SAN FRANCISCO — Credit unions should continue to invest in technology — and use it well — if they expect to attract the elusive Millennial demographic.
That was the message from Doug Benzine, VP publishing and strategic resources for CUNA, at the trade group's America's Credit Union Conference here Monday.
He told attendees of a packed breakout session there is some good news as CU growth (2.3% projected for 2014 and 2015) is higher than overall U.S. population growth (0.9%).
More good news: About 60% of members say their credit unions are their primary financial institutions. "Loyalty drives profitability, and loyal members are much more profitable members," he noted.
But only 24% of U.S. adults age 18 to 24 are credit union members, according to Benzine. Non-member awareness is even worse, especially by members of Gen Y. CUNA research found 45% of non-members age 18 to 24 are "not at all familiar" with credit unions. Another 26% are "not very familiar" with credit unions, a combined 71%.
"To attract and retain Gen Y, credit unions need sophisticated mobile services and an effective social media strategy. Access and convenience are the keys, so technology is vital," he said. "If we are going to continue to grow and be relevant, we have to build a pipeline."
All three of Benzine's daughters have their smartphones "attached to their hands at all times," he noted, only half-jokingly. Given young adults' proclivity to have a device at their fingertips, he said CUs can leverage this for their benefit.
Moving to Mobile
"Members accept and use online banking, so the next step is mobile banking," he said, noting the most commonly used online banking features are bill pay (68%), account monitoring (63%), internal transfers (51%) and e-statements (48%).
Mobile payments totaled just $16 billion in 2010, but are projected to hit $214 billion by 2015, growing 68% annually.
Non-traditional competitors, including Starbucks and Walmart, are "growing threats" to financial institutions, according to Benzine.
"Apple has 575 million credit cards on file through its iTunes store and apps. Facebook has 1 billion users. Walmart announced a payments service two months ago. For $4.50 will offer money transactions from its 4,200 stores in the U.S. That is very, very scary."
CUs need to watch the technology space carefully, especially trends in payments, he continued. "Put this on your agenda. Be aware of who your members are using. Are they using PayPal? People don't think twice about making a payment on the Web with PayPal — it is a trusted provider."
Benzine predicted the top three "new product" investments by CUs over next two years will be: smart cards/EMV, remote deposit capture, person-to-person payments. He said some CUs already are offering EMV cards today, with some are reporting it is a differentiator that is leading to more membership, while others have not seen a boost.
"Only a handful have implemented P2P payments. It is a frontier right now, but the industry is moving toward it."
There is a "great deal of interest" in using member data for modeling, often referred to as "big data." Benzine said there are a "hundred different definitions" of big data, but it boils down to using analytics from transactional data to map future strategies.
CUs Wary/Weary Of Regulation
In addition to technology, the other "megatrends" Benzine is asked about frequently during his travels around the country are legislation/regulation, membership growth: member loyalty/non-member awareness, and lending. He said CUNA's 2014 legislative action survey found credit unions are most concerned about losing their tax status, the regulatory compliance burden and NCUA's risk-based capital proposal.
When the tax exemption was threatened in February 2013, the credit union community responded quickly with the "Don't Tax My CU campaign." Thanks in no small part to this grass roots effort, he said, in February 2014 the House Ways and Means Committee upheld the tax exemption. But credit unions should not relax, he said.
"There still is a lot of activity. Credit unions need to keep in touch with their state leagues and CUNA."
CU lending is expected to increase 7.5% in 2014 and 8% in 2015, which he noted represents a return to the long-term average of 7.8%.
"Expect growth in auto loans, credit cards and purchase mortgages."
"People talk about these as tough times, but I think it is a fantastic time," he said. "The future will not be the same as the last 25 to 30 years, but change is all right.
