Want More Loans? Embrace Technology

Also, anticipate how generation Y will want to obtain services.

July 01, 2011
KEYWORDS loans , mobile , technology
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Credit unions looking to grow member loans should invest in their technology infrastructure to meet the needs of current and future members, a CUNA Mutual Group researcher told an America’s Credit Union Conference Discovery breakout session audience Wednesday.

“How do you get new members in the door? By investing in technology, not loan officers and new lending processes,” says David Polet, voice of customer research manager.

Credit unions will grow loans by focusing on how consumers shop. With today’s technology, consumers no longer have to rely on the credit union for information.

“Members have the ability to compare rates and quotes for loans at the tips of their fingers,” Polet adds.

Credit unions need to adapt to the changing shopping landscape in order to grow loans. Fifteen years ago, the loan officer controlled the lending process because the consumer didn’t have access to as much information. Today, that’s not the case.

“Generation Y consumes and makes decisions completely differently than their parents,” Polet notes, urging credit unions to embrace technology to meet generation Y’s needs and to attract new members for loans.

“Baby boomers are retiring; their lending lives are coming to an end. That’s not the case for generation Y, whose lending lives are just beginning to grow,” Polet says.

Credit unions must focus on meeting the expectations of generation Y, especially since there are 84 million gen Y consumers versus only 80 million baby boomers, according to 2010 U.S. Census Bureau findings.

Banks have more technology that’s in tune with what gen Y consumers expect, he explains. “Picture check deposits, text banking, and mobile banking are all being embraced by banks,” he says, highlighting the need for credit unions to do the same.

In fact, many analysts predict mobile banking will overtake online banking in just a few years.

“You must know your members and potential members to effectively use new technology,” Polet says.

According to a December 2009 Mercatus mobile banking study, mobile financial service capabilities were more influential in a consumer’s decision to select a financial institution than availability of online banking, access to ATMs, or nearby branches.

The study also indicated that by 2014, more consumers will access their accounts through mobile devices than through the Internet.

“Mobile banking is clearly taking over the online channel,” Polet says. “Keep in mind, in order to grow member loans you must grow your membership, which means your technology must benefit future members.”

Polet cites several Filene Research Institute resources to help credit unions understand the needs of potential generation Y members:

He also recommends a CUNA Mutual white paper, “Lending Strategies and Trends” [pdf].

Right on everything except the demographic

Serge Milman | OptiRate
June 23, 2011 12:37 pm
David Polet is 100% correct about the trends but he is completely off the mark on the demographic. There is no doubt that Gen Y will, at some point, be great consumers of banking products, including loans. Unfortunately, that is not today and it will not be tomorrow. A recent study by ForbesWoman and the National Endowment for Financial Education (NEFE) conducted by Harris Interactive found that 60% of parents provide financial support for housing, living expenses and other costs to their adult children who are no longer school (read more: ). Somehow I doubt that these Gen Y will past the credit checks for any extension of credit. However, the need to grow membership, revenues and profits remain. CUs would be wise to focus on the consumer segments that have resources, have need for deep banking relationships, have the need and capacity to support extensions of credit, and have the need for other value added products.

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Polet responds

David Polet
June 24, 2011 1:02 pm
I appreciate Serge's feedback about my presentation. While I don't dispute the statistics that he cites around Gen Y receiving financial support from parents, receiving some financial support does not equate to being completely financially dependent on them. Gen Yers are still buying cars, buying houses (especially the older ones), and acquiring credit card debt. The fact that 31% of Gen Yers (who are credit union members) in our recent study on consumer financial needs indicate that they are interested in receiving help in controlling or eliminating debt indicates they are taking out loans. Are their loans at the same level as their parents? At this point in their lives, probably not, but they are going to trend toward those levels while their parents will likely borrow less as they get into retirement.

I agree with Serge that the loan growth from this group will likely not be realized in the short term, but unless credit unions can start to attract them and create a relationship now, when they are ready to increase their borrowing habits in the next few years, they may lose Gen Yers to banks, which ultimately would create mid and long-term negative ramifications for credit unions.

David B. Polet
Program Manager, Voice of Customer
CUNA Mutual Group

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X + Y = Growth

Mark Arnold
July 05, 2011 10:32 am
Both Serge and David are correct. The best loan formula for growth is X + Y = Growth. That means it will take both Generation X and Generation Y to get your true loan growth. Generation X is in their prime borrowing years. However,if we ingore Generation Y we are going to make it harder on ourselves in the future. Regardless of your demographic focus, it will also take technology to reach both generations.

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