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What Would Your Members Say?

Originally published on CUInsight.com

Imagine a room filled with your members. All of them. Ones who have made your credit union their primary financial institution and those who hardly know you exist. Offer each a blank index card.

A third grade teacher in Denver did this exercise with her students. What was asked of them? To write down what they wished their teacher knew about their lives. They could add their name or leave it anonymous.

Surprising truths flowed. One explained how homework was challenging because they didn’t have pencils at home. Another lamented delays in getting their mom’s signature on school forms because they didn’t see her often.

It was a moving exercise, and offered valuable, if heartbreaking, advice to the teacher.

Before getting back to the credit union talk, let’s make it clear: Teachers like her are doing important work and should be recognized/compensated as such.

Do you see how this exercise could be of value for your credit union? If you handed out index cards to all your members, what would be written?

When I’m teaching martial arts classes, I often ask a student what someone will do if they use a certain move. “I don’t know,” is a fair answer. How can you be sure of their reaction? Well, you do that technique, and see their response!

What will your members wish you knew? Well, you ask! We read articles daily about how to connect with Millenials (Gen Y). Like everyone else, they want a say. They want a deliberate effort to engage, not a new promotion or product.

Connect and learn. What if it became an industry effort? Say, using social media under the hashtag #OurMembersWish. Now that’s @asmarterchoice I can support.

There’s a fantastic TED Talk describing one way to get into a mission, rather than product, centric, mode of thinking with a process called Golden Circle. You’ll recognize it in use with companies like Apple and Harley Davidson, in people like Elon Musk, as well as every non-profit you know.

The index cards? Yeah, they’re in that supply closet, just down the hall. Grab a bunch.

Image credit: https://www.flickr.com/photos/garylerude/2815430150/

Oh No! Millennials Aren’t Doing What We Expected!

The average age of a credit union member is 47. So it stands to reason the industry has a love affair with those of the younger demographic. If only they would talk about it!

Truth be told, a day cannot go by without seeing at least one discussion of Millennials and credit unions (And yes, Gen Z as well).

Everyone Has The Answer

So, is it tech solutions? Or streamlining your lending? There’s a lot of content out there. Most tell credit unions like yours exactly what you need to do to attract Millennials.

Is it really that simple? Can one thing change everything?

You know better. It’s no one thing. It’s a culture change. Why?

Millennial Challenges

It’s not an easy road to bring in these younger generations. If you listen to all the naysayers, Millennials don’t buy homes (mortgages), they don’t use credit cards, avoid owning cars (auto loans), and have no intention of changing.

Maybe it’s because their wage growth is stagnant and they are buried in student loans…no, it’s probably because they’re completely different from every other human ever to exist.

The World From Our Perspective

Tamagotchi

Alongside the disappearance of Tamagotchi pets, the needs of a generation had changed. Face it, it’s hopeless to even bother being in the banking industry anymore. Consider yourself lucky if you even retain a piece of their meager savings.

Except all of this turned out to be false. Or, as Obi-Wan would say, “from a certain point of view.”

When the average Millennial walked for graduation (like me), here’s what we had to enjoy in “the real world”:

  • Global recession
  • High unemployment
  • A banking sector in disarray
  • Wall Street in free-fall
  • Continuous threats of government shutdowns
  • Student loan burdens

Not an encouraging environment to make a stand!

The “Hesitant” Generation

So, Millennials waited. They put off moving out. They held off on new wheels. All in the hopes for a chance to visualize a solid career path (or a job that fit their degree!).

With all this patience, you can almost call them the Hesitant generation. Sure, adoption of technology, in every form, was rapid, but they also were the first to grow up with the Internet.

It was a given they would be comfortable amongst cyberspace. The real world? Not so much.

Until things started to improve. Like now (written in 2015). It’s far from fixed, however, credit is more readily available. More companies are hiring. For the most privileged (and sometimes, just lucky) growing incomes situated them in up-and-coming urban centers.

Big cities, sure, but also the smaller metro areas (like our own award-winning Fort Lauderdale) are experiencing dramatic influxes of young professionals. “Yeah, but in the city, they don’t drive, and they rent condos, so nothing changed.” Except not.

Millennials Have Drive

Millennials have grown into the second largest car buying group, behind their parents, the Boomers. You were right, they want the technology, and cool for us represents efficient and modern.

Chrome Tesla Headlight

While the Tesla Model S and X stand as the pinnacles of “cool”, I have a number of friends who drive the Model 3. And they love it. Plus, they’re saving money on cost-of-ownership, while making a statement on environmental and social change.

No wonder other carmakers are pushing their own plug-ins, electric, and other forward-looking models. Only, without the culture, I’m not sure how successful they’ll be.

