alerts, scholarships, online banking products, mobile apps, student loans, and even a $5 dividend each semester when students are on the Dean’s list.” Vacationland FCU also designs programs focusing on children of millennials. These programs include a Campus Connection Club, Dollar Dog Kids Club, and a Youth Club Account.

Another example is Credit Union of Colorado ($1.26 billion, Denver, CO). Technology is a major focus, along with marketing in specific areas, and sponsoring age-appropriate events to reach millennials. Along with regular TV ads, the Credit Union of Colorado advertises at local festivals, ski areas, and through Internet ads. As a result, the NCUA says about one-third of all new members are in Generation Y (ages 18-36), and more than 17% of the entire membership is in that young adult age group.

“The overarching appeal for millennials is the cooperative, non-profit, purpose-driven tradition of credit unions, and at the same time, the advanced financial technology we can make available,” Paxson says. “These consumers are discovering the human side of finance provided by credit unions. In fact, credit unions and their positive social mission are the antithesis of the banking industry; they're a great place to start building credit, offer the latest in mobile/digital banking and are a trusted resource millennial resource for financial advice.”

By Gina Ragusa
Published November 9, 2015
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