Attracting the next generation of members requires interacting on their terms and on their turf.
Credit unions that engage the young adults who make up Generation Y share a willingness to provide valuable financial information in unconventional ways.
Equally important, they take fresh approaches to designing and delivering financial services that appeal to young, tech-savvy members.
Engage Gen Y
Credit unions spend too much time reading about Gen Yers and too little time actually engaging with them to learn about their culture, needs, motivations, and behaviors, says Brent Dixon, Gen Y adviser to the Filene Research Institute and founder of The Cooperative Trust, a credit union youth network.
Dixon suggests forming an advisory group to gather information about young members’ psychographics: their attitudes, lifestyles, and values.
• CUs spend too much time reading about Gen Y and too little time actually engaging with this group.
• CUs must develop self-service technologies—online and mobile banking, remote deposit capture, online account opening—to reach Gen Y.
• Board focus: Consider forming an advisory group to gather information about young members’ attitudes, lifestyles, and values.
Credit unions must also develop products that overcome the barriers created by Gen Yers’ scant credit experience and respond to their preference for using technology to accomplish financial tasks. Dixon recalls contacting a credit union because it offered a compelling loan product, only to be discouraged by a complex loan application and payments made by snail mail.
“Developing the self-service technologies—robust online and mobile banking, remote deposit capture, online account opening—and product and service efficiencies young people expect can be a costly, complicated venture,” Dixon says. “But it’s necessary to attract younger members.”
Efforts to engage Gen Y should extend to the credit union’s internal culture to tap young employees’ ideas and opinions and offer mentorship and training opportunities, Dixon says.
Next: 'Young & Free'
‘Young & Free’
Michigan First Credit Union in Lathrup Village achieves those objectives through its Young & Free Michigan program. “Young & Free” is a marketing program developed by Currency Marketing and licensed for use by credit unions in eight states and two Canadian provinces.
The $640 million asset credit union introduced Young & Free Michigan along with new products for Gen Y members ages 17 to 25 in February 2011.
Michigan First wanted to build on its high school branches and partnerships with area universities to establish long-term relationships with Gen Y, says Linda Douglas, vice president of marketing.
A highly publicized contest to select a Gen Y “spokester” for a year-long term helped launch the program. Winner Janelle O’Hara now works for Michigan First to create weekly videos and daily blog posts on financial and lifestyle topics, appear at public events, and advise the marketing department (“A Gen Y convert”).
Best Practices for Serving Gen Y
Brent Dixon, Gen Y adviser to the Filene Research Institute, recommends these best practices for serving this demographic:
1. Invest in self-service technology. Online-only banks’ efficient, seamless product delivery is your primary competition.
2. Target key life events. Create “first time” products in areas such as auto loans and mortgages by tweaking the terms of existing products and bundling them with financial education or a financial advisor.
3. Differentiate yourself. Establish a compelling brand that can be clearly conveyed to Gen Y. Dixon says too many credit union brands are “lukewarm, safe, and begging to be ignored.”
Before launching the program, Michigan First gathered information about Gen Y by inviting tellers from its high school branches to monthly meetings that provided free pizza in exchange for discussions of financial needs and decision making.
Designing products with authentic appeal to Gen Y is essential, says Douglas, because the group is intolerant of marketing missteps and wary of attempts to manipulate their loyalty.
“They see through anything they feel is hype, so we really have a peer-to-peer conversation going on between our spokesperson and Gen Y,” Douglas says. An Overdrive Street Team of employees age 30 and younger work at public events to provide another set of peers for Gen Y prospects.
Next: Appealing products
Products developed for the Young & Free program include “First Gear” free checking and savings accounts with no minimum balance requirements or fees. The checking account features “Oops Protection” to waive two overdraft fees annually.
Gen Y members enrolled in Young & Free use an online banking site that shares the standard Michigan First Web functionality but replaces its corporate design with Gen Y graphics and opportunities to interact.
Other elements with high appeal to Gen Y:
Michigan First’s efforts to engage Gen Y have increased membership among the 18- to 25-year-old age group from 6% of total members in 2002 (2,887 of 45,836 members) to 11% in September 2011 (8,886 of 79,842 members).
Momentum generated by Young & Free Michigan is reflected by a 28% increase in new Gen Y members, from 1,708 who joined between January and September of 2010 to 2,194 who joined during that same period in 2011.
Average deposit balances increased nearly 20% annually among Gen Y members, with First Gear accountholders using 26% more services than other Gen Y members. Loan penetration among Gen Y members also increased, from 14.3% of members holding loans in September 2010 to 15.1% holding loans in August 2011.
A Gen Y Convert
Serving as Michigan First Credit Union’s Young & Free “spokester” for Gen Y members convinced Janelle O’Hara that credit unions have something special to offer.
O’Hara competed with other Gen Y applicants for the one-year term representing Young & Free Michigan by producing videos and blog posts, and making public appearances. She earns a $30,000 annual salary and received an Apple laptop, a smartphone with a one-year contract, and a digital video camera.