And, it’s true, a lot of younger people want robust public transportation and walkable communities as well. Unfortunately, we’re not there yet in most places. So, cars are still necessary.

Also, Mortgages

Large Home Along Street
A typical Millennial starter home. /s

Millennials are also buying homes, when they finally can afford it. To be clear, building up enough savings to get a traditional mortgage is still out of reach of most. An opportunity for your credit union, perhaps?

Renting was a necessary evil, and also helpful for a rapidly-shifting work environment. Now, the highest wage-earners of the Millennial generation are able to “settle down” just a bit, and that comes with buying property.

Help Us Learn!

Credit card usage amongst Millennials and Gen Z is down, in comparison to older generations. That’s true. However, debit cards are embraced wholly. To me, it’s a financial literacy issue more than anything.

If only credit unions served that role…

Also mentioned in a recent post was the activities of CU Student Choice, helping CUs become financiers of student loans. If you can help reduce the monthly payments, you can change a life.

The Millennial Struggle

So this Millennials group…where do credit unions fit?

It’s about connecting with culture and technology. You can be the coolest cause around, but if we can’t access it all from our phones, then you’re getting passed up.

Woman Drinking Coffee on Phone
It’s a stereotype, guys. But we do enjoy local coffee shops.

What can you do now to attract this generation? Show them how you can help their real challenges:

  • Offer student loan refinancing (Show the savings)
  • Help them get rewards-based debit cards (And work towards credit cards with even more back)
  • Provide a seamless online auto loan experience (With a functional car buying service)
  • Be there for their first mortgage (And help them when they don’t have the savings)

Offer your time-honored service. But pair it with the tech people today expect. Ask yourself: “How much of our banking experience can be done from our mobile app?” If the answer is less than 75%, you’re going to struggle.

Robust. Simple. Genuine.

I’m not saying everything is great for Millennials. It’s not. There are a lot of problems that our society needs to address. However, not being a member of a credit union is one that can get solved.

Millennials use the big banks because they’re easy. Be just as simple, ensure you’re genuine about what you say and do, and package it all to be ready on the go.

Do all this, and you’ve got a bright future ahead.

Sources: http://www.chicagotribune.com/classified/automotive/sns-wp-blm-news-bc-autos-millennials25-20150425-story.html, http://www.cuinsight.com/make-new-friends-reaching-the-younger-demographic.html

Image credit: https://bluesyemre.files.wordpress.com/2012/12/generation-x-y-z.jpg, https://perfectlylegitimatebusiness.files.wordpress.com/2015/09/tamagotchi.png

One Third of Them Means Half of This?

Originally published on CUInsight.com

Keep me honest. I’ve been known to ask for help in finding my sunglasses…while I’m wearing them. Hey, they’re lightweight and comfortable! So if I’m overlooking an important point, please guide me in the right direction. In this situation, I have a nagging feeling the industry is doing just that.

We’re talking auto loans. Or rather, auto loan funding.

If my data sources are correct, credit unions handle 16.7% of auto loans in America(1). Not too shabby. In fact, that’s a lot of loans, a whole bunch of cars, and millions of people receiving rates likely better than from a for-profit bank. Congratulations financial co-ops!

Hold off on swinging the “We’re #1” foam finger for just another minute. A previous post celebrated an announcement from CUNA of credit union penetration. 1 in 3 Americans. 100 million members. So why only 16.7% of auto loans?

Some digging ensued and it didn’t take long for the digital shovel to strike a proverbial wooden box. Upon opening it, I learned there was a leak in the ship.

Credit unions do, in fact, accept auto loan applications for 33% of Americans. However, only around half ever get funded. That’s 50% or 1 in 2 members.

What’s half of 33%? Not too far from 16.7%. Wait a minute, I’ve heard that number before! Isn’t that the total percentage of auto loans credit unions hold in the market? Weird, right?

Could it be that credit unions are receiving all the applications they need, yet, for various reasons, are losing out to other lenders? Sure, you have high underwriting standards, and not everyone qualifies; you don’t need to rationalize to that end. However, there is still a loss. You’re putting effort into underwriting these loan applications; be bothered by losing half of them!

From reducing flipped loans with the convenience of share drafts to the personal touch of a member representative calling on every loan approval, there are credit unions making strides to confront this issue. What are your numbers, and could reducing a portion of the lost half make a difference in your annual goals?

Disclosure: My company works with credit unions to help increase booked loan percentages as well as their total auto loan volume. It is in our, and the industry’s, best interest to identify sources of lost income and maximize growth for institutions and their members.

Image credit: http://sme-blog.com/files/2013/09/TSBB_Development-440×402.jpg

(1) Experian, Q3Y14

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