None of us want to see another lending crash. With today’s NCUA and FDIC insurance programs, money won’t be lost, but investments, collateral, and jobs are always in limbo.
How many of you know someone at a credit union which underwent a managed merger, either as the takeover entity or the one being absorbed? It accelerates a consolidation of the market, sure, but I don’t need to explain to any of you the hardships endured.
This post arises from a situation we faced during a recent partner planning meeting. The credit union had less-than ambitious goals for their auto lending growth. “Odd”, we thought. It was not until later in the meeting that we learned some background on their numbers.
Ever hear the phrase, “too much of a good thing”? This credit union was living it. They had been quite successful recently in their lending, so much so their cash reserves were depressed. The institution no longer had large sums of cash to lend and chose to devote marketing resources on growing their share account values. Turns out it isn’t an uncommon problem, as reported by CreditUnions.com.
What a wild challenge! It got me thinking. How can a credit union build cash reserves which are secure for a period of time, yet provide a value to their members? While, of course, having a low cost of attainment and maintenance?
I’m no financial expert (if my schooling had finance, I don’t remember). However, before I became more involved in investing, my go-to “safe bet” was a Certificate of Deposit. One year, three years, even 5 years; it was ok, since the money was safely locked away and earning a fixed interest.
Might CDs be a cost-effective strategy for growing cash reserves? No debit card required, the cash has a guaranteed term, and the member is happy to get more than 0.00014% interest.
Disclosure: As an independent agent working with credit unions, forced mergers are usually bad for our business. If our partner is the one being absorbed, we can probably bid their alliances goodbye. However, if it’s the other way around, we may find the potential market expanded. In truth, we would much rather expand our business through organic growth and greater credit union partner success. So, credit unions, please use your best judgment on maintaining a conservative loan to shares ratio. We are but lowly partners and should never be looked to for financial management advice. Besides, I’m a geek Millenial/Gen Y. Everyone knows you can’t trust us.
Disclosure 2: Image from Star Trek: DS9. Source: http://www.adafruit.com/blog/wp-content/uploads/2013/03/quark_600.jpg
Last March, I composed a post called A Loan By Any Other Name. The thesis was that as long as your members embraced your services, who cared what they called them? You could be, “that car pay thing”. As long as the auto loan was paid each month, specifics didn’t matter. I’ve decided to revisit the topic after learning more about partnerships and the co-op environment. Whereas in that discussion, I addressed product names, here we will look at the name use of the entire institution.
Nearly all of our partner credit unions have undergone a name change at some point in their history. Sometimes, it is to reflect a new affinity group or open charter. Other times, it is to clarify their mission to the membership and community. Most are good, some, fantastic. Is there an inherent benefit to a stylized name over “Such and Such Community Credit Union”? Depends on market coverage, size, and other factors better for your board to address than me.
The important part of your name is that it gets used, and in the right situations.
Think of a company with which you’ve had unsatisfactory dealings. Now say their name out loud. How do you feel? Uptight, frustrated, angry? What about a company you love? Don’t be shy, speak up! Better? Perhaps even the sound of their name made you smile.
Which reaction do your members have when vocalizing your credit union? Or worse, do they not even know?
Your members may see your name in different ways. Some, as a bill pay entry only. Others, their financial family. With a bit of networking on your end, that name can gain some serious value!
If a member uses your name in a positive light, that’s a referral, and it holds tangible value. Building on the stories in “Credit Unions, Spelled C-o-m-m-u-n-i-t-y“, helping each other comes by working together. Seek out responsible businesses (and fellow cooperatives) in your local area. Work out incentives your members can receive just by saying your name. Perhaps it’s 10% off dinner or a complimentary admission to a local museum. In return, offer new member programs for the staff or volunteers at these venues. Be creative in the arrangements! At the end of the day, both sides benefit, and your name spreads with a smile.
The next time they say your name could be for a home mortgage.
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?
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
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.
When the average Millennial walked for graduation (like me), here’s what we had to enjoy in “the real world”:
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.
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.
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.
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)
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.