TUCSON, Ariz.-It's a frequent refrain in credit union circles: "Our membership is aging and we've got to get younger."
But as credit unions attempt to lower their average membership age by marketing to young adults, they are fighting an uphill battle against the aging of America and their own inability to effectively convey the CU difference, according to a number of analysts.
Several sources say that credit unions can make some inroads into lowering the average age of their respective memberships, but it's only going to require even more work as demographics work against CUs. The country is simply getting older and will continue to move the average age of the member higher unless CUs can steal significant share of the youth market from other providers. While credit unions have sought to add additional delivery channels, such as mobile, the technology is only as effective as credit unions are at marketing their value proposition to the users of those devices.
Dr. Hope Schau, associate professor of marketing at Tucson University here, said to get a bigger piece of the youth market credit unions have to focus on changing their image. "Studies show that most of America thinks credit unions are for older adults. Credit unions have to break this mindset."
If there is good news, Schau said, it is that research also indicates that Generations X and Y are highly receptive to the credit union message of being a local, member-owned business. She believes credit unions are at a tipping point when it comes to their ability to get younger. Armed with a message that resonates with youth at a time when there is a great deal of anti-bank sentiment, this next year or two could present CUs with their biggest chance to take young members from banks.
The Perfect Storm
"The problem is that credit unions don't seem to be able to leverage this perfect storm of opportunities," said Schau. "For some reason they are not getting their message out. Credit unions are a very radical departure from the typical financial institution and somewhere over time credit unions became a bureaucracy and don't see what is revolutionary about themselves anymore. You see all kinds of credit union messages about no fees and free checking, but they need to say more about being a local, trusted cooperative."
Not surprisingly, spreading that word means better use of social media. "You want be able to reach youth through the channels they use, even if that means finding a way to get to them when they are on their mobile devices while sitting in traffic," said Schau.
Ben Rogers, research director at the Filene Research Institute, Madison, Wis., thinks credit unions can lower the average age of members, but also agrees it won't be easy, not only due to the aging of America, but because credit unions are more focused on products than convenience. "This is not an insurmountable problem, but credit unions have to get the convenience part down in order to capture a lot more of the youth market."
Filene performed research in 2008 that sought to identify why consumers choose one type of financial institution over another, and found a polarity in the findings between young and older adults. "We found that convenience, clearly, is the number-one reason young adults choose a financial institution," indicated Rogers.
A Mindset 'Split'
Rogers said that while convenience can be defined broadly, for the purposes of the study convenience was defined as easy access and the ability to interact with a financial institution. "That can mean branches, front-line staff, ATMs, good online banking, or call center, for example."
The Filene study also showed that older adults chose the credit union primarily because of products. "You have this split," said Rogers. "CUs are used to serving their members based more on the products they offer, but if they want to get younger they have to focus much more on convenience (see related story). A big strategic and cultural shift needs to happen."
Rogers believes the shift is occurring at many larger credit unions, but not at the smaller ones. He said that the average age of credit union members in mid-2000 was 47 and has been creeping up over the last decade, but at a slower pace in recent years. Rogers attributes the inability to lower the number to small credit unions not evolving quickly, nor paying attention to becoming more convenient.
The 2011-12 CUNA Environmental Scan shows the average age of credit union members is 47, up from 40 in 1985. At the same time, in the CUNA 2011-12 National Member Survey, members age 18 to 24 now account for 9% of credit union membership, up from 6% in 2006.
"The more sophisticated and community credit unions are doing a decent job getting young members in the door," Rogers said. "However, the median size of credit unions is $18 million, and the smaller credit unions, I believe, are having a tougher time attracting new members. So their average membership age is climbing at a faster rate."
Whether the credit union is big or small, Michael Steinberger, associate professor of economics at Pomona College in Claremont, Calif., and a researcher at UCLA, believes CUs stand little chance of getting younger. "They are swimming upstream and running against the wind if they are trying to lower the average age of their members. With all the advancements in medical care, the U.S. population is getting older. Credit unions won't be able to get younger because no financial institution will be able to get younger."
Steinberger, also dean of the Western CUNA Management School in Claremont, Calif., said the number of Americans age 85 and older will triple in the next 20 to 30 years. "The percentage of Americans 65 and over is going to go from 13% to 20% of the U.S. population."
One Success Story
But Larry Pixley, CEO of the $175-million Gateway Metro Credit Union in St. Louis, said his credit union over the last five years has cut its age to 43 from 45. "We are shooting for 42 this year. But it takes work, a lot of work. I hate to say it, some credit unions don't like work. They are set in their ways. We go the extra mile to get younger members."
The CU has a youth savings programs, a number of locations in grade schools and high schools, a debit card high schools can brand (see related story), and a 10% youth CD.
The secret to Gateway Metro getting younger, too, added Pixley, is focusing on older members. "You have to keep the parents happy. If you have the parents with you now, the kids will follow in their footsteps. So it becomes a bit of a balancing act."