A native of Eastpointe, Mich., O’Hara knew little about credit unions before she won the Young & Free “spokester” contest in April 2011. O’Hara is a December 2010 graduate of Lawrence Technological University with a degree in media communications.
“Right off the bat, learning about credit unions and the fact they’re member-owned and not-for-profit opened my eyes,” O’Hara says.
Credit unions can attract Gen Y by offering education in a way that reflects young members’ slightly different outlook on life, O’Hara says. Allowing young members to make transactions using their cell phones is also valuable.
“Generation Y doesn’t have to be this big mystery or problem or obstacle,” O’Hara says. “Just listening to their concerns and offering education in a low-key environment can help jump-start a relationship with the 18- to 25-year-old crowd.”
O’Hara researched topics such as credit, loans, and budgeting so she could deliver reliable information about Michigan First. Along the way, she learned that credit unions offer lower rates and fees than banks while delivering friendly, personal service.
“I trust credit unions more now than I ever thought I could trust a financial institution.”
Next: ‘Buck the Norm’
‘Buck the Norm’
Providing technology-based information and products for members ages 16 to 25 proves that $2 billion asset Tinker Federal Credit Union in Oklahoma City is willing to “Buck the Norm” to attract Gen Y.
The credit union’s “Buck the Norm” program, introduced in September 2008, includes a website, social media interaction, and grassroots involvement in community events such as a local music festival and the annual Ghouls Gone Wild parade in Oklahoma City.
“Buck the Norm” emphasizes resources that help Gen Y understand financial terms and products along with general information on topics such as writing a resume, according to Will Fathree, Tinker Federal’s marketing programs manager. Fathree, 31, and other young contributors provide weekly blog posts to share everyday experiences and address current financial issues.
"There are so many people in that age range who have bad spending habits and too much credit card debt, and it’s hard to get out of that,” Fathree says. “We want to give them the tools to avoid that in the first place.”
Who is Gen Y?
The Gen Y age group:
• Is defined by demographers with birth-year spans as varied as 1980 to 1992 or 1988 to 2001;
• Typically is segmented by credit unions as ages 18 to 25, although some Gen Y programs extend from the early teens to the early 30s; and
• Represents a growing credit union membership segment. Members ages 18 to 24 increased from 6% of all adult members in 2006 to 9% today, according to CUNA’s 2011-2012 National Member Survey.
Contests are often used to appeal to Gen Y, with more than 8,000 people visiting booths at local schools and universities and the “Buck the Norm” website in the fall of 2011 to enter a “win your break” promotion for a $2,000 travel voucher.
“We provide promotions that make them think about how they use their money,” Fathree says. Events are staffed by Gen Y employees.
Fathree says serving Gen Y requires evolving in response to their preferences, which include online and mobile banking. “These are technologies we’re comfortable using
because we grew up with them.”
“Buck the Norm” growth continues to exceed Tinker Federal’s annual goals, with Gen Y membership on pace to increase 6%, from approximately 29,400 members at year-end 2010 to just over 31,200 members in September 2011.
“Buck the Norm” materials will be revised in 2012 to provide a fresh look and ensure the website remains relevant to Gen Y. Fathree notes that efforts to appeal to Gen Y are
reinforced by branch staff who deliver high-quality information, advice, and service.
“You have to find a way to engage this group,” Fathree adds. “They have so many messages coming at them every single day. You have to separate yourself, whether it’s through social media, being at events in the community, or keeping website content fresh and interesting.”
Next: Seeds for success
Seeds for success
Reaching Gen Y starts well before high school graduation for $82 million asset Arapahoe Credit Union, Centennial, Colo. Arapahoe sows its “Seeds for Success” financial
education program in public schools and then reaps the results with myBank2Go.com—products for Gen Y members ages 18 to 34.
More than 7,000 students participated in classroom workshops and presentations on personal finance topics during the 2010-2011 school year in seven school districts, says Julie McLean, director of financial education.
Arapahoe offers youth accounts for children up to age 12. Teen checking accounts with debit cards are available with a parent’s signature at age 14 and with only the teen’s
signature at age 16.
At age 18, even young adults who lack a credit history can get a car loan through MyBank2Go.com using a program that requires borrowers with no credit or poor credit to have a GPS tracking device attached to the car. The device can be triggered remotely to prevent ignition if the member fails to make timely payments.
“Instead of dinging their credit, we teach them to make their payments on time,” McLean says.
Presentations to young adults and their parents often focus on technology to teach them to use products such as online banking, bill payment, and mobile banking. Wallet cards distributed at these events offer shortcuts for text banking.
McLean ends all educational events by emphasizing that she is a personal resource for young members. Business cards and other materials offer McLean’s contact information so young members can reach her at any time.
Those calls sometimes come two to three years after McLean makes a presentation. A young man who left college when he became a father called to thank the credit union for providing financial information that made a difference in his life years later. A teen who planned to drop out of high school called to say she changed her mind after participating in a workshop on the cost of rent and living expenses.
Building trust with Gen Y and then backing it with personal experiences is crucial, McLean says.
“They have to feel you’re a trusted resource,” McLean says. “Once you gain that, they’re your members forever.”
CUNA’s 2011-2012 reports: