With membership growth hovering barely above 1% and more competitors vying for consumers’ wallet share, attracting new members is an important but formidable goal for credit unions today. For those willing to make targeted, strategic investments to attract prospective members, the Gen Y market represents a prime growth opportunity.
The average age of a credit union member is 47; but the second largest segment of the U.S. population–74 million strong–is Gen Y, usually defined as those born between 1980 and 1997. These young people represent the future of this industry: the members who will eventually purchase homes, finance children’s college educations, and save for retirement. Currently, some 94% of 18- to 24-year-olds don’t belong to a credit union. Do the math and it’s no wonder credit unions quickly concluded that without Gen Y, their memberships would dwindle.
While Gen Y is increasingly of interest to credit unions, tapping this segment will take more than creative marketing campaigns. To win their business, you need to understand what they value and desire. And it turns out that there may be a natural fit between their values and the credit union movement. For instance, the credit union philosophies of giving back to the community and “people helping people” match up well with the Gen Y focus on volunteerism and philanthropy. At the same time, most Gen Y members believe their time is just as important as their money. That means they’ll respond well to services that free them from mundane tasks, allowing them to spend more time on a hobby or a cause they’re passionate about.
Gen Y’s Fascination With Technology
More so than any other segment, Gen Y members are fascinated with technology. But don’t fall into the trap of making generalizations about their technology preferences. A recent Javelin Strategy & Research study found that young adults are not solely wed to electronic service delivery. When choosing a credit card issuer or financial institution, they value traditional customer service channels, like a call center. The study also found that two-thirds of Gen Y consumers believe credit card rewards are important, but nearly half are dissatisfied with their rewards programs. These findings indicate that simply offering electronic services isn’t enough; you have to provide a complete package that demonstrates value as these consumers define it.
Because they favor electronic channels, young adults may not visit a branch often. Yet, the branch is something they can attach their trust and confidence to, and those are attributes that all age groups value in a financial institution. So don’t make the mistake of assuming your branch network and hours aren’t important to them. When marketing to this segment, promote your branches and any alternatives you offer, such as shared branching.
Another generalization to avoid is the mistaken idea that Gen Y members view all online sites as equal when it comes to imparting credible advice. Young adults have an expressed interest in getting financial information from trusted sources, and many haven’t obtained it from parents or educators. When polled, more than half said they’d look to news and general media sites vs. user-generated content sites for financial information. They recognize the distinction–and that offers credit unions an opportunity to turn their sites into a source for trusted financial information.
One reason Gen Y members are so in need of financial advice: they’re in debt. The average student loan balance is now $20,000, and most college students graduate with several thousand dollars in credit card balances. In a recent presentation to credit union professionals, Anya Kamenetz, author of the book “Generation Debt,” noted that the average savings rate for those under 35 is -16%. Clearly there is an opportunity to offer useful advice to help this generation get out from under their debt load and start to build savings.
When reaching out to Gen Y, keep in mind that personalization is vital to them, as witnessed by their intense interest in options–like Facebook, blogs, and custom ring tones–that enable them to make an experience their own. “Push” marketing tactics don’t tend to work; instead, they prefer to be pulled into a community that they can develop an affinity with. Whatever you do to attract them, keep it honest; they value authenticity and will shy away from blatant promotion. One study found that only 15% of campaigns on social networking sites work, due to a perceived lack of authenticity. The tone you use in reaching out to young adults will be just as important as the delivery vehicles you choose.
What Drives Gen Y Crowd
Recognizing that values like these drive much of the Gen Y crowd’s behavior, if this segment is on your radar screen then several current and emerging technologies should be as well. A robust home banking site offering online bill payment and e-statements is a good start, but it’s just that. Promote these options as part of a broader green campaign and you’ll tap into Gen Y’s desire for convenience and concern for the environment. At the same time, keep an eye on newer vehicles such as mobile banking via cell phone or PDA, access to your credit union through social networking sites like Facebook and MySpace, and emerging payment options like P2P (person-to-person). The more important Gen Y is to your growth strategy, the earlier you will want to adopt these technologies.
At the same time, consider adding financial products you can offer to parents, to help them assist teens in developing good financial habits early, while they’re still in the process of developing PFI relationships. Re-loadable stored value cards, savings accounts with rewards, and debit cards that enable parents to track spending are all good options.
History has shown that in difficult times, businesses that increase their strategic investments outperform those that retreat. With the Gen Y market ripe for growth, now is the time for credit unions to make the strategic technology investments that will increase their membership today and strengthen their position for the long haul.
Scott Butler is President of the Fiserv Credit Union Division. He can be reached at scott.butler<at>fiserv.com or 469-287-3648.
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